Vol 2 / Issue 06 / Mar 09
/Rs 30
alternatives to closing down your business 9 ways to reduce cost of doing business online Doing Business in Austria
entrepreneur of the month/
Before You Set Up a School
Jai Maroo, Shemaroo Entertainment Bala Parthasarathy, Snapfish
Business of Artificial Leather
investor of the month/
A Low-cost Windmill Opportunities in Shipbuilding Commercial Refrigeration Business
Vineet Rai, Aavishkaar TePP steps up India’s Innovation Case Study: Telibrahma How to Evolve a Brilliant Venture Concept 104 pages including cover
Vol 2 / Issue 06 / MAR 09
BOARD OF ADVISORS C K Prahalad
University of Michigan
N R Narayanamurthy
Chief Mentor, Infosys
Kanwal Rekhi
Chairman, TiE
Romesh Wadhwani Chairman & President, Wadhwani Foundation Gururaj ‘Desh’ Deshpande
Chairman, Sycamore Networks
Saurabh Srivastava Chairman, Indian Venture Capital Association Kiran Mazumdar Shaw R Gopalakrishnan
Chairman & MD, Biocon Executive Director, Tata Sons
Philip Anderson
Professor of Entrepreneurship, INSEAD
Shyam Malhotra Editor-in-Chief Krishna Kumar Group Editor ANALYSTS Ambrish Jha Aswathi Muralidharan Binesh Kutty Mohita Nagpal Vimarsh Bajpai
strategy/startups
44
OPERATIONS Ajay Dhoundiyal Product Manager VIjay Rana Design Anil John Photography SALES & MA Jaideep Mario Gabriel Imran Ali Dayanath Levaj Jagadeesh Kingshuk Sircar
MARKETING Associate VP West West South South South-East Asia
PRINT & CIRCULATION SERVICES NC George Associate VP T Srirengan GM, Print Services Sudhir Arora Circulation Services Manager Pooja Bharadwaj Assistant Manager, Subscriptions Sarita Shridhar Assistant Manager, Reader Service Printed and published by Pradeep Gupta. Owner, CyberMedia (India) Ltd. Printed at International Print-O-Pack Limited, B-204-206, Okhla Industrial Area, Phase 1, New Delhi-20 Published from D-74, Panchsheel Enclave, New Delhi-17. Editor: Krishna Kumar. Distributors in India: Living Media India Limited, Mumbai. All rights reserved. No part of this publication may be reproduced by any means without prior written permission. BANGALORE 205, 2nd Floor, # 73, Shree Complex, St.Johns Road, Tel: 41238238 CHENNAI 5B, 6th Floor, Gemini Parsn Apts, 599 Mount Road, Tel: 28221712 KOLKATA 23/54, Gariahat Road, Ground Floor, Near South City College, Tel: 65250117 MUMBAI Road No 16, D 7/1 MIDC, Andheri (East) Tel: 28387241 DELHI D-74 Panchsheel Enclave Tel: 41751234 PUNE D/4 Sukhwani Park North Main Road, Koregaon Tel: 64004065
76 ways to reduce cost of doing business online
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104 pages including cover
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MARCH 2009
This piece looks ks at ways to reduce costs cost and nd tighten the purse pur strings if your business is primarily online onlin
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/contents
38
opportunities/ Commercial Refrigeration Business ......... 16 Shipbuilding............................................. 25
global opportunities/
Artificial Leather....................................... 36
Doing Business in Austria
Before you set up a school........................ 51 Designer fans ........................................... 72 entrepreneur of the month
JAI MAROO SHEMAROO ENTERTAINMENT
He is a second-generation entrepreneur in a company that has been in the business of bringing Hindi cinema to the Indian households for decades.
blogs/columns Philip Anderson ........ 23 Rupin Jayal ............. 58
48
As one of the richest countries in the European Union, Austria offers plenty of opportunities in both services and manufacturing sectors
innovation/ Sheep rearing project ............................... 34 strategy/ How much can you trust a partner’s network ... 80 society/ Gold on Marble ...................................... 100 event/ HeadStart’s Startup Saturday .................. 66
Paranjoy Guha Thakurta ... 82
62
Anurag Batra ........... 90
Investor of the month/ Vineet Rai CEO, Aavishkaar Venture Management Service The venture fund promotes development in rural and semi-urban India.
84 innovation/ A Low-cost Windmill
60
An innovation that helps farmers to pump out ground water from a depth of 50 to 60 feet and save fuel cost entrepreneur of the month
BALA PARTHASARATHY SNAPFISH
Parthasarathy talks about his entrepreneurial ventures, his successes and challenges, and his gradual decision to be MD, Asia Pacific, Snapfish, HP
INSEAD/ Telibrahma ............................................... 28 TePP steps up India’s innovation.................. 54
NEN / E-Week 09 ............................................... 94
others / Exchange ............................................... 10 Feedback ............................................... 14 MARCH 2009 5
www.dare.co.in
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blogs/edit
Swim or sink together The current crisis has made it amply clear that the global village is a reality and none of us can escape the results of acts of omission or commission of each other. In today’s economy, we swim together or we sink together. There is no other way. The days of winner takes it all is over.
I
ndia will ban Chinese toy imports for six months, America will not give tax breaks to companies offshoring jobs.... A new type of economic warfare is breaking out.
As world economies contract, governments are resorting to protectionism as stop gap measures to rebuild growth. In the process, they are avoiding facing original problem; they are avoiding correcting the basic mistake. Nobody questions the fact that the current global turmoil has its roots in the questionable and ultra-sharp financial practices that the leading investment institutions in the west resorted to and in the complete abdication of control on the side of their governments. Instead of moving to correct those basic problems to ensure long-term robustness of the global economy and their individual chunks in it, governments are themselves resorting to short-term measures for short-term gains, much like what the business conglomerates did in leading us to the current situation. While businesses are still working on the next quarterly results to governments are only focused on the next election. The current crisis has made it amply clear that the global village is a reality and none of us can escape the results of acts of omission or commission of each other. In today’s economy, we swim together or we sink together. There is no other way. The days of winner takes it all is over. It is unfortunate that our businesses and our governments are yet to act on this realization to ensure long-term stability and growth.
/Krishna Kumar
MARCH 2009 7
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• partners • mentoring • funding • guidance • advice • ideas...
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etter Life Foundation was established in Mumbai on 1st October 1998 for the welfare and wellbeing
I
am a management passout of NIFT-Chennai (National Institute of Fashion Tech). I am
of senior citizens. The beginning was self-supportive
interested in starting up an institute dedicated to
and hence we launched the SCOPE (Senior citizens
teaching core fashion business and retail. I have the
of Professional Excellence) Network. It was registered
drive in me because I want to bridge the gap between
in 2008 and projects related to widow upliftment in
books and the industry to give an industry, workshop
villages, children eduction, healthcare were added.
experience at college level, thus saving training cost
We are particularly working in Rajasthan now. We seek
for companies hiring students (which would be given
like minded persons and organizations to join us.
at the institute itself ). Please let me know as to how
Ashoke Arya, Founder President
I should go about doing it and what should I do as base research. I want a mentor who can guide me. Nandhakumar B.S
P
ublished: November 2008 Arjun Rajkumar is from Bangalore and wanted
help to form a base team for his next internet venture in the eduction business.
I
run an IT company in Kanpur, Uttar Pradesh. I have developed a product,EDUFRUIT.COM, a completely
innovative model for educational institutions. I am
Response: February 2009 I wanted to get the contact details of Arjun, who figured in the November 2008 issue of
looking for an angel investment of 20-25 lakhs in order to scale up the product nationally. INVESTMENT MADE: 15 lakhs
DARE in the Exchange section. Shailendra
SOURCE: Family & Own Funding CURRENT STAGE: Development Complete
Response: February 2009 I want to get in touch with Arjun who mentioned about wanting to build a team
TESTING: To be completed BUSINESS PLAN: Completed
in the Exchange section of November 2008 issue
MARKETING PLAN: Completed
of DARE.
INVESTMENT REQUIRED TILL: May last Via SMS
M
y hometown produces the world’s best mangoes - Devgad. Presently I am studying
Masters in London and am very keen to set up a business in my hometown. I have strong contacts in the local markets of Devgad, Malvan, etc. Kindly email me so that we can take this forward. Sagar Pednekar
10
MARCH 2009
Gaurav Yadav
I
am planning to start a rose polly house project on my piece of land. I do not have a money bank
ready to finance upto 1.5 crore (75% of my project). I am short of remaining 50 lakhs only. Can I have a meeting to discuss the same in detail, which will show the profits of the project. Dhiraj
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efore I get into the exact subject, I want to thank all the DARE team members for bringing
I
run an international call center in Nasik, and also do data entry work for a domestic client. For international, till now I have been dialing
out such a magnificent magazine for budding
outbound for US & UK clients. The processes that I entrepreneurs. I became a huge fan of DARE as soon as I saw the first edition. Since then I have never missed
have dialed till now are: a. National Health Network
a single edition, and have become a subscriber too.
b. Mortgage lead generation
Thanks again to you guys for this excellent job. It has
c. ID Theft
became an entrepreneur encyclopedia for me.
e. Charity for Police Officers and Fire Fighters (USA)
I am a design engineer by profession and am currently working with an MNC. I have a work experience of more than 5 years and have worked
For domestic, I am doing data entry work for : a. Rajasthan Government (form filling) b. Gujarat Government (data conversion)
with start ups as well as OEMs. As I have a strong zeal
c. Database generation for different government
to become an entrepreneur, I am planning to setup
d. CGHS card data entry and database generation
a state-of-art consultancy for empowering SMEs
e. TDS database generation
with innovative techniques. One of the example is
f. Starting with Airtel and Idea form filling process
implementing six sigma methodologies and
from next week
lean
techniques. In this regard, I need a mentor as well as a venture capitalist or angel funder who can invest and guide me through the journey.
The job that I am looking out for is: a. Data Entry Work b. PDF to DOC conversion work
Ramesh Kumar c. OCR to DOC conversion work d. Any type of data entry or you can say non-voice
F
process available
irst of all I would like to thank you for DARE. Like Anil Kumar, whose request was published
If any queries, please feel free to revert back to me. Sumit Das, Director (Technical) GIPL, Nasik
in February 2009 issue, I am interested in jute diversified products. I am also a mechanical engineer by profession. Can you please guide me by giving information about machines, machine supplier, raw material supplier, and about export through DARE. Pinak
I
can supply a variety of flowers at a cheap rate. Please let me know if someone has any idea of
how to sell it. Via SMS
MARCH 2009 11
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• partners • mentoring • funding • guidance • advice • ideas...
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e have a multi-vertical and horizontal ERP product called iWeb Enterprise Suite (www.
iweb.co.in) with a built in BI and Business Process Management Suite Agilewiz. All our products are
P
ublished: February 2009 Shilpa Dubey was planning to setup a kids
furnishing and furniture store in Noida, and wanted information on product sourcing.
web-based, and can work on the SaaS and SOA
Response: February 2009
framework. We are looking for marketing cum
Please refer to the query of Shilpa Dubey
implementation partners for our products. System integrators, consultants, hardware
/
in the Exchange column of DARE / Feb 09
software
issue. I would like to share that we want to discuss the
dealers / distributors, chartered accountants,
matter of consulting in the area of kids furnishing
auditors, consultancy firms all are most welcome to
and supplying it. I am also based in Delhi NCR. Priti
come together. Akshay Shah, Executive Director & COO iWeb Technology Solutions Pvt.Ltd.
I have been reading DARE for the last few months and have always wanted to start something of my own. As a professional working in the entertainment
A
month back I traveled to Israel and tasted
industry, I had a business idea, related to a deep need
frozen yogurt (looks like softee ice-cream). I
(that I myself face too), which has not been addressed.
want to start a new “Frozen Yogurt” softee parlor
So I see this as an opportunity but it requires an
in Bangalore and would like to know about the best softee ice-cream / freezer machines, ingredients for frozen yogurt, and agents / distributors for machine. If there is any research paper on frozen yogurt market
investment to the tune of about a couple of crores. I have worked for over 5 years in advertising creative, then took a sabbatical to study at FTII Pune, and am now a national award winning working Cinematographer in Mumbai, shooting movies,
in India, please pass it to me. I need a mentor in this
commercials and documentaries. I also run a couple
field (softee ice-cream) to guide me on the business
of blogs, and am very cued on to technology and
plan and execution of the same.
consider myself an early adapter. Sivakumar M
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MARCH 2009
Paramvir Singh
Beware of the wolf in sheepâ&#x20AC;&#x2122;s clothing.
Insure against payment risk with ECGC. ECGC provides credit risk insurance covers to exporters. We offer guarantees to banks and financial institutions to enable exporters to obtain better facilities from them. And we provide Overseas Investment Insurance to Indian companies investing in joint ventures abroad in the form of equity or loan. So whatever your need, come to ECGC.
Export Credit Guarantee Corporation of India Ltd., (A Government of India Enterprise) Express Towers, 10th Floor, Nariman Point, Mumbai 400 021, India. Tel.: (022) 6659 0500-10 Fax: (022) 6659 0517 Toll-free No. 1800-22-4500 E-mail: marketing@ecgc.in Visit us at: www.ecgc.in Mumbai (022) 26572740 Chennai (044) 28491013 Bangaluru (080)25589775 Kolkatta (033)22822218 Delhi (011)41506406
You focus on exports. We cover the risks.
Feedback DARE.CO.IN
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I have been a regular reader of ‘DARE’ for the past few months and greatly appreciate this endeavor to bring out a magazine solely focused on entrepreneurship. MAG Its sheer serendipity that an article on ‘Natural Ingredients’ came in your magazine when I am in the take-off stage of installing a manufacturing facility for ‘herbal and natural extracts’ at Bikaner. There’s a lot of gloom and the extent of the current recession is intimidating but I firmly believe that India as an economy shall emerge much stronger and resplendent from the woods. This is a wonderful time to be in India for never before in the history of this nation has there been such opportunities of creating lasting wealth and building fantastic enterprise. And as you very rightly
observed in your blog, some of the tallest names today have been born during recessions. Rtvik Sethia
E-Waste ARTICLE Your magazine has been helpful in more ways than one. I once read an article on e-waste recycling in Bangalore. Now here in my MBA at IE Business School, we are developing a business plan based on it. Thanks to DARE team once again. Ashutosh Agrawal, International MBA 2009, IE Business School.
Really Dashing magazine to read about! MAG I am a regular reader of the magazine
and found it quite lucid for not only start up companies, but established firms as well. They can learn about new things without many jargons and complex process. I strongly suggest all business or professional institutes to subscribe the same to create confidence in students. This will make India from power deficit country to super power economy. Ramesh Moliya GIR GAAY GORAS PVT LTD
Foot-operated paper bag machine ARTICLE This article published in the January 2009 issue of DARE recieved tens of quieries, mostly for striking a deal with the innovator K.J.Thomas. The innovator has replied on the website by giving his contact details.
Form IV (See Rule 8) Statement about ownership and other particulars about newspaper DARE to be published in the first issue every year after last day of February • Place of Publication
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Can we trust Pricewaterhouse Coopers? BLOG Re: Satyam, jhootam, fraudam, fasam! Satyam has produced one of the biggest scams (Rs. 7,000 crores) in the Indian corporate world. The auditors of Satyam have admitted that they signed the balance sheet without its verification and they will face its consequences. Our laws shouldn’t be weak and we shall punish them heavily so that tomorrow no auditor will dare to do such blunders. It is the auditor’s duty to verify not only the contents of financial statement but also its correctness, and on proper auditing (various auditing techniques) with due observation one can easily find frauds and forged documents. If the auditor fails in it, he is negligent in discharging his duties. The firm including all of its partners must be banned from practice in India. M. Kumar
Heritage Tourism ARTICLE This refers to the article, “Heritage tourism” – a historic opportunity (February). Heritage tourism is one of the mainstay of Indian tourism and a big attraction for both international and domestic tourists. Heritage tourism in India has grown in recent years but there is scope for further development which can be attained only through combined efforts of the government of India and the tourism boards. Besides personal love and interest in places of historic interest, the motivation to venture into the business of heritage hotels was to ensure that these magnificent edifices don’t lose their charm due to neglect. The article clearly shows that we believe in the continuity and dynamism of Indian cultural heritage and it is our endeavor to help people from world over get acquainted with same. The number of important monuments and sites
in India is so great that a single tour to discover the multifarious facets of its wonderful heritage is not enough. India’s glorious past and cultural diversity make a potent blend which attracts millions of tourists each year to its heritage tourist attractions. Vinod C. Dixit Ahmedabad 20 things that improve your chances for loan or equity funding ARTICLE This article is really good. As I am looking for funding now, each line in this article is worth crores. For "DARE & me" it's just a beginning. It would be helpful for start ups, if you can provide in-depth information and some real examples. If you ask me my feelings after reading this article, "instead of getting nothing its better to get something" for me. Looking for more valuable information from your side. Kartikeya, Airlinejobz
CORRIGENDUM DARE January 2009 Pgs 88-89
There was a spelling mistake in 'Lemelson'. The error is regretted. — Editor MARCH 2009 15
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opportunity/commercial refrigeration
Commercial refrigeration A host of business opportunities exist for entrepreneurs in the Rs 1,100 crore industry /Vimarsh Bajpai
F
or TM Venu, the founder of Chennai-based Bharat Refrigeration, the last ten years have been that of brisk business and new opportunities. Having started with a small air-conditioning manufacturing unit 30 years ago, Venu moved fulltime into the commercial refrigeration business a decade back, riding on the explosive growth in the country’s US$ 383 billion retail industry. As orders poured in, he expanded his product line from water-cooled chillers and blast freezers to ultra-low temperature freezers and cold storage rooms. Today, the boisterous domestic demand ensures that 90% of his production is gulped by the Indian market and only 10% is what goes into exports. “There is high demand for refrigeration products from sectors such as agriculture, dairy, retail and pharmaceuticals. The supply side, however, is limited,” he says pointing to the opportunities that remain untapped. The lure of the commercial refrigeration industry, growing at around 35% annually, has got global players such as Blue Star, Godrej & Boyce,
Industry Segments • Deep freezers • Commercial freezers • Cold storage
• Cold rooms
• Bottle coolers • Display cabinets • Ice cream machines
• Ice-making machines
The list is indicative.
Bitzer and Haier to get active in this segment. They are now rolling out new product lines to meet changing consumer needs. It is on the shoulders of developing economies such as India and China and some countries in Latin America that the global demand for commercial refrigeration equipment is likely to touch $29.3 billion by 2012, according to the latest estimates by the Freedonia Group, a US-based market research firm. It believes that the growing number of food retailers
Opportunity Areas • Manufacturing • Assembling • Servicing
• Retailing
• Renting
• Distribution
and restaurants will fuel the growth of this business.
The business A number of opportunities in the commercial refrigeration business beckon entrepreneurs. These include manufacturing, assembling, installation, distribution and retailing, servicing, exports and refrigerated cargo movement. A large part of the industry is in the unorganized segment, and many players provide a multitude of services that overlap. However, big players also outsource plenty of manufacturing contracts to local players. As these equipments are used across sectors such as retailing, pharmaceuticals and agriculture, the demand is perennial. However, the performance of downstream sectors do fluctuate the demand-supply matrix. Even if enough demand is not generated, as is the case these days because of the economic slowdown, the replacement business still thrives. Many retailers and companies trash out older equipments in favor of more innovative products and newer models. Some may
• Refrigerated cargo movements
The central government’s Directorate of Marketing and Inspection provides consultancy and technical services to prospective entrepreneurs for the construction, maintenance and operation of cold storages. The Directorate also helps prepare a master plan for cold storage requirements at micro/macro levels, conducts seminars, problem-oriented studies and coordinates research in cold storage. 16 MARCH 2009
DARE.CO.IN
opportunity/commercial refrigeration even bend in favor of products from multinational companies that may offer time-bound free service contracts. But this does not deter local players from striking a chord with their regular customers with prompt delivery and top-of-the-class service. With India being a low-cost manufacturing destination, a number of big multinational players are seeking to set up manufacturing units here. This would also help them service their clients better. Manufacturing is an intricate business and quite challenging. Setting up a small plant requires high investments in terms of land, machinery, technology and manpower. According to an industry player, even the smallest unit could cost you anywhere between Rs 5 to 10 crore. More than manufacturing, it is testing for high quality that could leave small players in a tizzy. The Bureau of Energy Efficiency accords star ratings to electrical products, and these could sway customers in favor of highly-rated products. Thus, more than manufacturing, it is the assembling business that is more promising for newcomers. “Technical knowledge and understanding of how this business works is very important,” says Vinod Kumar Rekhi, Managing Director, Patton Refrigeration India. Patton is a New Zealand-based company that is into manufacturing and wholesaling of refrigeration equipment. There are a lot of players who do the assembling work for big companies. Rekhi insists that getting into the servicing business is also a great opportunity. For example, if Voltas was to set up a cold storage unit for its customers in a small town in Ludhiana, it may outsource after-sales services work to a local player
Cold Storage India is the second largest producer of fruits and vegetables in the world. Despite the enormous increase in the amount of perishable goods to be stored, the availability of cold storage facilities in the country is not enough to meet the demand. A case in point is the plight of potato farmers, who, despite the bumper crop this year are facing a crash in the price of the commodity, as much of their crop has been devastated due to the lack of cold storage facilities. Cold storages are used to preserve food and other perishable items such as flowers so as to retain their original color, taste and flavor for a long time. These storages form the backbone of the food supply chain, and are used to store the produce. According to government estimates, at the start of 2007, there were 5,101 cold storages in the country. The combined capacity of these facilities was 21.7 million metric tons. Approximately 66% of these facilities are in the states of Uttar Pradesh and West Bengal. Highlighting the shortage of cold storages, an expert committee set up by the Department of Agriculture has made a strong case for creation of additional cold storage capacity of 12 lakh tons. The committee has also sought removal of state control over cold storage tariffs. Cold storages are required not only for food items, but also for chemicals, medicines and flowers amongst other things. Cold storages alone are not enough. You need an uninterrupted cold chain—an uninterrupted chain of temperature-controlled storage and transportation infrastructure that can take the goods from the point of production to the point of processing and on to the points of sale and finally to the retail points. who could reach out to the customers faster than Voltas. This also offers a good opportunity to understand the nitty-gritty of what goes into the installing and servicing of such units. The distribution and retailing business in this sector is bound to grow at a fast pace in the coming years. If we believe that the ongoing economic slowdown is only a blip, the future for the commercial refrigeration industry is definitely bright. As the retail, restaurant and food processing industry is still in its growth stage, the day is not far when there could be a chain of retail stores showcasing products such as bottle coolers, deep freezers, display cabinets and chest freezers. “Reach-in and walk-in coolers and freezers are expected to be the fastest growing product group, due to their
DARE/estimates Avg cost of a chest freezer
Rs 12,000
Net profit margin
Rs 1,000
Total Retail outlets (2014)
5,50,000
Total size of opportunity
Rs 55 Crore
Assumption: Each outlet purchases at least one chest freezer DISCLAIMER: This data and analysis are indicative and Cybermedia makes no warranties about its accuracy. You are advised to do your own analysis if you are evaluating a similar venture.
widespread use in all the major markets,” says the Freedonia Group. These equipments are used by food processors, restaurants and food retailers, and the market research firm expects solid gains in developing regions. Export opportunities also exist for players in this segment, but it is most likely to happen in less-developed countries in the Asia and Africa region. This is because quality norms and stringent export regulations make developed markets a tough nut to crack for Indian manufacturers. Another area that is gaining traction is that of renting and logistics. Take the case of Evergreen Foods, a company started by Gagan Seth, a first-generation entrepreneur. Seth owns 110 refrigeration trucks that are used to transport perishable food products such as chocolates, fruits, vegetables and ice cream. This is another area that has grown substantially with the growth of the retail sector. Some companies rent out refrigeration products to small businesses on a monthly basis. The security deposit could vary depending upon the cost of the equipment.
The market The sheer number of products and their usage across a range of sectors MARCH 2009 17
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opportunity/commercial refrigeration
Q&A
Vinod Kumar Rekhi Managing Director, Patton Refrigeration India
How is the current economic slowdown affecting the commercial refrigeration equipment sector? The industry segment related to our daily needs, the effect would be much less because whether it is food or beverages, the demand will continue to be there. However, new projects are going to take the back seat for the next two to three quarters, while the replacement business will continue. Take the example of Subhiksha that is closing down its stores. In case a new player decides to enter the retail business, he is most likely to buy Subhiksha instead of starting from scratch. This means that no new demand for commercial refrigeration equipment is generated. There are many players in the unorganized sector. Are they able to meet the high quality norms of such equipments? The unorganized players have always been there. Initially, in air-conditioning, big players were present. Slowly, assemblers got into the business, putting together units because the government was giving duty concessions for assemblers. Now, duty rates are so low that even those concessions are not going to help assemblers and now the same is getting replicated in commercial refrigeration. In small towns, the contractors who till recently were working with big companies have started their own shops. But quality wise, they face difficulty in matching those of organized players. A lot of contract manufacturing is also happening. Big companies outsource work. Any threat from Chinese players? No, not really. This is because quality is a major issue in this business. Also, after-sales service is very important. It would be difficult for Chinese companies to service customers. What opportunities exist for entrepreneurs in this sector? Technical knowledge and understanding of how this business works is very important. Take the case of a cold room. It is all about assembling indoor units, outdoor units, insulation, panels, etc. Those entrepreneurs who have good technical knowledge can enter this sector. These products require a good after-sales service. So when they make their quotation, they should be able to take into account that cost as well. For entrepreneurs, the best thing is to start by taking service contracts from big players. So they become assemblers for big players. This would ensure a continuous flow of business and would give them a good experience.
DARE/world commercial refrigeration equipment demand Geography
2002
2007
2012
North America
5555
7000
8470
Western America
4860
5870
6960
Asia/Pacific
5605
7290
9680
Other Regions
2355
3240
4190
SOURCE: Freedonia Group 18
MARCH 2009
All figures in Million Dollars
makes the size of the opportunity enormous. Take the example of chest freezers. The prices vary depending upon the capacity. A 100 liter chest freezer costs Rs 11,000 plus taxes, while a 500 liter freezer costs Rs 20,000 plus taxes. Say the average price of a chest freezer is Rs 12,000, and profit margin on each is Rs 1,000. Presuming that the number of retail outlets across the country that have installed at least one chest freezer is 500,000 and in the next five years, the number of such stores grows by 10%, in 2014, the number of such stores would be 550,000. (see chart: DARE/estimates) Thus, the total size of the opportunity in freezers alone would be Rs 55 crore. Add to this the businesses that come from selling other products and that in itself is a long list. Even if we believe that the Rs 55 crore opportunity exists across ten other segments, the size of the opportunity becomes Rs 550 crore. Besides this, the services business is huge. Installation, manufacturing, assembling and refrigerated cargo movements make the figure shoot higher. Presuming all this to be of equal size as the products market, the total size of the opportunity will be a whopping Rs 1,100 crore.
The challenges Till some time back, before the slowdown hit India and the rest of the world, high prices of raw materials, such as steel and copper, were increasing the input costs of commercial refrigeration equipment. On one side, the slowdown has led to a crash in commodity prices leading to cheaper raw materials, while on the other, the demand for new products has gone down. Many of the retail chains are now postponing new buys leading to the increase in unsold stocks at the manufacturersâ&#x20AC;&#x2122; and distributorsâ&#x20AC;&#x2122; end. Providing top-class after-sales services is a big challenge. Getting good quality manpower is also a challenge. As the market is price-sensitive, one may lose customers even if the price difference between oneâ&#x20AC;&#x2122;s products and that of the rival is a few hunDAR E dred rupees.
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blogs/INSEAD
How to Evolve a Brilliant Venture Concept O
/Philip Anderson
A number of business schools and other educational institutions offer courses in creativity. Unfortunately, as I have described in a previous column, the end result is that students often troop in my office in despair because “the big idea” has not yet occurred to them. Somehow, they have been brainwashed into believing that if they don’t personally have a “Eureka!” moment three weeks into a course, they not only fail but are probably far more dull than are their classmates.
ne of the most interesting aspects of being an entrepreneurship professor is listening to company founders tell the story of how they got the idea for a venture. Inspiration can come from a walk in the park, a late-night conversation with batchmates, an article in a magazine, a frustrating experience at work or in your personal life, and so on. Seldom does the kind of formal market research that goes into new product development in an established company seem to enter into the picture. Entrepreneurs, it seems, must start with a spark of inspiration that is usually linked to personal passion. For this reason, a number of business schools and other educational institutions offer courses in creativity. Unfortunately, as I have described in a previous column, the end result is that students often troop in my office in despair because “the big idea” has not yet occurred to them. Somehow, they have been brainwashed into believing that if they don’t personally have a “Eureka!” moment three weeks into a course, they are not only failing but are probably far more dull than their classmates. [“Eureka” in Greek means “I have found it,” and is supposedly what Archimedes said in his bath when the idea occurred to him of using the volume displaced by an object to measure whether it was made of pure gold.] At INSEAD, the “business school for the world” where I teach, a young professor has brought a fresh and systematic approach to the problem of how wouldbe entrepreneurs can generate compelling venture concepts. Professor Karan Girotra grew up in south Delhi, earned a bachelor’s degree at IIT-Delhi, then completed his PhD at Wharton, before joining INSEAD last year. On both our
campuses (in Singapore and France), he is pioneering this year his own version of an established course, “Strategies for Developing Products and Services.” Girotra calls his approach to the course an “Innovation Tournament,” and in a short time, he has assembled a rabid following among the MBAs by helping them use nature’s technique for creating novelty—evolution. Why develop a research-based course on developing entrepreneurial ideas? Says Girotra, “As an entrepreneur all my life, I thought that coming up with business ideas was more of an art, so I’d sit somewhere waiting for lightning to strike. At times it worked and a great idea would come to me, but if you want to make entrepreneurship a career, you can’t wait to get lucky. The risk-averse operations management professor in me is not comfortable waiting for a great idea.” While a doctoral student, Girotra worked with pharmaceutical companies and was exposed to a different approach. He explains, “They don’t wait for magic to happen in the new drug development process. They pick up any new synthesized chemical and test it for certain properties. They were coming up with novel compounds and therapies by searching very broadly, not through a creative spark. I wondered if that would apply to other opportunities for potential businesses.” Girotra saw the same process at work when watching how graphic designers created a company logo. “They’d come up with 20 concepts, fine-tune them down to five, iterating and refining as they go,” he elaborates. As a teaching assistant for a new product development course at Wharton, Girotra helped a lot of MBAs incubate their ideas, and he ended up MARCH 2009 23
DARE.CO.IN taking time off to be an entrepreneur. “Terrapass came out of a class project, and I joined a couple of MBAs to run it for a while,” he relates. “We bought carbon offsets and allowed individuals to purchase them if they wanted to be carbon-neutral. I worked in that venture for six months, then returned to my studies while other people ran the business, which has received subsequent rounds of investment.” Building on the ideas to which he was exposed during his doctoral studies, Girotra designed an elective course at INSEAD meant to generate venture concepts like Terrapass that students could actually grow and run if they chose. Evolving ideas systematically is the theme of his course. Girotra says, “The main structure is a tournament. The idea is to generate variance, select, and then refine concepts between different rounds of selection.” The philosophy of the course is that cultivating and leaping on a “Eureka” experience is a bad approach. “When ideas come, you don’t know which are great and which are bad,” Girotra asserts. “You should never go to one idea right away. You need to let a lot of ideas come to you, then screen them sequentially in a spread out way. Do selection in multiple steps.” Girotra likens this approach to a reality television show. “All these shows, like Indian Idol, have the same approach,” he notes. “First, they cast a wide net. Then, they put contestants through a series of selection hurdles, eliminating a few every week.” Just as a reality show screens thousands of contestants, Girotra forces his students to start with hundreds of ideas. “I make people sit with an empty piece of paper for a dedicated time each day, forcing themselves to come up with ideas,” he says. “It takes diligent application of effort and a clear notion of what ‘an idea’ is. You want a concise description of both an un-met need and a solution, captured in 25-50 words. It’s not a full model of how a business will make money—an idea combines a market need with a solution.” Once each student has generated several hundred ideas, Girotra invokes 24
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blogs/INSEAD the “wisdom of crowds” to help winnow them. Using a web-based system called “The Darwinator,” students upload a brief description of each concept. They are then required to rate one another’s ideas. [The web site is freely available at www.darwinator.com for DARE readers who are interested in giving it a try.] Says Girotra, “You need 18-20 data points to get a feel for how good an idea is. In a class of 50 people, I get everyone to rate 200-250 ideas of their peers, which takes about 2.5-3 hours of work. However, many people go far beyond this and rate hundreds more ideas, because it is just engaging.” Just as the voting on a reality TV show doesn’t always eliminate the weakest performers, The Darwinator doesn’t always eliminate the worst ideas. “Early on, you need a quick and dirty method that is efficient, though maybe not as accurate as possible,” Girotra explains. Later in the course when we get down to a few ideas, we use an innovation workshop that is more accurate and less efficient.” The Darwinator’s effectiveness also depends on how well-suited the raters are to the idea. Girotra comments, “MBA students give good feedback for products and services that are designed for 25-25 year olds who are cosmopolitan and upper-middle class. A large crowd can be fairly efficient in evaluating more generic ideas. However, if you were looking at the latest nanotechnology application, for example, you’d need a panel of experts.” Once students have identified the top half of their ideas via feedback from The Darwinator, Girotra has them evaluate each idea via a series of stages. First, having matched a need with a solution, he forces students to come up with five alternative solutions for each needs. “This is the equivalent of mutation,” he says. Then, he has students evaluate the economics of delivering each alternative. How much investment is required to achieve what cost of delivery at what possible scales? For each idea that survived the Darwinator, the student chooses which of the five solutions seems most economically appealing, then winnows the
set down based on how they compare in attractiveness. Next, Girotra has the students reduce market uncertainty by building a prototype of the user’s experience with the most promising products or services. “I want my students to get away from spreadsheet models and do something tangible,” he clarifies. “I ask them to take a prototype to five people for feedback, get their hands dirty, look for what people like and what they would be willing to pay.” After another round of selection, the most promising survivors are analyzed for ease of execution. “You list the tasks required, the cost of each task, and the uncertainty reduction you will get from each,” Girotra elaborates. “Then, you pick the alternative that lets you eliminate the key uncertainty as quickly and as cheaply as possible.” By putting his students through a careful, step-by-step process of searching wide, selecting carefully, and taking advantage of the wisdom of crowds, Girotra helps students transcend doubts about whether they are creative enough to be entrepreneurs. Why do they come up with better concepts? “The best five out of 500 ideas will be better than the best five out of 100 ideas,” Girotra explains. Perhaps it is not surprising that this is the approach adopted by an IIT graduate, a survivor of the relentless numbers game that sends the best of the best of the best to India’s most elite institutions. Experience suggests that successful ventures evolve from the idea originally pioneered in a business plan. The concept with which an entrepreneur starts seldom survives the test of the marketplace—some descendant of the original idea, often so changed as to be unrecognizable, is the one that finds a customer base. As your initial idea will evolve anyway, why not use the power of variation, selection, and retention of the survivors to evaluate ideas systematically and find a useful starting point for evolution to continue? That’s the key thought driving Karan Girotra’s innovation tournament approach. D A R E The author is INSEAD Alumni Fund Professor of Entrepreneurship, Director, Rudolf and Valeria Maag International Center for Entrepreneurship and Director, 3i Venturelab
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Photo: iStock
Shipbuilding—India Aspires to Emerge as a Leading Player
Even with an eternal history of shipbuilding, India was never a major shipbuilding nation. With cheaper labor and efficient working conditions on offer, India has started emerging as a force to reckon with in this sector. India, which plans to make all kinds of commercial ships, aspires to be a US$ 20 billion industry by 2020
D
espite a legacy of over thousand years in shipbuilding, India is far from being a major player in the $200 billion global industry, dominated by Korea, Japan and China—the trio together having 75% of the overall market. The shipbuilding industry is interlinked with shipping, which, in turn, is intricately connected with the international trade of a country. Trade might have dipped in the current global scenario, but India’s exports have grown from $44 billion in 2002 to $163 billion in 2008 (CAGR of 24.5%), and imports from $51 billion to $251 billion (CAGR of 30.3%) in the said period. This has augured well with the shipping industry, and shipbuilding activity has also increased as a result. India aspires to be a leading player in the shipbuilding industry by 2020. Market size is estimated to grow
/Ambrish Jha Shipbuilding: Important Facts Number of shipyards in India => 30-40 (27 being actively operational) Investment required for shipyards=>Rs100 crore -Rs4500 crore Market size of shipbuilding at present=> $5 billion Market size of shipbuilding expected in 2025 => $20 billion Number of ships being built at present => 250 Shipbuilding capacity at present (in terms of cargo carrying capacity) => 2.8 million ton Shipbuilding capacity by 2012 (in terms of cargo carrying capacity)=> 4 million ton Shipbuilding capacity by 2017 (in terms of cargo carrying capacity)=> 19 million ton Percentage of ships built for exports => 75% from the current $5 billion to $20 billion by then, when India will have 15% of the global market. This piece is an attempt to give an overview of the Indian shipbuilding industry and strategies different players involved in the industry have adopted, and how the industry is coping with the slowdown.
History & overview Traces of shipbuilding activity in India can be traced to the Harappan days, but in the modern sense, it took off in the 1990s when India’s share in the global trade started increasing gradually. Initially to mitigate any possible risks of downtrend in shipbuilding, shipMARCH 2009 25
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Major shipyards According to the report of the Working Group for Shipbuilding for the 11th 26
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Photo: iStock
yards were equipped with ship repair facilities. Private players started shedding their initial reluctance once they were sure of the surge in demand and support from the government. According to the report of the Working Group for Shipbuilding for the 11th Five-year Plan (2007-2012), India’s shipbuilding sector grew by 72% with an average rate of 15% per year during the10th plan (2002-2007). Contrast this to the average growth per year of only 4.5% achieved during the 9th plan (1997-2002) and one can understand how shipbuilding has evolved gradually in India. Increase in trade, coupled with availability of cheaper and efficient labor, created an encouraging environment for the shipbuilding industry in the country. Indian efforts received a boost by a directive from International Maritime Organization (IMO)—a UN affiliated body responsible for improving maritime safety and preventing pollution from ships—to phase out all single hull tankers by 2010. This has fuelled demand for replacement ships, considering almost 32% of the fleet worldwide at present are single hull. Demand is getting further encouragement from an internationally accepted regulation of replacing 25-year old vessels with new ones. At present, almost 65% vessels in use are over 15 years old. Rise in exploration and production activities has also helped in sustaining demand for vessels of particular types. No wonder, order books of major shipbuilders in India are full till 2012. It should, therefore, come as no surprise that a number of new players have shown intent to enter shipbuilding with various kinds of investments. Steelcast, a Gujarat-based company, with an annual turnover of Rs18 crore, is setting up a greenfield shipbuilding facility in Bhavanagar with an investment of Rs100 crore. ABG Shipyard, on the other hand, is going ahead with its Rs400 crore plan to build a new shipyard at Dahej. Reliance is reported to be spending some $2 billion on shipbuilding.
opportunity/manf
Major Shipbuilding players 1. ABG Shipyard 2. Bharat Shipyard 3. Cochin Shipyard 4. Hindustan Shipyard 5. Mazgaon Dock 6. Pipavav Shipyard 7. Chowgule & Company 8. Goa Shipyard 9. Dempo Shipbuilding & Engineering 10. Tebma Shipyards Five-year Plan, there are 27 shipyards around which Indian shipbuilding is based. Of these, eight are in public sector (six under the central government, and two under state governments) and the rest are in the private sector. ABG Shipyard and Bharati Shipyard, largest of the private shipbuilders, are based in Mumbai, while Chowguhle and Dempo are based in Goa. Major public sector players include Vishakhapatnam-based Hindustan Shipyard, and Cochin-based Cochin Shipyard. Pipavav Shipyard, sitting on order books of Rs4,360 crore, is working on building the largest shipbuilding facility in India 130 kms east of Bhavnagar in Gujarat. The Shipyards Association of India (SAI), a lobbying body of the Indian shipbuilders, insists that investments in new shipyards are moving forward.
Shipyards are usually built taking into consideration a lifespan of 100 years, which is bound to see many ups and downs in the global economy. This explains why Indian shipbuilders are going ahead with their plans to build their own yards despite problems with raising finance. L&T, which already has a shipyard at Hazira, has, however, decided to scale back investment on its upcoming shipbuilding facility at Katupalli near Chennai. It had expressed intentions to spend Rs3,000 crore on this. Shipbuilding activity is expected to remain strong in India for another two decades, for it has moved here as a spillover from other countries. The industry started moving from Europe to Asia in the 1960s. First it moved to Japan and from there to Korea, and subsequently to China. With slots full in these countries, India has emerged as a new favorite. From India it is expected to move to Vietnam, which is already being seen as a force to reckon with.
Government policy Though order books for Indian shipbuilding players, whose 70-80% orders come from foreign companies, are full till 2012, new orders are too hard to come by in the current slowdown. Global players like Hyundai and Daewoo are also feeling the heat. The role of
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opportunity/manf the government thus assumes significance for the shipbuilders. Shipbuilders are lobbying with the government to continue with the subsidy scheme that was in place till August 2007. Prior to August 2007, Indian shipbuilders were given 30% subsidy on all ship sales to foreign firms and on ocean-going merchant vessels more than 80 meters to domestic clients. The abolition of the subsidy scheme, according to Shipyard Association of India, has adversely affected new orders, as Indian vessels are now pitched unfavorably against those from Korea, Japan and China, where subsidies are as high as 40%. The old subsidy scheme is now expected to be re-implemented from April 1 this year. KPMG, which was hired by the Shipyards Association for a study on shipbuilding subsidies as prevalent in other countries, has advised the government to confer infrastructure status on shipbuilding activity. This would render the sector applicable for tax holidays extended to infrastructure companies. KPMG also asked the government to extend the subsidy scheme till 2017. However, things are not so honky dory even discounting the current slowdown. India is building ships of small to medium sizes only, with shipbuilding capacity limited to 110,000 deadweight tonnage (even though some shipyards have capacity to build very-large crude carriers). Mechanization at shipyards is non-existent and productivity level is quite low. What still makes shipping companies approach India is the nonavailability of slots at the yards in Korea, Japan and China, and availability of relatively cheaper labor. Tonnage tax had received good feedback initially, and private players were encouraged to step up investment in shipbuilding. Under tonnage tax system, income tax is levied on a predetermined fixed scale on the basis of presumptive income of the net tonnage of each ship. There are reports that this had reduced the incidence of tax to as low as 3%, and this spurred shipbuilding activities. Order books of Indian players grew from Rs816 crore to Rs21,800 crore by 2007 end. But
Labour costs in shipbuilding Country
Labour costs ($per annum)
China
729
Indonesia
1008
India
1192
Philippines
2450
Thailand
2705
Malaysia
3429
Korea
10743
Singapore
21317
SOURCE: Ministry of Commerce & Industry
benefits have been offset by the introduction of a number of service taxes and dividend tax. Effective service tax, according to tax experts, has jumped from 8% in 2004 to 12.6% by 2008. This has affected foreign direct investments (FDI) adversely, as is reflected in almost zero FDI in shipbuilding in the last two years, despite 100% being allowed. While China is trying to become the most preferred shipbuilding destination in the world by 2025, the Indian government, through its National Maritime Development Program, plans to turn India into one of the leading players. In pursuit of this the government has brought custom and excise tax for shipyards on par with export-oriented units, and has exempted capital goods meant for shipbuilding from customs duty.
Future Shipping companies have started putting their expansion plans on hold, thanks to credit crisis and plunging sea rates. After all, ships purchased by them generally have an 80% debt com-
ponent. Speaking at the India Shipping Summit in October last year, Tobias Konig, managing partner of Hamburgbased shipping investment firm Konig and Cie GmbH, had said there would be no new business in ship financing as European banks had ceased extending credit line to ship financing in 2008 itself. Slowdown in the shipping industry, though, will not have an immediate impact on shipbuilders as lead time from placing the order to the date of delivery of vessels varies between three to four years, and, most of the players have orders booked till 2012. Adverse affects have, though, started surfacing. The Shipping Corporation of India has postponed its Rs500 billion fleet expansion plan, and Essar Shipping has canceled orders for three vessels. Private companies like ABG and Bharati are putting up a brave face. ABG Shipyard had made an impressive net profit of Rs1.6 billion in 2007-08 - a growth of 38% over last year - with a sale of Rs9.7 billion. Bharati, which had registered 47% jump in its profit in the same period, expects to continue growth of 30% to 40% in 2009, according to agency reports. However, going by the way their stock prices have plunged, it seems market is expecting a sorry year ahead. Shares of ABG Shipyard have fallen by over 50% since 2007, while that of Bharati by as much as 80% from the beginning of 2008. Their old orders, however, look quite impressive. Bharati, for instance, is working on an order book of Rs48 billion. According to an analyst working with a shipbuilder, “The key to keep floating in these troubled times is to ensure that jobs already assigned on order books remain firm in place. It is difficult considering the largest global player Hyundai is also seeing orders getting canceled.” Banks need to realize that financing ship acquisitions would remain a profitable portfolio for them in the long term. Asian banks need to step in for European banks, traditional finance providers for the industry. Perhaps it’s time shipbuilders should ponder newer ways, like offering deferred payment facility to shipping companies. D A R E MARCH 2009 27
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case/INSEAD
Telibrahma The story of the Bangalorebased mobile solutions company and the entrepreneural journey of its founder has a lot of learnings embedded in it
Since the launch of Telibrahma’s “BluFi” network in 2007, the company had acquired hundreds of high-traffic locations such as stadiums, malls, coffee shops and movie theaters. As customers roamed from one to another, they were remembered and served innovative content, entertainment, and advertising from a central bank of servers 28
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N
arasimha Suresh felt a wave of pride wash over him as the batsman from Bangalore’s Royal Challengers IPL team stood at the wicket, awaiting the bowler’s next delivery. From his seat, he could see hundreds of his fellow fans bent over their mobile phones, many talking excitedly with their friends? A newcomer to the stadium might wonder whether the team’s fans had lost interest in their master blaster, but Suresh knew what was happening—the spectators were using their phones to get statistics, commentary, and even gossip between deliveries. While basking in the unmatched splendor and excitement of live cricket, they were also able to access all the commentary and information that made watching the sport on television enjoyable. How? Suresh’s venture, Telibrahma, had wired the stadium with a Bluetooth network accessible from anywhere in the stadium, and working with partners was delivering rich content plus advertising to those fans who had Bluetooth switched on. Since the launch of Telibrahma’s “BluFi” network in 2007, the company had acquired hundreds of high-traffic locations such as stadiums, malls, coffee shops and movie theaters. As customers roamed from one to another, they were remembered and served innovative content, entertainment, and advertising from a central bank of servers. Now, Suresh saw the company at a crossroad. Its original investor was closing its fund and needed to exit the venture, which it could do profitably thanks to Telibrahma’s success. What kind of strategic investor should Telibrahma look for, and how should it continue to expand in order to build on the unique position it had carved out? With a bitter economic recession looming, what was the best way to grow the company in an increasingly
/Philip Anderson gloomy market for young entrepreneurial ventures?
Suresh’s entrepreneurial path Suresh grew up in a middle-class environment in Bangalore, and graduated in 1996 from PES Institute of Technology with a degree in engineering. He joined Siemens’ operations in Bangalore because he wanted to develop software in a cutting-edge technology company. After three years, he joined a startup enterprise as its first employee. Explaining why a fast-moving young engineer would leave a prestigious company for an entrepreneurial venture, he explains, “I was extremely lucky because my family always supported my decisions and never told me what I should do. I think a person should know where he will be happy. I joined a startup as a design engineer for a type of learning and satisfaction you can’t get in a large company.” Suresh was hired as a design engineer by eCapital solutions, a venture providing software solution integration services for the telecommunications and financial services sectors. With Chase Manhattan and CIBC Capital Partners as investors, eCapital set up business competence centers in Europe and North America to help ventures rapidly develop solutions for enterprise customers. Suresh Comment, “eCapital wanted to do a lot of work in the mobile space, which was getting hotter in 1999. We were the first to deliver SMS transactions in the UK and the first to deliver mobile-based social networking and chatting solutions for telecom operators. Working there gave me a lot of insight into mobility and mobile technologies.” Additionally, Suresh learned firsthand how to turn an idea into a company. “I joined them to get exposed to the way startups are built.” he recalls. “If you focus on the fact that you are
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case/INSEAD
I was extremely lucky because my family always supported my decisions and never told me what I should do. I think a person should know where he will be happy. I joined a startup as a design engineer for a type of learning and satisfaction you can’t get in a large company. ny.
there to build a company with your peers, you can’t have a better learning ground than a startup. That’s exactly what happened in my case. But a startup is a place where you have to take a lot of initiative, and if you are not that kind of person, you shouldn’t join one. You can experiment a lot—you can suggest new products, new ways to sell products, new internal processes, and so on. If you expect the company to provide you an education, you won’t get one, but if you take initiative, you can learn so much.” Although he was hired as a design engineer, Suresh’s position gave him broad scope and flexibility, typical of a startup in which each key employee must wear many hats. This allowed him to expand his skill set beyond the technical. He says, “I was involved in a lot of activities, including product management and marketing. I build my own team and we designed our own product road maps. Nothing can teach you more than real world experience, and I never felt the lack of a formal management degree. In a startup, you should be okay to take risks and
make some small mistakes. That’s just the opportunity eCapital provided me and that I hope I am providing to others in my present company.” In 2002, eCapital spun off a separate venture called eVector, which developed a WAP-based Internet solution for mobile devices. Suresh went over to the new enterprise, but it was eventually closed, while eCapital was sold to Leading Edge. Suresh then worked at Wipro for nine months, defining solutions for different enterprise customers “That was a great learning experience, but I wanted to start something fairly quickly, so I took some small assignments for a while, and then launched Telibrahma in 2004,” he relates.
Telibrahma begins “eCapital and eVector gave me huge experience in mobility, and with wireless growing so fast in India, I thought the best opportunity would be to create a product company in that space because the market is here,” Suresh reminisces. “In Europe and the US, investments were happening again after the post-dotcom period, but not at a
— Narasimha Suresh
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Telibrahma initially grew as a solutions and IP licensing business. By 2006, Telibrahma was stable enough that the partners believed it was time to raise external capital and build a business that went well beyond building solutions for others
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case/INSEAD high rate. A lot of ventures were raising $500,000 to $1 million. Therefore, I thought there would be an interesting opportunity for an Indian product company to build some components and license their intellectual property to Western startups that had limited funding and needed faster time to market so they would have more ability to experiment.” To exploit this opening, Suresh decided to start a new venture with Ravi BR as co-founder. He explains, “I had hired him in eVector, and we worked well together; he was always with me. He was my most preferred partner, and he knew the mobile domain.” However, no funding was available in 2004 for such an early stage company, and neither partner had significant personal resources to invest. “We had to base the company on positive cash flow and profitability from day one, and the 2004 economic scenario let us do exactly that,” Suresh says. “We focused on mobile solutions, marketing to companies in the US and Europe. We built applications and components ourselves.” Ravi specialized in technology, while Suresh concentrated on sales, marketing and customer relationships. “Once you decide to become an entrepreneur, you then have to do what is good for the company,” Suresh says. “I felt that instead of hiring someone with a sales and marketing background who might not understand the technology we were trying to build, I should give it a shot, rather than recruit a costly resource. We had done
a lot of work for European clients in eCapital and eVector, so I had decent exposure to that market. I always had a pretty good personal network, and the people who gave us our initial orders knew me from my earlier career and various forums.” The partners did try to bring more seasoned functional managers, but that proved problematic. Suresh Recalls, “We hired a couple of management graduates to join us, but I realized that entrepreneurship is a different ball game. We had a small period in 2005 when we were not able to draw salaries from our cash flows, and some of the management guys could not withstand that pressure, so they left the company.” However, the partners were able to use their personal networks to hire versatile people who could fill in where needed. Suresh comments, “Both of us had to agree that someone was the right guy before he could become part of our team. Fortunately, the people we hired scaled up well, and most of the people who joined us in the early days at very low salaries continue to be with us today.” Telibrahma initially grew as a solutions and IP licensing business. Suresh explains, “Our first two years were all about technology ideas. The pitch we had was, ‘Here is an interesting feature or extension, and we will help you go to market with it.’ For example, one customer wanted to do a mobile search engine to serve the city of London, and we customized a module for them, handed it over, and helped them go to market in two months instead of
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case/INSEAD spending six months in R&D to do the same thing. Using our existing contacts worked for us, telling other entrepreneurs how we could help them.” By 2006, Telibrahma was stable enough that the partners believed it was time to raise external capital and build a business that went well beyond building solutions for others. “We were a profitable company and had some intellectual property, so we thought we had a decent chance to raise funds,” Suresh says. “We were thinking about a mobile ticketing platform.” An investment banker whom Suresh knew connected the entrepreneurs to Karnataka Information Technology Venture Capital Fund (KITVEN), a SEBI-registered venture capital fund backed by the Small Industries Development Bank of India (SIDBI). Suresh comments, “They were one of only two or three companies in India that were funding startups then, unless you were incubated in an IIM or were an ex-Google employee. I knew about them through forums such as The Indus Entrepreneurs. We had a good balance sheet and solid Intellectual Property, but we didn’t have so much clarity about what kind of opportunities mobile ticketing could offer. You had to build a lot of story in the future, and we thought we needed an unconventional venture capital backer who was slightly aggressive.”
Building a new network In 2006, after KITVEN invested Rs 1.25 crore for an 11% stake in Telibrahma, the partners began planning how to deliver a mobile ticketing platform in India. “We realized that you need the right channels and scale for that, but transactions weren’t happening in the mobile channel as fast as expected, so we changed plans,” Suresh says. “We needed to create an infrastructure that would drive more transactions.” What else could the partners target? Suresh Say, “Our original plan was to focus on India, so we started with that. We thought the mobile telephone operators were too strong to take on. Working with operators was a space that looked taken up, and it seemed difficult to differentiate ourselves as a startup. Therefore, we thought, why not build our own network that would be well-suited for value-added services?” Telibrahma had few options if it wanted to bypass the problem of depending on mobile operators. “Only 1% of the phones in a country such as India can use WiFi. Only 4-5% of phones here could use GPRS. So the only option in terms of building a differentiated story was Bluetooth. That would let us deliver a rich media experience to consumers away from the operators, and get ahead because there were no 3G services, and it looked like the
In 2006, after KITVEN invested Rs 1.25 crore for an 11% stake in Telibrahma, the partners began planning how to deliver a mobile ticketing platform in India. “We realized that you need the right channels and scale for that, but transactions weren’t happening in the mobile channel as fast as expected, so we changed plans,” says Suresh
data costs would be huge when they arrived”, elaborates Suresh. A number of entrepreneurs were creating Bluetooth-based companies at the time, but Suresh thought their approaches were misconceived. He explains, “A lot of people were putting a hot spot next to a shop, offering a coupon to whoever passes by. But that just creates a lot of spam, which consumers don’t like. None of them had scale, and none of them was thinking at a large level.” Telibrahma’s leaders pursued a different angle, resolving to build a Bluetooth mobile media network in various parts of the country, across which they could offer free location-based services to consumers. It took a lot of R&D to figure out how to blanket a larger area with a high-speed network that could deliver rich media quickly to a standard phone, but the venture’s technical staff cracked the problem, and the company began building its network in November 2007. Suresh emphasizes, “We never saw Bluetooth as a proximity marketing tool. Our fundamental differentiation is that we see ourselves as a network layer. We wanted to build our own network to deliver location-based services instead of coupons. The idea was to cover a lot of high-traffic locations across India, such as theaters, stations, and malls, managing all of them centrally from our servers, as if they were one. People think of Bluetooth as something that works for a few meters around their mobile devices, but we can covert a whole stadium into a seamless network, and that’s what we call BluFi.” Thanks to proprietary techniques, a Telibrahma BluFi network could deliver videos of 400-500 kilobytes to most phones in less than ten seconds. The company positioned itself to its earliest customers as a technology solutions provider. Suresh relates, “We’d go to a mall, for example, and offer to build a low-cost loyalty management solution that would work every time a user walks into the mall. We took the approach of selling a solution, telling customers, ‘You are spending so much MARCH 2009 31
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Telibrahma’s leaders pursued a different angle, resolving to build a Bluetooth mobile media network in various parts of the country, across which they could offer free location-based services to consumers. It took a lot of R&D to figure out how to blanket a larger area with a high-speed network that could deliver rich media quickly to a standard phone, but the venture’s technical staff cracked the problem, and the company began building its network in November, 2007 32
MARCH 2009
case/INSEAD money delivering paper brochures, so why not send do e-brochures that you distribute via mobile phones?’ We’d offer location based services such as a social networking application for a coffee shop, or match updates in a sports stadium, or deal locators within a shopping center. We delivered interactivity tools that let our customers connect to people walking into a location or event.” However, to realize the promise of this model, Telibrahma had to overcome a number of barriers that had plagued other Bluetooth advertising concepts. Suresh explains, “We based our business on two proven assumptions—no one wants to receive advertisements on mobile phones, and no one has Bluetooth turned on.” The challenge was getting people to activate their phones and eagerly seek content from a trusted address. “We had to educate people to turn on Bluetooth,” Suresh elaborates. “We used a lot of different techniques. For example, we would do a partnership with a radio channel so that a disk jockey would tell the audience to go to a particular location; turn on Bluetooth; and send him a message. We put notices in newspapers saying that to get a news update, go to a particular location and turn on Bluetooth. The key to getting people to do it is to give them an interesting service via mobile. They won’t do it just to get deals. But a decent number turn on Bluetooth if you educate them and provide an interesting service that works.” Once a critical mass of locations was in place, Telibrahma was able to reach out to brands. “Location-based services delivered on our network are fundamentally different from proximity marketing, which delivers coupons to people who pass by an outlet. We create engagements for brands”, says Suresh. For example, Coca Cola wanted to enhance its recruiting presence in India’s top 15 management colleges and attract bright young graduates to join the company. Telibrahma built BluFi networks on these campuses and used content, contests and games to explain to students what it would be like to work for Coke. “We provided
games that were related to everyday work at Coke and asked students to play and report their results,” Suresh says. “We made it exciting by having students solve very interesting puzzles, decode messages, and so on. We also sent a lot of teasers describing things that Coke had pioneered, to convey the image that it was a cool, innovative place to work.” In another example, ICICI Bank wanted to excite its customers to download a mobile banking application. Telibrahma created a “BluFi” network across branches of the bank and put a poster in each branch encouraging clients to turn on Bluetooth while they were waiting in line. Over 100,000 customers downloaded the application over two months. Similarly, Telibrahma developed a set of movie trailers, wallpapers, and other information to help some producers of Kannada movies reach movie fans in locations near theaters. More than 50,000 customers downloaded content from locations near cinemas, while 40,000 more downloads were generated from a mobile van that moved around the city, advertising movies and educating users to turn on Bluetooth in the van’s vicinity. By late 2008, Telibrahma was operating a digital media network in more than 400 locations throughout India, serving more than 80 brands. That was accomplished through a significant company transformation. Suresh clarifies, “We had to become an organization that understands advertising, and that’s what we did in 2008. It was complex because we were a technology house with a hardcore technical team. Converting the whole organization into a media company was the biggest challenge I have faced.” On the one hand, Telibrahma brought in new talents. “We hired people from radio stations, people with brand backgrounds, and people who knew how to sell ads, and we ensure that we learned a lot from them,” Suresh says. On the other hand, the existing work force adapted. “We had a great level of passion, and people were willing to move into different roles,” he continues. “We had a fifty-person
case/INSEAD
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Telibrahma’s growth and success created excitement and high morale, even as economic storm clouds were gathering during 2008. By the middle of the year, however, Suresh realized that the company had reached a key point of decision. KITVEN was closing its first fund, having raised a second, and needed to exit technical team, but today we hardly have twelve people doing that. A lot of people agreed to take on new challenges. Our operations team manages 100 terminals in 14 cities around the clock. Our media sales team talks to brands and agencies about how to create engagements for brands. We often help customers get into mobile advertising, creating applications that look best on mobile devices.”
Telibrahma’s dilemma Telibrahma’s growth and success created excitement and high morale, even as economic storm clouds were gathering during 2008. By the middle of the year, however, Suresh realized that the company had reached a key point of decision. KITVEN was closing its first fund, having raised a second, and needed to exit. Suresh was confident that he could find new investors who would give KITVEN an attractive return on its investment, but two key questions arose. First, what kind of investor should the company seek? India had many more professional venture funds in 2008 than it had in 2004, and Telibrahma was no longer a struggling venture in need of seed funding. However, another alternative would be to find a strategic investor, such as an adver-
By late 2008, Telibrahma was operating a digital media network in more than 400 locations throughout India, serving more than 80 brands. That was accomplished through a significant company transformation TELIBRAHMA, CONTD. ON PG 88 ç MARCH 2009 33
INNOVATION
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Helping Kurumbai Gounders Earn a Better Living
/Anand Krishnaswamy
Shepherd Shivakumar (on the left) and Innovator Sudarshan (on the right) in discussion
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obichettipalayam, a small town in Erode, bordering Tamil Nadu and Kerala, evokes images of emerald green rice fields and rolling hills from the umpteen Tamil movies that have been shot in its scenic locales. Now these idyllic plains and hills are also the setting for a quiet revolution that is happening in the lives of shepherds who frequent the area. Named after the Kurumbai breed of sheep that they rear, the Kurumbai Gounders are a community of nomadic shepherds who traverse age-old routes covering the region bordering the Erode district, spilling over into the state of Kerala on the west, and northwards into Karnataka. While earlier extended families owned herds of sheep numbering thousands, today the numbers have fallen drastically and the average herd size tends to be
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750. Ewes have a five-month gestation period, thus producing two crops of lambs each year.
Butchers: Middlemen in the market The shepherds sell three- to fourmonth-old lambs and selected ewes to middlemen, who in turn supply to the mutton markets. The shepherds retain some ewes as parent stock, along with the rams. Until about 10 years ago this system worked well. Even though it is probably true that the middlemen always exploited the shepherds by not paying true value for the lambs, the plentiful availability of grazing ensured that ewes got adequate nutrition. This in turn resulted in healthy numbers of lambs being born. As the ewes were eating well and producing sufficient quantities of milk, lambs fed well, stayed largely healthy, and steadily gained weight during the first three
to four months. Even if the middleman cheated the shepherd, they could still make a comfortable living. Today, however, the scene has changed. The continuous shrinking of grazing pastures due to industrialization, as well as their conversion into rainfed cash crop farming, has led to a drastic reduction in green grass available for grazing. The ewes lack optimal nutrition, and as a result the lambs struggle to reach the weight of even 8 to 9 kg in four months. Besides, lack of proper nutrition means their immune systems are not robust, and mortality is high. To make a bad situation worse, the shepherds face severe labor shortages. Thus, while faced with the need to cover larger areas to give their sheep adequate grazing, they do not have enough laborers to help them do so. These factors have resulted in the creation of an unalloyed buyers market. Middlemen, often relatives of the town’s butchers, or butchers themselves, visit the shepherds when the lambs are ready for sale. They are experts at judging the weight and health of the animal, which they do by grasping hold of the sheep’s rump. After a quick check of its teeth to arrive at its age, they make their offer to the shepherd. Deals are struck for sheep pairs, with rapid bargaining for older or unhealthy animals. A healthy pair of lambs should fetch about Rs 1,300; however, the price paid often ends up as low as Rs 700. Although the shepherds also have the innate ability to judge an animal’s weight and health, the middleman can easily cheat them by under-quoting the weight by a kilogram or two. As the sole buyer, he bargains from a position of strength. Socio-economics also play a role and the shepherd–middleman link often can be traced back
INNOVATION to generations through family ties. A critical element in this whole mix is that the shepherds operate under perennial cash shortages. When they make their purchase, the middlemen also give the shepherds cash advances for the next cycle of breeding, thereby cementing their dependence through a clever combination of incentive and first purchase rights on the next crop of lambs.
Life on the edge The shepherds live hard lives, trudging long distances with their wards as they graze, caring for them when they fall sick, and penning them at night. There are all sorts of issues. For example, leopard attacks are common. They told us about one that attacked three sheep and was chased off by the shepherds and their dogs. However, one of the sheep did not survive the mauling. The sheep do not graze properly during extreme climatic conditions. During the rainy season, the presence of moisture on the grass puts them off. Similarly, during peak summer or winter the grass undergoes a change in taste, which results in poor grazing. During these times the shepherds are forced to cover a larger area to provide sufficient grazing. GV Sudarshan comes from a family that runs a livestock feed manufacturing company in Gobichettipalayam. After graduation, Sudarshan returned to Gobi to take care of the family business. Realizing the severity of the food crisis for the sheep, he first developed an innovative pelletized food concentrate, using knowledge and experience from the feed manufacturing business. To prepare this special concentrate, he uses extracts of cottonseed, rapeseed, peanuts, and sunflower. Added to this are grains like maize, jowar (sorghum), ragi (millet), rice, molasses, salt, and trace quantities of special minerals and vitamins. All this is compacted into pellets to increase the digestibility of the feed in the sheep’s rumen. This concentrate is fed to the sheep every evening when they return from grazing.
DARE.CO.IN For the ‘lean’ months, Sudarshan has another product innovation—he mixes in ‘waste’ material like maize, jowar, ragi straw, and corn cobs to this feed concentrate to make fodder pellets, which he describes as a semiwhole feed. Farmers earlier had no use for this ‘waste’ material and used to either throw or burn it. This semi-whole feed is given to the sheep during peak summer (May, June), winter ( January), and rains (October, November). Not only does this compensate for the suboptimal feeding of the sheep during these months, it also ensures that the sheep forage over a smaller area.
Sudarshan’s sheep rearing project was approved through a funding of Rs 582,750 by L-RAMP. The ongoing pilot project covers 2,000 sheep. Simultaneously, field pilots are on for Semmari, another breed of sheep. Sudarshan is also using the funding to develop an MIS using RFID (radio frequency identification) to track movements and data on the herds This means the shepherds can stay put in one spot for days, reducing the hardship of being constantly on the move, and of making and taking down sheep pens. Lack of fiber-rich food was only a part of the problem. Realizing this, Sudarshan pioneered two other innovations for this community—access to veterinary care and livestock insurance, both unheard of until then, for nomadic sheep. The fourth and final element in his model is the buyback guarantee that he gives shepherds. To prove his model and win the confidence of the shepherds, he offers these inputs—feed plus services—at his own cost, to be adjusted against the price of the sheep at the time of buy-back. Thus, the shepherds are at zero risk.
Sudarshan’s staff visits the flock everyday to monitor health and record weight gain. The itinerant lifestyle of the shepherds meant that previously veterinary care was difficult and insurance non-existent. There was no means of tracking the shepherds’ movements or verifying claims. With Sudarshan paying for veterinary visits and insurance, the shepherds now have better options than panic selling of injured or sick sheep to the everpresent middleman. Price is now fixed in a transparent manner based on weight gain, at the rate of Rs 50 per kg. Doing away with the imprecise method of grasping rumps to gauge weight, this model uses a weighing scale, and the shepherd participates in the operation. In informal trials that Sudarshan has run with one shepherd, lambs have reached weights of 12 to 13 kg at the age of four months. Sudarshan recovers his costs in two stages. First, he pays for 1 kg less than the actual weight to the shepherd. Thus, for a 13 kg lamb he will pay the shepherd Rs 600. Next, when he sells the lambs to meat processors in cities, he incorporates a margin that covers his expenses on feed, veterinary care, operational costs, and insurance. Shivakumar, a local shepherd and an early adopter of Sudarshan’s model, is a rugged man with a ready smile. Full of anecdotes about elephant raids on crops and forest foraging trips, he narrates how he and a friend recently lost 70 sheep at a railway crossing. Apparently, the Kurumbai sheep have an irresistible ‘follow-the-leader’ instinct, regardless of consequences. Thus, when one sheep jumped, all the rest followed even though the train was upon them. “Intha kurumbai aatto’du gunam ippadi thaan,” says Shivakumar in his lilting Gobi-accented Tamil. “This is the nature of these Kurumbai sheep.” And then he adds, with a mischievous smile, "and the shepherds are also just like their sheep. In three months, when the others see how my lambs have gained weight, they will all jump in!” DAR E Anand Krishnaswamy is a consultant with the Lemelson Foundation. MARCH 2009 35
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opportunity/xransport
The Business of Artificial Leather With issues like animal cruelty, pollution, low supply, and high price plaguing the leather industry, the demand for artificial leather is on the rise /Aswathi Muralidharan
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id you know that humans started making and using leather goods more than 7,000 years ago? At that time, though, the use of leather (in its crude form) was more for the purposes of protection than fashion. As times changed and technology developed, we learned how to preserve the material better, soften it, and dye it in vivid colors. When on one hand the strength, durability, and versatility of leather made it very popular, on the other the number of animals killed to manufacture the products and the pollution created by the industry raised many eyebrows. This led to the hunt for alternatives to leather.
The market Artificial leather looks and feels like natural leather, but is made on a fabric base rather than from animal skin. The fabric, due to its leather-like finish, acts as a substitute for leather and is fast replacing it in many industries such as footwear, upholstery, and automobiles. Today, the leather alternatives market in India and abroad is witnessing 36
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good growth, and the demand is expected to further intensify in the future. According to Rishabh Jain of Rishabh Velveleen, “In the next few years, this industry is expected to boom, thanks to better technology, animal cruelty issue, pollution, etc.” In comparison to the demand, the current supply of synthetic leather lags far behind, especially in the domestic market.” Says Jain, “Currently, nearly nine to 10 times of what is being produced domestically is imported from China.” Moreover, of the synthetic leather that is produced in India, only about 15 to 20 percent is exported; the rest is used for domestic consumption. This demand–supply gap coupled with the fact that synthetic leather is fast replacing natural leather from various industries is opening doors for more entrepreneurs in this sector. In India, the market for synthetic leather is highly unorganized, there are only a handful of players in the organized sector. As Jain puts it, “At present there are 10 leading players constituting the organized market, and about 150 to 200 small or medium level players who cater to the local
Annual requirement for synthetic leather Footwear industry
- 2,60,00,000 meters
Automotive industry - 3,20,00,000 meters Furniture industry
- 1,10,00,000 meters
Luggage industry
- 2,50,00,000 meters
SOURCE: Rishabh Velveleen
market.” Among the major names are Mayur Uniquoters, Rishabh Velveleen, and Manish Vinyls. Indian synthetic leather is exported to European countries and also to the US.
The business Though many alternatives to leather are now available, most synthetic leather is made from PVC and PU. On the basis of the process used, it can be classified into four types. The cheapest is made by a process called ‘calendering’, in which the PVC sheet is laminated to a fabric. “The other three are basically coating processes in which there are three categories – 100% PVC, semiPU, and 100% PU,” elaborates Jain. “In semi-PU, there is one layer of PU mixed with a layer of PVC and then the
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opportunity/xransport Top PVC export destinations 2006-07 (Figures in Rs lakhs) UAE
1712.67
US
1604.66
S. AFRICA
1361.98
FRANCE
1195.73
SAUDI ARABIA
645.92
SOURCE: Plastic Export Promotion Council (Plexconcil)
it would be 1 mm. The general range of synthetic leather starts from 0.6 mm to 1.4 mm. For the purpose of clothing, it can go as low as 0.4 mm, which is rare. The thickness depends on how much PU or PVC you are coating,” Jain adds. The companies manufacturing synthetic leather sell the product under a brand name of their own.
Photos: iStock
Leather vs artificial leather
skin is transferred to a fabric. In 100% PU, there will not be any PVC but only layers of PU.” Besides these, there is another type of artificial leather known as split leather or pleather. However, its inclusion in the synthetic leather category is debatable as it does not use a fabric base, but is manufactured from the second layer of skin (the first layer is used for making natural leather) obtained from animals. Compared to PVC, PU leather cloth is more flexible with a higher tensile, tearing, and bursting strength. Due to this, PU leather cloth has an advantage when used in making products with high stress tolerance like shoes and luggage bags. Another difference between PU and PVC leather cloth is that the former is washable, can be dry-cleaned, and allows some air to flow through. On the other hand, PVC leather cloth does not breathe and cannot be dry-cleaned, because that can make it stiff. The synthetic leather is made into different thicknesses depending on the end use. “If you take shoes, the inner lining is around 0.6 mm and the outer cover is 1.3 mm. If you take furnishings,
The synthetic leather industry is now on a high growth trajectory. One of the reasons for this is the high-pitched campaign against cruelty meted out to animals in the leather industry. This has resulted in growing awareness for an alternative to leather. The level of pollution (both air and water) created by tanneries has also led to an increase in the popularity of alternative leather. Besides this, a huge demand–supply gap exists in the natural leather industry. This, coupled with the high price of leather, has also been a boon in disguise for the industry. On its part, synthetic leather is cheaper and has a lower manufacturing cost. Earlier inferior technology was one factor holding back the growth of the artificial leather industry. However, with technological advancements, synthetic leather being produced now is much smoother, looks similar, and feels like leather. The fabric is versatile and is fast replacing leather in a number of industries.
Production process Synthetic leather can be made from several processes. Some of the common ones include direct coating process, transfer coating process, and wet process.
Direct coating process: This was the original technology used to manufacture artificial cloth. In this process the plastisol was directly coated to a woven fabric before passing through the oven and then embossed. However, the end product made from this process had limited use in industries such as the bag and luggage industry. Transfer coating process: In this process the coating is done on a release paper and then the film is released and laminated on to the fabric, usually knitted fabric. The end product from this process can be used in several industries such as upholstery, shoes, bags, etc. Wet process or coagulation: This process is used for producing PU cloth. The fabric is dipped into a bath of PU and the PU is then impregnated into the fabric. Split leather is also made using this process.
Challenges One of the major challenges for this industry is competition from Chinese synthetic leather. China is one of the major producers of synthetic leather, and up to 10 times the amount produced domestically in India is imported from China. This is due to two reasons – one, the demand for synthetic leather is high in India compared to the supply, and two, India still does not produce good PU leather cloth, which accounts for major imports. Another challenge is the sourcing for PU. Says Jain, “There are not many good manufacturers for PU resin. It is generally imported from Italy or China.” This also adds to the manufacturing cost of artificial leather. In India, another problem is that there is no communication platform for manufacturers. No association or industry body exists either. Besides these, this business also requires several clearances from the government such a pollution certificate. There are other quality certifications also, such as the ISO 14000 and ISO 9000, but they are not mandatory. In sum, despite several challenges, it appears that the artificial leather industry in India is an industry to watch DAR E out for in future. MARCH 2009 37
DARE.CO.IN an you begin with telling us about Shemaroo in brief?
C
I would love to talk about it, because lot of people do not know everything about Shemaroo as all of it is not visible. The company was started by my father Buddhichand H. Maroo way back in 1962 and was later joined by his brothers (my uncles) Atul Maru and Raman Maroo. It was at first a partnership with the Shethia’s. That is how the name Shemaroo came into being. Subsequently, we bought out their interest in the company, but we retained the name because it was already well- known. Shemaroo was started as a book circulating library, and then moved on to become one of India’s very first video libraries. That was the heyday of VHS. Gradually, my uncle suggested that it is not only about video distribution, but that the real play is in content. Hence, we evolved ourselves as we saw other emerging platforms. For instance, we positioned ourselves for cable when the boom happened, and grew in that. Similarly, we positioned ourselves for satellite and we grew with that. As a result of which we got into the still ongoing joint venture with Sony Entertainment Television, India. We basically positioned ourselves as the people who can make content available on any platform. We are known mostly for videos as VHS/VCD/DVD have always actually been available to consumers. However, we are also one of the largest suppliers on other platforms – terrestrial television, cable television, satellite television, and so on, which is not obvious or visible to the consumer, but is still a huge business for us. Just for instance, not many people realize that many movies being broadcast on Sony Entertainment Television have actually come from or via Shemaroo. Be-
entrepreneur of the month sides this, we have created our own technical capabilities such as our own post-production facility, where we can manipulate, enhance, digitize, and convert content to master DVDs and more. Now, of course, we are moving forward to newer platforms such as mobile phones, Internet, IPTV, etc. Also, we have ventured into creation of content in last four years. We have got into films, including mainstream cinema, with movies such as Omkara and Manorama: Six Feet Under, and animated movies such as Bal Ganesh and Ghatotkach. So that is a gist of where we are at this point in time – creation, aggregation, and distribution of content on multiple platforms.
Why did you work at Citrix when Shemaroo was given? Well, one strong value distilled by my elders was to not take Shemaroo as the given. Every member of our family has to be educated, has to get their share of work experience, and be capable of standing on their own feet. After achieving all this, Shemaroo was an option that could be looked at. As I was growing up, my love was in books, movies, and technology. I fell in love with computers at a very young age. 38
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/bio
JAI MAROO
SHEMAROO ENTERTAINMENT He is a second-generation entrepreneur in a company that has been in the business of bringing Hindi cinema to the Indian households for decades. Jai talks to DARE about his entrepreneurial journey, and shares his knowledge about business in entertainment industry.
/bio
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DARE.CO.IN I went on to do computer engineering in India, and then went to the United States get my master’s degree in computer science and engineering. It is only after this that I joined Citrix to gain experience in technology. I knew I was in the States only to gain experience, and I came back soon after, as I knew that to start something of my own it has to be back in India. To get acclimatized, I spent time in Shemaroo – from the ground up, learning about our business as well as the Indian business scenario. While I was at this, I realized that the new direction that Shemaroo needed to head, which was highly technology-driven, was a perfect fit with my background. Therefore, it was logical that rather than to create a completely different venture, I should treat it as an extension of Shemaroo. So, that is how it all happened for me.
The entertainment business is full of huge egos and black money. How does an organization do business in such a mix? The fact that we have been in this business for several decades helps a lot. We are reaping the benefits of the very strong relationships in the industry that our senior had established in their time. As far as handling egos is concerned, it is like any other relationship – trust helps a lot. In an industry that is not known for maintaining transparency, our values have always been maintaining transparency and building trust. Because of our decades of clean dealing, producers not only give us a chance for business, but even come back to do more business. For instance, many producers are skeptical about new platforms that are emerging fast. However, our relationship with them has been strong all the way, and they trust us for not misrepresenting them. As far as the black money angle is concerned, I think that has changed a lot now in the last decade. For instance, a lot of corporate organizations are entering this business, an industry status has been accorded to it, and banks are also getting involved, etc. We at Shemaroo have always been transparent about the business we do. There was a point in time when we were one of the highest tax payers in our segment. The fact that you are clear of all such activities, such as the black money aspect, helps you a lot in partnering easily with international companies and hence scale up.
Video library, film making, animation, post-production... how much time and effort do you spend on each? Why? Shemaroo has a strategic business unit kind of a structure, where each vertical has couple of key people heading them. It is not an owner-only company; we have a good team that we believe in. Therefore, we do not micromanage the business. We leave the team to do what they know best, and we only focus on the results. Over a period of time, we have managed to get some really great people, who are pretty much entrepreneurs in their own right, for running their respective businesses with a feeling of ownership. There are a couple of verticals where people have been with us for more than 20 to 25 years now. From a macro perspective, I focus on new initiatives. Early on, even when I started to take on more responsibili40
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/bio ties, it was made very clear to me by my uncles that there were the existing verticals that were well-established. The need of the hour was to have someone look at the plethora of emerging platforms and dig for opportunities in them. It also gets me involved in finding the right people and work with them till they developed a free hand to run the unit, and then I moved on to the next initiative. New initiatives are not just in platforms, but also in expanding our range. For years we were known for our Hindi content (movies and serials). Over time we have expanded our portfolio by bringing in a lot of regional content. We have one of the largest collections of Gujarati plays, Punjabi telefilms, etc. We have also expanded our category into health and wellness. Our bestselling recent products include Shilpa’s Yoga, Talks of Osho, Deepak Chopra, etc. We have got into edutainment, world cinema, and more. We have, in fact, even expanded from plain content into value-added services for the mobile platform. The way I see it, within content we have expanded our range into many types of content. We have also expanded our range of platforms on which the content goes.
What was the strategy of transition taking it from VHS to VCD to DVD to post-production to movie making to mobile and IPTV platforms? One of the challenges in general was dealing with the life-cycle of these mediums. For example, in the mid-90s when VHS died completely, it took several years before VCD could take off. One thing that has always worked for us is that we realize it is not about being in a single medium of distribution or a single platform. The days when VHS went down were actually the days when satellite and cable was doing really well. This has helped us ride through the rough patches. Because if one platform is not doing well, there is always another that is doing great. This strategy has really worked well for us. In terms of the format itself, like with any new format there is always a chicken and egg situation. You want to invest, bring the content out there, and make it available to the consumers. At the same time, you have to deal with the volumes not being there. Therefore, it boiled down to challenges such as how many movies should we release, what quantities do we come out in, how to bring the price point down at the same time, etc. For example, when we introduced VCD in the mid-90s and actually worked with Sony to do that initially, the price point was Rs 799 and Rs 999 for a VCD. The challenge was to make it viable, sustain it, and then bring down the prices as the volumes increased. Today, we are providing the same at Rs 69 and Rs 99 for regular movies, and Rs 149 for premium movies. A similar thing is happening with DVDs. It is only now that DVDs are getting the volumes, with prices coming down to the level that they are at today. Again, it took time, as people started buying DVD players but preferred buying VCDs to play in it, mainly because of the pricing. We worked on that, and also looked at how we can offer additional value additions in a DVD that will get the consumer’s attention.
DARE.CO.IN
/bio As for dealing with the technology changes throughout these mediums, we realized early on that we are not in the business of selling physical tapes or physical discs; we are in the business of selling movies. As long as that remains the focus, the technology change impact is not that much if the underlying medium is a VHS, VCD, DVD, or maybe Bluray tomorrow. But, of course, these technology changes did call for managing and understanding the technology as far as the manufacturing aspect was concerned. We worked closely with many manufacturers to understand the changes better and to make a viable business. Also, the fact that we had established our own technical post-production facility gave us a lot of control over the quality of the content. Just to put it clearly, from digitization up to the mastering of the product, the process is controlled in-house. So the only step that was not internal was the actual physical manufacturing or replication. We had to go back to do our homework for certain aspects like packaging. But even in that, since an audio CD was already out there in the market, we could learn from the music industry. But more importantly, the mediums with underlying technology changed, though fundamentally the logistics, sales network, distribution, etc. remained the same. The team that we had in place was able to adapt to the changing mediums.
provided Mahaan – the only movie with Amitabh Bachchan in a triple role on a VHS tape. We did that on VCD, and we are still doing that on DVD. We know that we are just shifting from the medium while still being in the same business of providing content.
Online DVD rental business is doing well. What is stopping you from being in that space? It is simply a case of priorities. Several years ago, we went back to the basics and thought about where we wanted to take our business if we defined ourselves loosely as an entertainment company. We actually came out with 27 business ideas. Then we decided which the mature ones were and which the growth ones; which are the ones accessible immediately with our core strengths and which are not, etc. We prioritized these in three phases. The first phase was expanding the content range and the distribution verticals. The second was businesses that were immediately related and were also key areas. Owning content (Shemaroo owns one of the largest library of negatives) and creating new ones was what got us into film production and animation movies. The third priority was which platforms to be on and
How do you identify when it is the right time to move on from one medium to another? It is part instinct, part luck, and part analysis. We believe in going into any new medium or platform early and experimenting with it. So one thing that helps in being prepared for the right time is diversification in verticals of our business. By understanding the emerging platforms early on gives us an edge when the market starts to take off. The fact that we are not reliant on one single platform for our source of revenue helps us have the luxury of making mistakes.
How do you decide on the time to phase out a dying medium or platform? Look at today’s scenario for instance. The VCD is still the bulk of the business, even as the DVD is emerging as the platform that will take its place. We foresee VCDs being here for at least the next couple of years. The DVD has grown a lot faster in the last one year. As the DVD grows to slowly challenge the market share of the VCD, one has to scale down the volumes that are released for the latter, striking a balance according to the market. That said, we have also always monitored the numbers of VHS players being sold, and so on for VCD players, DVD players, Blu-ray players, etc. It is not all that difficult to let go of the medium we are delivering in, because we know that we are not exiting that business. See, we
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We realized early on that we are not in the business of selling physical tapes or physical discs; we are in the business of selling movies. As long as that remains the focus, the technology change impact is not felt that much
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/bio
within those we wanted to look beyond just being a mere content supplier. For example, in the IPTV space we provide full content management solutions. As a part of this prioritizing, we focused more on the immediate distribution of the content business rather than on the end consumer touching business in some cases. So when it comes to the DVD rental business, our idea was to partner with the people running these businesses and facilitate that whole model. Hence, we have a commercial video model for them. In fact, we actually work with players such as Seventymm.com.
From among all the verticals that you are in, where is the big money? Clearly, the most mature and largest market is the broadcast business. Say, for an individual movie, the largest revenue comes from theaters, then satellite, then overseas, then home video and audio, and then emerging mediums like the Internet and IPTV. Our revenue at Shemaroo falls in similar lines. Film production and animation are also big revenues, and increasingly creation of content is important to our plans for going forward. About the money splitting for these, it is not much of a financial decision. Obviously, if the film production and broadcast businesses require heavy working capitals, the largest allocation is for those businesses. The way that we ensure that upcoming businesses do not lose focus is by having them as separate divisions, with a separate team and resources, which are fairly semi-independent. This helps us prioritize.
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them, etc. Third, we work with the government to strengthen laws. Fourth, we have our anti-piracy team that does market surveys and reports them to the law enforcement agencies. This is not only at a company level, but we do this at an industry level as well. For example, we cooperate with other labels where we inform them if we find pirated versions of their products, and vice versa. Last but not the least, we work at it from a business angle, which is to say, we are in this constant endeavor of bringing down the prices. We also work with the movie producers to shorten the hold-back window because a lot of piracy happens between the time the movie releases in the theaters and the time the official VCD/DVD product comes into the market. For example, if this window is four weeks, one needs to deal with piracy from the day of movie release in the theater till this time. We constantly work with the producers to shorten that window – it used to be six months, which was brought down to three months, to eight weeks, and now there are movies that we release one or two weeks from the theatrical release.
Give us an estimate of revenue loss due to piracy? For videos, in the total number of copies sold for a movie, only 10 to 33 percent of that is official. In other words, 60 to 90 percent of the video discs brought are pirated. Looking at it from the other side, in terms of volume, whatever we are able to legally make from a single film, almost three to 10 times that amount is being made by the pirates. Of course, in revenue terms it may be a little different. It is not just a loss to the industry, it is also a loss to the government – hence, we work with the government too. Every dent in piracy we can make is an increase in legal sales.
For an individual movie, the largest revenue comes from theaters, then satellite, then overseas, then home video and audio, and then emerging mediums like the Internet and IPTV
How do you deal with piracy? We do put in considerable effort, including having our own monitoring and vigilance teams that work with law enforcement agencies. Having said that, it would be wrong to say that we are able to control it. We, at best, try to reduce it in whatever ways we can. It is a worldwide issue, which no agency has been able to tackle yet. The way we handle the issue of piracy is sort of a multiprong approach. One is to strengthen the product to make it worthwhile for the consumer to go for original — by increasing the quality of the product, by increasing the valueadditions (behind the scenes, making of, interviews, etc). The second is generating awareness of the benefits of original versus pirated products, how to distinguish between 42
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How do you go on about choosing the titles to distribute? What is the success rate like? We get approached by producers sometimes, while otherwise if we know of the upcoming titles, we approach them. Our relationship with a lot of producers that go back to several decades helps us in knowing what their line-up is. Moreover, we work with them on multiple platforms. There are some producers with whom we work on all of their platform businesses, where for the same movie we are buying seven to 11 different platform rights (cable, satellite, home video, IPTV, etc.). As for the success rate in the titles we pick, we have a portfolio approach. The film business is lot like venture capital,
/bio so to speak. For example, if you are in the film production business, out of the six movies you make, one could be a super hit, two will break even, and three will be loss making. When you average this out as a portfolio, we roughly make around 20 to 25 percent of returns. Bollywood in general has a success rate of 7 to 12 percent, which includes Hindi mainstream, B and C grade movies, dubbed movies, and so on. For well-known banners this rate is between 20 to 25 percent. For the home video, satellite, and other businesses, the failure rate is much lower. A lot of this has to do with the fact that many of the sales of these rights happen very close to release or post release. Therefore, further knowledge of the film, of how it performed is there, and this helps us in making a slightly more educated guess on the potential of the movie.
How is the business of animation, and alternate content like world movies, and health and wellness videos doing? The animation business has been around for us since 2007. It has done very well for us. Although a lot of people are working on animation projects and given the hype about it, there are only a handful of released projects in the market. We have the learning of the two animation movies (Bal Ganesh and Ghatotkach) that we have released and were very successful. We have also worked for the distribution of products like Dasavtar and Return of Hanuman. We have established ourselves as early leaders in this space, with a clear pipeline going forward as well. We have had very good results, especially with regards to The Secret, Shilpa’s Yoga, and Deepak Chopra. They clearly exceeded our original expectations. So we definitely foresee alternate content being a significant segment in taking us forward. It is a lesser tapped segment and there is so much there to explore. Also Gujarati plays, for example, are a category that we helped in bringing in. The Gujarati film industry is not as prolific in its output but the play industry is. And we were one of the first people to take this excellent theatrical industry of Gujarati plays and take it on to other platforms. We got into the model of taking plays, shooting it in a controlled environment, and releasing them on VCDs and satellite in good telefilm quality. World cinema as a segment has been doing well. But, of course, that is a relative term. If we were to judge the volumes by comparing it to mainstream English films, then world cinema is far behind. We anticipate that there is an audience in India that is willing to go beyond mainstream Hindi and Hollywood films. We are looking to see how we can bring that in.
Bollywood apparels and merchandizing – a business that did not take off ? Internationally, merchandizing, both in terms of themebased toys, stationery, etc. to celebrity apparel auctions, are very well-established revenue streams. Even if the revenue stream in India today is not that significant, we were quite heartened when we successfully sold out apparel from our
DARE.CO.IN very first film project Kuchh Meetha Ho Jaye. Although it might seem unlikely that people would buy used clothes, there is actually a response and people do bid for clothes worn by celebrities in a movie. Eventually, when it does emerge, we will have the advantage of early learning. Similarly, we have made extensive efforts to release promotional key chains, T-shirts, notebooks, etc. of both Bal Ganesh and Ghatotkach. Initially there wasn’t even a market and manufacturers said that they can’t really invest in it. But we took the risk and worked jointly with the manufacturers to commission a minimum amount of quantity on a sharing basis. We strongly felt that if only someone helps to catalyze this business, it will be a matter of time that merchandizing could be a huge revenue stream for animation films, just like it is internationally. Another key concept that we were able to pull off, and is a great achievement for us, was being able to make Bal Ganesh the first animated film to be associated with McDonalds Happy Meal – like they did with Shrek and Finding Nemo. We got Bal Ganesh to become the first Indian merchandize to come free with McDonald’s Happy Meal. It was for a limited run for about three weeks in 12 cities and 50 outlets. Given the success of Bal Ganesh, we were able to do the same with Ghatotkach and expand on our relationship with McDonalds. These are the stepping stones in establishing this kind of merchandize. The big challenge, however, is piracy and counterfeiting. Many people, for example, can find Ghatotkach apparel in the market, even though we haven’t officially licensed it to any garment manufacturer. We are talking to retail chains and garment manufacturers to make it official, even if it is in a limited quantity. Because we do believe that in the coming years, it will take off.
Is seeking funds a part of your expansion plans? So far we have managed quite well with our internal accruals. But with the kind of expansion plans that we have had in the last few years, we did realize that bringing in a certain amount of growth capital would help us expand beyond what our internal accruals and organic growths would allow. So we are on the lookout to have some PE funding. But it’s a very challenging market right now. The valuations are in pressure and we are not financially in such stretched circumstances that we absolutely need it. It will only happen if we can get it at a reasonable valuation with regards to our strategic interests and brand value. Since it is a matter of quickly expanding the projects that we are already doing, it is not something that needs to be concluded in the next few months.
What is the challenge that you face as a second-generation entrepreneur? The biggest issue with the new generation has been to really expand out to the new areas that we can explore, or breaking the barriers that we drew for ourselves in terms of the DAR E business we are in. MARCH 2009 43
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strategy/startup
alternatives to closing down your business While the economic downturn could have run your business out of steam, there are still some tried and tested ways that can help you stay afloat /Vimarsh Bajpai
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ou have built your company from scratch but now you are facing rough weather. Cash-flow is drying up, costs are going high, profitability and revenues are sliding, your customers are dumping you and what not. If the thought of closing down your business has passed your mind, you may want to look at the alternatives that can prevent you from taking the extreme step.
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Closing a company in India is not simple. According to the World Bank’s Doing Business Report, India ranks a low 140 among 181 countries on the parameter of ease of closing a company. This reflects the complexity in the country’s laws and stringent procedural bottlenecks in the process. While the US and other developed economies offer bankruptcy protection to businesses, such is not the case in In-
dia. Even if you declare that you have no money with you, but you are debtridden, the law can catch up with you soon. You will be forced to pay back to your creditors no matter what. “If you have taken a working capital loan from a bank, the bank takes the guarantee. The moment the personal guarantee has been given, you actually have no bankruptcy protection, at least to the extent of your bank liability,” says Jayant K Tewari of Outsourced CFO & Business Advisory Services. It is important to find out the cause behind the crisis that your business is facing. “The problem is the cash-flow. Unfortunately, people misunderstand the difference between profitability and cash-flow. You may have good profitability in the books but no cash in the bank. It will make it impossible for you to run the shop,” says Pankaj Jain, Director & CEO, Finman Ventures. “You may have good profitability but lack of working capital could make things difficult for you. Your inventory will pile up, you will be unable to pay back loans or pay salary to your employees,” says Jain.
DARE.CO.IN
strategy/startup Despite all the gloom, you may still look at the following options to save your business from closing down.
Can you redefine the market?
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While you consider revival strategies for you business, it could be a good idea to take a close look at the market you are catering to. You may be surprised to notice the changes that may have taken place. One of the possibilities could be that your customer base has been slowly wiped out while you were busy making new products or planning for launch of new services. “If your primary market is, say, high-end luxury goods, then you have a problem. If your target market is BFSI brokerages in the US, then you have a problem,” says Tewari. This means that the customers in these markets have already reduced spending and are unlikely to buy your products or services. This would mean looking for new markets and could involve changing your focus from urban to rural. Many companies, particularly in the FMCG sector are already focusing heavily on the rural market, as rural customers are increasing their spending on white goods and other products. “If your definition of the market is too broad and you try to be everything to everyone, then you actually don’t focus on anyone. That is the recipe for disaster,” says Tewari. He advises that it is much more important to narrow your definition of the market further.
Can selling stake rake in cash?
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One of the good ways to stake up cash-flow is to offload some equity of your company to a buyer that could be an individual or a strategic investor. This option could come in handy in case banks decide not to lend you any money. A lot of companies that are facing cash crunch these days are resorting to this method. The slowdown has made banks cautious lenders and many are reluctant to dole out credit. A strategic investor, which could be an angel, a venture capital firm or a private equity, brings more than just money on the table. It could help you with strategies that could give your
business a new lease of life. As investors appoint a member of their own on the company’s board, he could be a valuable asset for you and guide you out through difficult times.
Will management change help?
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Many a times, as a promoter, you may fail to see the loopholes in your business model. This could be either due to lack of experience or certain biases. In such a case, an outsider can bring in fresh perspective to help you put things in black and white. Getting a professional CEO or rehashing the top management could point towards recovery. Sometimes investors such as VC firms or PE firms could bring about a change in the management if they deem it to be beneficial for the compa-
One of the good ways to stake up cashflow is to offload some equity of your company to a buyer that could be an individual or a strategic investor ny. Jain cites one such example. “This is about an auto components company. After scaling their business to a certain level, the promoters were unable to take it further. The company’s growth started to slip. At that stage, a PE player offered the promoters to buy a stake in the company. The investors changed the top management, and soon the company was back on track.” “Several reports cite poor management as one of biggest reasons for business failures,” says Anshul Gupta, Founder and CEO, Salvage Settlers, a salvage management firm. “First generation entrepreneurs sometimes lack expertise in finance, purchasing, production, etc. It therefore becomes important to put a good management in place,” he adds.
Reduce manpower
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This is what most companies are resorting to now, given that cost of manpower in terms of salaries and benefits is a major chunk of the cost that the company has to bear. Making a prudent decision about how many people to remove so as to ensure that major projects do not get derailed is also an important one. “If you find two of your eight projects going down the tube, you should naturally reduce 25% of the manpower,” says Tewari. “But as an entrepreneur you may think of carrying those 25% for three months in the anticipation of getting a replacement project for them and that is going to burn you even more,” he adds. But sacking and retaining people could be an emotive issue too. An entrepreneur at a recent event organized by DARE talked of his dilemma when it came to sacking his employees during the current slowdown. He stressed that when his company was in trouble last time, he still retained most of his employees for a long time believing that new projects would pour in. But unfortunately that did not happen and he suffered major financial losses due to this.
Move to low-cost premises
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At times the high rentals of your office premises could be a major cost to your business. You may save some more cash by relocating to cheaper premises. As slowdown has hit the real estate sector badly, a good deal may be just round the corner. Moving from downtown to a suburb or on the outskirts of the city could work well. The very basis of outsourcing services and manufacturing operations to low-cost destinations is aimed at saving some extra bucks. In case you are into manufacturing, you might consider outsourcing the operations to a low-cost manufacturer.
Can you ask your bank to restructure loans?
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Debt restructuring involves altering of the terms and conditions of lending by banks or financial institutions pertaining to rate of interest and MARCH 2009 45
DARE.CO.IN principal. For this, the company has to approach the lender seeking such a restructuring. It could help a company avoid default on its loans. Take the case of Subhiksha. The founder of the troubled retailer, R Subramanian, is believed to have approached banks seeking a two-year moratorium on interest and principal that the company has to pay. He is also said to have asked his lending banks to reduce the interest rate, which costs the firm approximately Rs 14 crore a month. The company has taken major loans from HDFC Bank and ICICI Bank. Whether the banks agree to such a restructuring is solely their prerogative.
Sell un-utilized or underutilized assets
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Desperate times call for desperate measures. While you may feel emotionally strongly about that piece of land or a locked facility that you own, it could now come to your rescue when your business is almost shutting down. Such un-utilized or under-utilized assets could be in the form of machinery or equipment too. Selling them off to save your business could be one of the options to bring in some desperately needed cash. However, during the current slowdown, you may fail to get a high value of those assets. In these difficult times, many a companies are resorting to this route to rake in cash. Take the case of DLF, India’s biggest property developer. The firm is reportedly planning to sell its “non-strategic” assets to get Rs 2,000 crore. Those that could go on block include land and its power business.
Renegotiate contracts
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Much of this strategy is now evident in the outsourcing space. Due to recession, a host of companies overseas are renegotiating contracts with their Indian IT suppliers. Many have now either postponed new projects or are looking at lower rates from Indian buyers. This is also evident in the case of the real estate sector, as many developers are lowering prices to increase sales that have been going down over the last six months. 46
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Selling off un-utilized or under-utilized assets to save your business could be one of the options to bring in some desperately needed cash It makes good sense to renegotiate with both ends of the link—the customer and the supplier. Offering discounts in return for more work could keep you in business longer than thought. Most IT companies now acknowledge that their customers are seeking renegotiation of contracts in the downturn but expect the same level of service quality.
Review distribution network
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Many a times, lacunae in the supply chain could choke the reach of products or services. Reviewing and if need be, redrawing the distribution roadmap could boost sales. The distributor is a key link in the supply chain that starts with the manufacturer and ends at the customer. He plays that important role of “pushing” the product from the manufacturer to the retailer, and in turn makes money. He works at the business-to-business level, wherein he interacts with the retailer and not the end-customer. While reviewing the network, you might discover that the distributor is lax in his approach to the business or the retailer is unhappy with his margins and is therefore keeping your products in the backdrop.
Selectively prune operations
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Many companies are now streamlining their operations and are not shying away from closing down loss-making areas of operations. This is one way of stopping money from getting out of the pipeline. Take the case of Panasonic, the Japa-
nese electronics major. The company plans to dump its unprofitable businesses and close down loss-making overseas operations. With this mind, it would cut investments in two television panel plants.
Does a merger with another company make sense?
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Instead of closing down your business, it may be a good idea to look for synergies with other companies in the sector you are in. Thus a merger or a joint venture or even a strategic partnership could be a good option to explore. A merger in legal parlance means that two companies pool in their assets and liabilities. This would result in the birth of a new company that could have a new name and identity. “There can be a couple of ways in which you can look for merger,” says Ashish Ahuja of Ahuja & Ahuja Chartered Accountants. “One is merging directly with your competitor. The second option could be merging with someone who is producing the raw material for your business— something like backward linking. Thirdly, merging with a company that provides some associate product for you,” he adds. Going in for a joint venture instead of a full merger could also be a good option. It involves signing a pact with another firm to do business together and thus share profit or loss. It could be for specific projects or streams of businesses. However, a strategic alliance could mean tapping into each other’s distribution channels or customer base with the intention of maximizing profits and minimizing risks.
Getting acquired
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Getting acquired by a bigger entity could fetch you some good money. This is also an option that a number of firms prefer to take. “If your company has been posting losses for a long period of time, then financially it gives some tax incentives to the buyer. Tax incentive could be a good factor to have the buyer interested,” says Jain. A loss-making company can give the buyer a good valuation, he adds. D A R E
/advertorial
SECURITY AT STAKE SITUATION A CONCERN Today’s environment is leaving a sense of uncertainty where security is at stake due to various surprising situation springing up in spite of efforts put in by concerned authorities to encounter to resolve. Primary reason is the non-involvement of the society on the whole, to participate to make collective efforts to make it more effective. A continuous awareness campaign to make the society understand and involve is absolutely necessary for a near total solution in security concerns. Security is a multilayer process. For India today ultimate state of the art technologies may not be achievable due to constrains. But basics and mid range developments in technology is feasible.
For the sake of the public at large and their own safety basic securitization by the various organizations highlighted should be made to strictly implement as statutory norms security systems in each every premises rather than throwing the total responsibility to the security providing authority, the police.
The following areas can be comfortably covered under the feasibility range of security:
Further such an environment cautions any offender and reduces the chances by 80% to commit an offence or a crime.
1. Browsing Centers – where internet functionalities give immense opportunities for cyber crimes. The intensity sometimes can be shocking. A highly capable hacker can enter into highly secured areas like banks, stock exchanges, reputed international companies and very personal confidential areas of VIPs to alter records destroy data, steal intellectual proprietary right data, credit card information. All would or still happens without the trace of the doer. Complaints received are very rarely traceable by the authorities. 2. Hotels, Lodges and motels. 3. Hospitals 4. Schools and Colleges 5. All business establishment receptions 6. Banks 7. Shops & Establishment 8. Commercial Logistics, private & public transports 9. Mobile phone users Only when all the above establishments along with the public collectively support security providing authorities, 80% of security concerns can be successfully prevented or resolved. Today’s stand alone operations by the authority can never take a nation to a secured environment.
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A visitor data base management with photo capturing and storing capability should be a statutory must norm in every establishment. Considering current economic situations in all the above 9 establishment avenues, a basic investment to ensure security and help the security authority with the lead of possibility of photograph, information with fingerprint would give an excellent lead to the search.
The terror strike on 26/11 in Mumbai is a real awakening caution to all public to move away from casual attitude to collective protection awareness of their own self, kith and kin to be a support to the security authority. This also is another proven reason for security authority to be more stringent to get support from the establishments who should take care of the preliminary layers in security which assures the lead to find and prevention of occurrence by a very high percentage. To express a problem may be easier than a solution. Raltes Technologies is willing to extend their support in the Herculean endeavor of the nation where security concern is seeking solutions. By successfully launching a software product MyAthithi (visitor data base management) at a hitherto not available realistic affordable price with first layer for basic security needs the foundation with quality easy use for all establishment in India, a commitment to the society moving into IT environment has been extended by Raltes. An awareness campaign till the society gets to understand of a collective support to the authorities is possible in this socio economic approach to resolve security by stepping on to the first step MyAthithi – maintaining the data base of visitors till it is not necessary by the Security Providing Authorities – The Police – Law & Order Enforcers – Protectors of the society, by the society, for the society.
info@raltes.com
DARE.CO.IN
/going global
Doing Business in Austria As one of the richest countries in the European Union, Austria offers plenty of opportunities in both services and manufacturing sectors /Vimarsh Bajpai
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hen Bajaj Auto picked up a minority stake in the Austria-based KTM Power Sports, Europe’s second largest sports motorcycle manufacturer, in 2007, it was a strategic move by the two auto makers to jointly cash in on the then booming automotive industry. While things have slowed down in the auto sector now, it has not dissuaded Bajaj. This comes in the backdrop of the proposed launch of KTM bikes in the Indian market and entry-level bikes in the European market. Bajaj is not the only one to have struck deals with Austrian firms. Shilpa Medicare, the Karnataka-based pharmaceutical company, acquired LOBA
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Finchemie in 2008 in an all-cash deal. The acquisition was aimed at providing Shilpa with an advantage in oncology products, and in the contract research and manufacturing (CRAM) sector. LOBA holds an edge in active pharmaceutical ingredients (APIs), organic intermediates, biochemical diagnostics, and customs synthesis, the company being an established name in the pharmaceutical space, dating back to 1957. The IT sector has also seen some action between Indian and Austrian companies. Take the case of Wipro, which acquired NewLogic in 2005. NewLogic is a semiconductor design services company having IP cores for wireless applications. Besides
strengthening Wipro’s position in the Bluetooth and WLAN space, the acquisition gave the IT major a convenient route to reach out to its European customers. These deals are a reflection of the growing interest of Indian companies in Austria, which saw investments worth 12 billion in 2007.
Why Austria? Austria’s strategic location, a favorable tax regime, an educated workforce, and world-class R&D facilities make it an attractive destination for investors. It shares its borders with other major European economies such as Germany, the Czech Republic, Slovakia, Hungary, Slovenia, Italy, Switzerland, and Liech-
DARE.CO.IN
/going global
DARE/key sectors
tenstein. “Austria’s sound and stable structural basis, as well as its booming economy, low inflation, falling budget deficit and a positive performance record makes it an exceptionally attractive business location,” says Has-Jorg Hortnagl, Austrian Trade Commissioner & Commercial Counselor at the Austrian Embassy in New Delhi. “As recently as last fall, the World Economic Forum has referred to Austria as one of the seven most attractive business locations within the EU.” Austria’s economy is dominated by the services sector, which has witnessed an average annual growth of 5% over the last two decades. Today it employs around two-thirds of the country’s total workforce, as against half about 30 years ago. A large chunk of labor force is in the sales, public service, health, and education. Agriculture and forestry are other key sec-
Austria’s sound and stable structural basis, as well as its booming economy, low inflation, falling budget deficit, and a positive performance record makes it an exceptionally attractive business location. − Has-Jorg Hortnagl Austrian Trade Commissioner & Commercial Counselor
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Information Technology
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Agriculture & Forestry
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Automotive
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Mining & Quarrying
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Pharmaceuticals
tors in Austria, even as construction and infrastructure play major roles in the economy. The IT sector has gained traction since 1995, with both the turnover and manpower almost trebling with growth in businesses. A host of incentives for businesses seems to be giving Austria an edge over its other European counterparts. Corporate tax rate now stands lowered at 25%, and there are no wealth and trade taxes. A host of incentives for R&D activities that include research allowance in the form of tax breaks of up to 35% make it lucrative for businesses to focus on innovation in a big way. Over 2,500 research institutes and 60 centers of excellence highlight the presence of a strong foundation for scientific activities in the country. Hortnagl says that Austria offers efficient infrastructure and public institutions, which would be to the advantage of businesses that opt to settle in the country. They can be ensured of well-trained and highly-motivated manpower, and can enjoy the high standard of living in a country that also offers a wonderful landscape, an unspoilt environment, social stability, and a low crime rate.
Bilateral trade Austria’s foreign trade has been rising consistently, having doubled since 1995. The country imported products worth 114.3 billion in 2007, while exports touched 114.7 billion. Germany is Austria’s biggest trade partner, accounting for over 40% of imported products. Bilateral trade between Indian and Austria has been on the rise, too. India MARCH 2009 49
DARE.CO.IN
/going global INDIA-AUSTRIA TRADE
exports garments, textiles, and accessories, including yarns, fabrics, leather, and leather products. Footwear, carpets, gems and jewelry, computer software, handicrafts, spices, coffee, tea, and chemicals, among others, are exported to Austria. In turn, India imports machinery and equipment, including projects goods, newsprint paper and paper products, iron and steel products, and professional instruments from Austria. “Bilateral trade and economic relations based on strong institutional framework have gone up in recent years. A number of important agreements were signed such as on avoidance of double taxation or on the promotion and protection of investments,” he adds. "These bilateral relations have been further strengthened with increased Austrian interest in India. Austrian companies who are world leaders in their respective fields have set up engineering, production and research facilities in India in the automotive industry, electronics, for waste-toenergy cogeneration, for special alloy tool bits for the aviation and space industries, for pharmaceuticals, and also for lifestyle sectors such as pearl processing and leather watch straps. Indian companies such as Wipro Technologies, Bajaj Motors and Cafe Coffee Day are, in turn, beginning to invest in Austria.” he says.
Note: All figures in US$ Million Source: Ministry of Commerce, Government of India
DARE/doing business Ease of….
Doing Business 2009 Rank
2008 Rank
Change in Rank
Doing Business
27
23
-4
Starting a Business
104
83
-21
Dealing in Construction Permits
46
44
-2
Employing Workers
50
49
-1
Registering Property
36
32
-4
Getting Credit
12
13
1
Protecting Investors
126
125
-1
Paying Taxes
93
88
-5
Trading Across Borders
19
12
-7
Enforcing Contracts
13
7
-6
Closing a Business
20
21
1
SOURCE: World Bank Doing Business 2009 Report
50
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According to the World Bank’s Doing Business report, it takes eight procedures and 28 days to start a business in Austria. This lags behind the OECD average of 5.8 procedures and 13.4 days. The minimum capital paid (as a percentage of Gross National Income per capita) is 52.8, as against the OECD figure of 19.7. On the overall parameter of doing business, Austria has slipped from its position at 23 last year to 27 this year. However, the country improved its position on the parameters of credit disbursement and closing a business, even as it slipped on other aspects such as enforcing contracts, dealing with construction permits, employing workDAR E ers, and investor protection.
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opportunity/education
Before You Set up a School Opening a school is a herculean task in India. Despite this, more and more people are coming forward to start a venture because the demand for schools seems to be unending /Ambrish Jha
Photo: iStock
Which laws?
A
school is a unique business. Unique because it cannot even be called a ‘business’. Running a school is considered a not-for-profit venture, but you just need to look around to see that the business opportunity is huge. According to an estimate by an NGO active in the field of education, there are more than 14 lakh children in Delhi alone who seek admission every year in various classes. Schools cannot be set up by private entities. They have to be run by a society formed under the Societies Act of 1860, or a trust under Public Trust Act as existent in different states, or by forming a company under Section 25 of the Companies Act 1956. In other words, a school has to be set up strictly as a non-profit business. At least that is the theory. Setting up a school is not just about constructing physical infrastructure in the form of building classrooms and setting up libraries and laboratories. It does involve obtaining permissions and licenses from concerned authori-
ties at various stages. It starts with the setting up of a trust or a society, with a governing board of five or six members, with a president, chairperson, and a secretary duly identified, as specified under the law. This article will focus primarily on identifying the various steps involved in opening a school, providing facility for the study for students from Class 1 to Class 10.
The next step Once the governing entity, whether a company, trust, or society, comes into existence, it will have to look for land. There are two possibilities—one, if the society or trust has a land of its own, or, second, when the governing entity decides to buy a land for the proposed school. Buying land from the government requires permission in the form of a no-objection certificate from the Department of Education of the concerned state. The no-objection certificate, called Essentiality Certificate (EC), certifies the requirement of a school in a particular area. The logic
Originally, education was a state subject under the Constitution. In 1976, by a constitutional amendment, education came in the concurrent list, the joint responsibility of the central and state governments. behind the practice is to make sure no two schools compete with each other and one becomes redundant. The EC comes with a rider that construction must commence within three years, failing which the society will have to reapply for the same. One can apply to the concerned municipal corporation for land for the school with the EC. Land is supposed to be allotted to the governing entity at subsidized rates is usually allotted through auction. “It is almost impossible for a new entrant to get land. Land is normally granted to established players with a MARCH 2009 51
DARE.CO.IN chain of schools,” says R.B. Adityodaya Karna, deputy secretary of Prarthana Society, Bangalore, a trust that runs a school in the city. Even if a member on the board of a governing entity has land that the entity wants to use for setting up a school, a no-objection from the Department of Education stating the requirement of a school in that area is required. The major education boards of the country, namely, the Central Board of Secondary Education (CBSE), the Council for the Indian School Certificate Examinations (CISCE), and state government boards, have clearly laid down norms for land requirements for schools. This, in most cases, is 2 acres, except for hilly regions and metropolitan cities, where the requirement is less. Construction can take place only on a part of the land, and a playground has to be created in the rest. Adityodaya says, “While conceiving the idea of a school, one has to asses the potentials of a location, kind of competition possible, and the target group—the lower middle class, upper middle class or the rich class—the school will cater to.” From the time of forming a governing entity to a school actually starting up, one normally requires about a year, though taking more than two years is also not unheard of. Normally the infrastructure required to start up can be constructed within a period of six to seven months. Once the construction is over, school authorities need to apply for recognition. Up to Class 5 recognition from municipality is all that is required. For Classes 6 to 8 recognition comes from the Department of Education. Recognition for anything above this also comes from the Education Department, but after a minimum gap of two years. School authorities are free to seek affiliation to CBSE or CISCE. In that case, the school will have to follow the guidelines of the board it is seeking affiliation to. The school will need to follow the syllabus, books prescribed by the affiliating board, and pay specified salaries to the teachers. If it is not a government school, affiliation for schools normally comes 52
MARCH 2009
opportunity/education
Open School An open school is a mode of catering to the needs of those who, for some reason or another, cannot continue in the regular schooling system. National Institute of Open Schooling (NIOS), formerly called National Open School, was established as an autonomus institute in 1989 by the Ministry of Human Resource Development. According to the website of the NIOS, it focuses on not just elementary education, but also on courses at the pre-degree level, both academic and vocational. It has shown a steady growth in student enrollment, number of courses, and study centers. According to the website, over 14 lakh students are enrolled with the NIOS, making it the largest open school in the world. The degrees provided by the NIOS are as much valid as those provided by any other board in India. NIOS is now cooperating with state governments to start state open schools. So far 11 states have started it, and eight more are in the process of doing so. in stages. Initially, for Classes 1 to 6 a temporary affiliation is given and guidelines are laid down for schools by the concerned education board. Once things are in place according to the guidelines, an inspection is conducted. If things are to the satisfaction of the board authorities, permanent affiliation is bestowed on the school. Adityodaya says inspections are not so rigorous after permanent affiliation is granted, but a school has to be run according to the rules of the board.
Licenses and documents Setting up a school involves a lot of legal processes from the very beginning. While forming a society, trust, or company, one has to have a Memorandum of Association, a document needed al-
most at every stage later. Like for any other business, a detailed project report for the school is also needed.. In addition, details of land and building, auditor’s statement, bank statements of the governing entity and their members and auditor’s statements are needed at some point or the other. Once the school building is ready for initial use, a certificate of recognition has to come from the state government, issued by the municipality for the junior classes, and by the Department of Education for middle school. If high school is to be added subsequently, certificate of up gradation is required which is again issued by the Education Department. Affiliation from either the CBSE or CISCE is also done through a set process. Things do not stop here, as schools need certificates for hygiene, water, and completion of the building from the municipality.
Investment and expenditure Investments required for a school depend on two vital components—cost of land, which depends on where you want to start your school, and whether it will be residential or non-residential. Thus, setting up a non-residential school in Delhi with over 1,000 students spread over 5 acres can easily cost around Rs 25 to 30 crore , while the costs would be lower in tier II and III cities. Adityodaya says, “The key is to keep investments as low as possible. One should start with the bare minimum and keep on adding with time. We started with 350 students six years ago. At present we have 5,400 students enrolled in our school.” For residential schools, which are normally spread over 15 to 20 acres of land, costs can go quite high, as it will require hostels. A Kolkata-based school consultant who has worked with the renowned Doon School, says that the operational cost on teachers in normal non-residential schools is 70 percent, while in residential schools it is 50 percent.. Catering makes up another 30 to 40 percent of the operational cost. The teacher-student ratio in nonresidential schools, according to the consultant, should not be more than
DARE.CO.IN
opportunity/education 1:20, and for residential schools it should be 1:12. However, this is hardly the case in real life and many schools run with 40 to 70 students in a classroom. Adityodaya says, “Teacher-student ratio is 1:40 in most of the schools here [Bangalore] and is 1:60 or even 1:70 in many other schools.” There is no general law governing school fee, though different state governments have tried to regulate this from time to time. Generally, if the only source of income is the amount collected under the head ‘fees’, then it will leave a huge hole in the school’s finances. Adityodaya says, ‘Schools make most of the money from donations, if it is not exclusively for rich class where very high fees are charged. Another source of income is development fees. The amount amassed through this route is quite high compared to the actual expenditure on development.” Schools set up their entire infrastructure in stages. For instance, the school run by the Adityodaya’s school started with only 50 books in the library, and kept on adding 10 more every month. Even the laboratory was built slowly. “The school has a sleek computer laboratory now, and one big science laboratory, which caters to the demand of all students and all science subjects.” However, usually schools do set up separate laboratories for physics, chemistry and biology.. “While expanding to other states, a no-objection certificate from the state where one is running a school is required. This proves helpful as the concerned Education Department takes recognition of you as an established player,” Adityodaya says. It is important to mention here a Supreme Court ruling that disallows schools from diverting the money earned to start another school.
International programs in India International education boards in the form of the International Baccalaureate Organization (IB) and the Cambridge International Examinations (CIE) have slowly penetrated the Indian schooling system. About 50 schools already have IB affiliation or are authorized to follow
/
the IB curriculum, and over 150 DARE market estimation schools follow the CIE, which ofNumber of students 800 fers International General CerFIXED COSTS tificate of Secondary Education (IGCSE) and A-levels in India. Cost of land 20000000 Number of rooms 50 According to the regional direcArea per room 700 tor of IB Asia Pacific, India will Cost per square foot 1500 have more authorized IB diploTotal cost 52500000 ma programs than Australia by Number of laboratories (One each for Physics, the year end. Chemistry, Biology & Geography) 4 The IB program was foundCost of setting up laboratories 1000000 ed in 1968 by the International No. of computers 50 Cost per computer 55000 Baccalaureate Organization Total cost 2750000 (IBO), a non-profit educational Cost of sports equipments, educational organization based in Geneva, tools, electrification 1000000 Switzerland. According to inforCost of furniture per room 100000 mation on IBO website, three Total cost 500000 kinds of IB programs are: PriNumber of buses 10 mary Years (Kindergarten to Cost of buses 1600000 Total cost 16000000 Class 5), Middle Years (Classes 6 Net Fixed Cost 93750000 to 10), and Diploma (Classes 11 and 12). RECURRING COSTS The Cambridge InternaNo. of teachers 40 tional Examinations (CIE), on Salary of teachers (per month) 15000 the other hand, is a part of the Total salary (per month) 600000 University of Cambridge. It is a Total Salary (per annum) 7200000 Number of non-teaching staff 60 non-profit organization providSalary of non-teaching staff (per month) 480000 ing international qualifications, Salary of non-teaching staff (per annum) 5760000 as its website claims. It offers the Utility payments (telephone, electricity, water, IGCSE, a two-year curriculum Internet etc) (per month) 150000 for students of Classes 9 and 10. Utility payments (per annum) 1800000 This is considered equivalent to Maintenance payments (cleaning, equipment the British General Certificate of annual maintenance etc) (per month) 50000 Secondary Education. It also ofMaintenance payments (per annum) 600000 Supplies (stationery, equipments etc) (per annum) 100000 fers Cambridge O-level, equivaLibrary acquisitions (per annum) 50000 lent to the British General CerInterest Payments (on loans) (per annum) 10000000 tificate of Education, and the Insurance (per annum) 1000000 Advanced Subsidiary for Class Staff Training (per annum) 150000 11. A-level program is for Class Compliance costs (Filing reports and returns, 12 students. auditing etc) (per annum) 500000 For schools CIE affiliation Miscellaneous Expenditure (per annum) 1500000 normally takes six weeks to get, Net Recurring cost 28660000 but if the schools are not ready Total cost for the project 122410000 it can take two to three years, as regional director of CIE, Rakesh DISCLAIMER: This data and analysis are indicative and Cybermedia makes no warranties about its accuracy. You are advised to do your own analysis if you are evaluating a similar venture. Singh says.. The case with IBO is more or less the same. Today, schools tain a no-objection certificate from the have the option of seeking dual af- Department of Education in the state filiation—to an Indian board and to a concerned. In a few states like Andhra foreign one. This has apparently made Pradesh there is currently no requirethe Ministry of Human Resources con- ment to get a no-objection certificate sider the need to bring in some kind of to run an ‘international’ school. Aclegislation to regulate this. cording to a school authority, schools Like in the case of the CBSE or ICSE do not always follow the procedure of boards, schools willing to offer a cur- getting a no-objection certificate even DAR E riculum of a foreign board should ob- if such regulations exist. MARCH 2009 53
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/INSEAD
TePP steps up India’s innovation In our previous column, Confederation of Indian Industries’ (CII) principal advisor Prof. Y.S. Rajan, briefly spoke about a few “doors” that young entrepreneurial minds can knock on for growth opportunities. Continuing with that series about organizational initiatives to foster entrepreneurship, we uncover an open innovation network, initiated by the central government, which would interest anyone with “a big idea”. /Irawati Gowariker and Philip Anderson 54
MARCH 2009
DARE.CO.IN
/INSEAD
As Indiaâ&#x20AC;&#x2122;s largest network program, TePP has nearly 30 outreach centres making itself easily accessible to independent innovators. TePP provides grants, technical guidance and mentoring support to independent innovators to become technology-based entrepreneurs (technopreneurs).
Photo: iStock
T
echnopreneurship Promotion program (TePP) has helped many an innovative mind. Last month at the Delhiwood 2009 expo held at Pragati Maidan, Vinayaka Pandi proudly displayed his split-type wood cutter customised for carpenters; one that combines a sophisticated design with an affordable price tag. P. Karuppaiah speed up tedious coconut harvesting by mounting a hydraulic jack to his old tractor. With this innovation, two people alone can harvest as many as 600 trees, while only 160 trees could be harvested manually. Khimji Bhai Kanadia in Gujarat created another agricultural innovation-the Kittanal, a small soil-filling device which has proven to be a boon for labourers in plant nurseries and forestry departments as it significantly increases their daily wages. Other enthralling innovations are the soap-less washing machine, silk made out of banana fibres, the areca-
nut-peeling machine and a fertiliser made out of leather industry waste. Each of these products was a seed of an idea in the mind of a creative genius in some corner of the country. Brought alive and moulded to marketable precision by the Ministry of Science and Technology (S&T) through TePP, these innovators would otherwise not have gained this recognition and success as entrepreneurs. As Indiaâ&#x20AC;&#x2122;s largest network program, TePP has nearly 30 outreach centres making itself easily accessible to independent innovators. TePP provides grants, technical guidance and mentoring support to independent innovators to become technology-based entrepreneurs (technopreneurs). These technopreneurs have diverse backgrounds â&#x20AC;&#x201C; engineers, scientists, artisans, housewives, students and even farmers. Dr. A. S. Rao, Advisor to the Ministry of S&T and orchestrator of this program shares his unconventional wisdom as
Photo: TePP
An illustrative example is SMALL WONDER-LYZER, a technology breakthrough invention for biotechnologists developed by innovator Dr. Parikshit Bansal of the National Institute of Pharmaceutical Education and Research (NIPER). The device is primarily meant for carrying out dialysis of desalting of proteins, i.e. removal of salts from proteins, usually after the initial step of salt precipitation, which is a widely used, low-cost method for protein purification. The technology breakthrough in the invention lies in the remarkably simple mechanism of sample loading and removal, which none of the existing commercially available devices is able to offer worldwide. Unlike existing devices, the present device does not involve use of any threads, clamps or syringes during use. The innovator obtained a US patent and floated a start-up firm to take up manufacturing in Chandigarh. MARCH 2009 55
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/INSEAD TePP provides an opportunity to innovators to fail. Picking winners is not an objective- the market does it. TePP advocates a new philosophy – failure is not a sin. We share dreams of innovators and celebrate their success. — A. S. RAO Advisor to the Ministry of Science & Technology
he explains TePP’s value proposition, “TePP provides an opportunity to innovators to fail. Picking winners is not an objective- the market does it. TePP advocates a new philosophy – failure is not a sin. We share dreams of innovators and celebrate their success.” TePP was conceived a decade ago after IIM professor Anil Gupta’s research study of grass-root innovation potential further highlighted the imminent need to open a window of opportunity to independent innovators. Until May
2008, TePP was a joint program of two Govt. departments under the Ministry of S&T. The Department of Scientific and Industrial Research (DSIR) and Technology Information, Forecasting and Assessment Council (TIFAC) of the Department of Science and Technology (DST) pooled resources, thus backing it up with 100 man-years of experience in new product development(NPD). Besides this distinction, TePP is unique for other reasons, Rao says. “It is the only program which funds the
innovator account directly without any repayment obligation as a grant. Second, it gives all rights to innovators on intellectual property ownership and technology commercialization. And it is exclusively meant for a non IT, non software entrepreneur or inventor”. Eligibility criteria for TePP programme are simple and uncomplicated. The most important condition is that the idea must have a commercial implication; not pure play research or patenting. TePP support is provided
The Role of Network Partners Activity
Network Role
Spark
The idea spark comes form the innovator. The network accessed about 800 ideas in 2007-08 by publicity/ advertisements and road shows.
Shapers
The ideas need to be refined and 18 TUCs have mentored the innovators by carrying out counseling and initial screening. 200 complete proposals emerged from the 800 ideas.
Sponsors
These 200 proposals were distributed among DSIR & TIFAC officials and they became sponsors of innovators in the Ministry of Science and Technology.
Sounding Board
15 external experts of TePP Screening Committee evaluated these 200 proposals and recommended 50 for approval.
Specialists
Technical experts evaluated the 200 proposals. TePP experts not only assess proposals but also get involved in the implementation. For direct interaction with innovators, names and addresses of 93 Technology Angels is posted on DSIR website.
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Photo: TePP
/INSEAD
Vinayaka Pandi, Innovator of split-type wood cutter. prise incubation and has a ceiling of INR 45 lakhs (US$ 90,000). Phase-II has a seamless scale-up support and supplementary TePP Fund, applicable for candidates that have completed phase-I. Since the time of its inception,
263 innovations have been supported by TePP. It is positioned as pre-seed fund for start-ups. Owners of startup companies too can apply provided their turnover does not exceed INR 30 lacs per annum.
Illustration: TePP
in two distinct phases- innovation incubation in phase-I where maximum support is INR 15 lakhs (US$30,00) for which any Indian citizen with an original idea or invention is eligible. The second phase focuses on enter-
TEPP STEPS UP INDIA’S INNOVATION, CONTD. ON PG 68 ç MARCH 2009 57
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/blog
Worth paying more for The impact of people willing to pay more for your brand over its competition is not just on the bottom line
/Rupin Jayal
“T
he ability to get information about whatever you want, whenever you want has given shoppers unprecedented strength. In markets with highly transparent prices, they are kings. The implications for business are enormous: threatening for some, welcome for others. For instance, the huge increase in choice makes certain brands more valuable, not less.” (The Economist 2005) “Price can be a potent element in positioning, and within a brand portfolio.” (Getting the Brand Strategy Right – Admap 2004) “In the obsessive quest for share, even the biggest names—Miller, Kraft, General Mills and Coke—have become so addicted to low prices that some of their great brands are now little more than commodities. Rethink the category, and price like you rethought the category. “Parity prices are not the answer.” (Marketing to the affluent new quality seekers - Jonah Bloom, Adage 2005) Walking the malls these days is a sobering experience. Discounts are ubiquitous while bursting shopping bags are increasingly difficult to spot. Yet there are some brands that seem to hold the price line better than others. And while we might groan inwardly about paying more, we continue to patronise these brands. The question 58
MARCH 2009
is, what makes these brands Worth Paying More For (WPMF)? Simple answers are many and could range from “better advertising” to “better product” or “better management.” Yet the answer is very far from simple in a world where people are both better informed and more cynical. Some argue that the answer simply lies in delivering the basics well: “You need not offer something unique to attract business. Customers rarely buy a product or service because it offers something unique. Usually, they buy the brand that they expect to meet their basic needs from the product category a bit better or more conveniently than the competition. What customers want is simply better and not more differentiated products and services.” (Simply Better - Delivering what matters most - Patrick Barwise, London Business School/Sen Meehan, IMD in Market Leader 2004) There are categories where just delivering the basics well would in itself be a great advantage such as mobile services without constant call drops or arbitrary disconnection of services, retail stores with well-informed salesmen, restaurants with prompt service, airlines’ on-time record, utilities that were efficient, etc. So this is a good starting point. Understand what your brand’s category expects, see whether your key competitors are delivering these basics, and if not, then there is an opportunity waiting to be exploited. There are many categories where people would be happy to just get what they are paying for and a minimal level of competence and simplicity in their dealings with that category. However, with increasing knowledge and activism increasingly being powered by the interconnectivity of the internet, people expect more. And even
if they get this “more”—opening their wallets for it is a very challenging task. So while people might want “more” safety in cars with additional safety systems – would they actually be willing to pay for them? Most automotive safety features have become ubiquitous because of regulations demanding them rather than the demand coming from people buying cars. However, people have demanded better comfort, driving experience and fuel efficiency and manufacturers have responded. WPMF is better driven by “more” positive areas rather than passive/defensive features or attributes in most categories. The fact is that there are no simple solutions that ensure that people pay more for your brand other than a monopoly or first-mover advantage. Whole categories are now increasingly becoming commoditised as technology and white hot competition ensure rapid parity between products and where an increasingly crowded advertising environment creates a cacophony of claims and counter claims. Hence the solution has to lie in multiple layers of interaction between the brand and active buyers and in multiple activities to deliver the sense of value. Today large companies and not just brands are valued on the basis of tangible and intangible assets. With many service brands, the value of the intangible exceeds that of actual physical assets. “Why are we willing to pay 20 percent more for the well–known brand of Walker's Crisps when we could buy the equally serviceable Sainsbury brand? Or why do consumers pay a 50 percent premium on their PCs for the satisfaction of knowing that Intel is inside? Why do we believe that, when we buy the leading brand of cereal, ointment, drink or car, we are cleverly buying health, beauty, virility and status?” Establishing and sustaining brand
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/blog identity probably accounts for half of marketing expenditure and it is money well spent for, in many well– known cases, the value of the brand exceeds or equals the other asset values of the company. In 1988, Philip Morris bought Kraft for $12.6 billion, six times what the company was worth on paper. The price difference? The cost of one word: 'Kraft'. Similarly in the UK, Rank Hovis McDougall successfully used brand valuation to avoid a takeover by putting a valuation of £678 million on their brands (Bisto, Hovis, Mr Kipling cakes and others) in the balance sheet. Last year, Unilever bought Best Foods for its Slim-Fast Foods for £13.6 billion as well as Ben and Jerry's Ice cream. From a firm's perspective, we are in an age in which management is increasingly about 'intangibles'. In 1988 Interbrand found that intangibles accounted for 56 percent of the market capitalisation of the FTSE 100. By 1998 this had risen to 71 percent. Companies with strong brands no longer look at their tangible assets. To quote: 'If Coca Cola were to lose all of its production–related assets in a disaster, the company would survive. By contrast, if all consumers were to have a sudden lapse of memory and forget Coca Cola the company would go out of business.' (Barwise et al., 2000, p. 75) Or, as John Stuart, former CEO of Quaker said: 'If this company was split up, I would give you the property, plant and equipment and I would take the brands and trademarks and I would fare better.' ( Twitchell, 1999, p. 159) (The Sorcerer's Apprentice? Alchemy, Seduction and Confusion in Modern Marketing - Karin Newman, Middlesex University, IJA 2001) “All the steps that the customer takes – becoming aware of the product or service, obtaining information about it, comparing available products or services, making the purchase, using the product or service, dealing with customer service representatives
and making additional purchases – must reflect the promise: a single relationship reflected across many contact points. The presence of the brand promise should be obvious in all aspects of service and operations, adding value and building loyalty during every step of the customer decision process.” (Branding in the 21st Century - Making and keeping the continuous promise, Chris Hall, The Advertiser 1999). Here are just some of the factors and activities that need to be considered to build a brand that people are willing to pay more for than its closest competitor: • The power of word of mouth: With the growth of user-generated content, online communities like Facebook, MySpace and myriad sites connecting people from around the world, a brand’s need to understand, track and if possible influence it, has never been more acute. There is an even more critical group of people who are increasingly populating the Internet. Various people define them in various ways - Holt (2004) identified one small group of brand advocates as 'insiders': “Insiders are the gatekeepers to the brand's claims on the populist world... Insiders are a crucial constituency because they wield considerable influence on followers.” “After some 14,000 interviews and some five years in the development process, we have identified seven traits of these new consumers. We have identified five traits that set them (future shapers) apart from early adopters in particular. In fact, much of our early work came about from being unhappy with the early adoption model – it tends to identify young, fickle consumers who equally are early abandoners.” (Introduce the Concept of Future Shapers (Engaging the new consumer - Lee Ryan, TNS, Singapore/Mark Leong, TNS, Hong Kong – ESOMAR 2007). “What sets Mavens apart, though, is not so much what they know but how they pass it along. The fact that Mavens want to help, for no other reason than because they like to help,
turns out to be an awfully effective way of getting someone’s attention.” (Tipping Point, Malcolm Gladwell). A great example of such an online Maven is the site “CrackBerry.” It is run by an enthusiast of the Blackberry Smartphone. Every new Blackberry, even before it is introduced into the market, is “tested” and reported upon by the site. The site isn’t a company site or even a formal mobile/IT reviewing site such as CNET. And because it is run by a maven rather than a marketer, the reviews are very credible for any prospective buyer. Blackberry has clearly recognised the importance of this site and hence CrackBerry gets “beta” versions of their phones long before they are released in the market. The site also has a spin-off benefit of creating “mini-mavens” – people who frequent the site to get information on the “latest” Blackberry and then act as oracles to less well-informed people in their own circle. Word of mouth is already a key determinant for brand choice in many categories such as consumer durables, the automotive sector, household furnishing, apparel, etc. With Internet getting ever more ubiquitous and with the exponential growth in mobile Internet, understanding, evaluating and if possible managing this could play a critical role in ensuring that your brand gains the upper hand and hence commands a premium over its closest competition • Real role in people’s lives: Many times, the role of categories and the brands within them are overstated, understated or even more often, misstated. Getting the balance just right ensures that they play a role that is more than a commodity and actually makes a meaningful contribution. In the days when motorcycles had two-stroke engines, riders had to add 2T oil to the petrol for lubrication. The oil was largely seen to DAR E be just a commodity. THIS COLUMN IS CONTINUED AT: http://dare.co.in/columns/rupin-jayal/worth-payingmore-for.htm
The author is Director-Strategic Planning at M&C Saatchi. MARCH 2009 59
INNOVATION
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Innovators Mohammad Mehtar Hussain and Mushtaq Ahemad with the static model of the windmill
Fact Sheet Innovator: Mohammad Mehtar Hussain and Mushtaq Ahemad Innovation: Windmill-operated tube-well Description: A low-cost windmill for lifting groundwater for irrigation purposes Cost: Rs 6,000 (Static Model) / Rs 40,000 (Improvised Model) Features (Improvised Model) : • Multi-directional, hence can automatically adjust itself to the wind direction • Iron body • Blades made out of fiber-reinforced plastic • Has a tilt mechanism generate enough energy to make it function still remained. The solution to this came when one day they were watching kites, and a sudden gust of wind made them soar higher. They concluded that a large wheel, moving by the power of wind, could be attached to the handle of a hand-pump to pump out water continuously. They made their first prototype using bamboo, old tyres, iron, and so on.
A Low-cost Windmill An innovation that helps farmers to pump out ground water from a depth of 50 to 60 feet and save fuel cost
/Aswathi Muralidharan
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ohammad Mehtar Hussain and his younger brother Mushtaq Ahemad are farmers in the Darrang district of Assam. They own two acres of land, and produce just enough paddy to feed their families. As cultivating paddy is a water-intensive task, drawing out large amounts of groundwater was difficult due to frequent power cuts. Moreover, the alternative of pumping out water using a diesel set was too expensive and handpumping required a lot of effort. This 60
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set the brothers thinking, and in 2003 they came up with a solution that was a much cheaper and effective alternative. They invented a simple windmill using bamboo and a tin sheet, and attached it to a hand-pump! The genesis of their invention is interesting, given the fact that the brothers are educated only up to higher secondary level and have no technical background. While looking around for an answer to their problem, their eyes fell on the movement of a sewing machine. They observed how the circular motion of the wheel resulted in the up-and-down movement of the needle. This formed a rough impression of how their solution would work. However, the major problem of how they would
How the innovation took shape The basic model of the windmill consisted of a tower-like structure, made of two parallel bamboo posts. These were connected using an iron shaft, which in turn mounted the blades of the windmill. The wind makes the blades move, thus rotating the shaft. Being connected to the handle of the hand-pump, the rotating motion of the shaft results in the pumping out of water. However, this static model of the windmill has several advantages and disadvantages. Made of inexpensive, locally available materials, such as bamboo and aluminum sheets, made it much cheaper than traditional windmills. Moreover, the entire unit could be assembled and dismantled in an hour, making it portable. No foundation was required for installation as the bamboo poles could be erected by digging
INNOVATION
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The improvised model
holes in the ground. On the flip side, as the blades were static, they rotate only when facing the direction of the wind. Second, being light in weight, it did not withstand high-velocity wind. Third, there was no brake system in this design—it has to be stopped by inserting a wooden pole between the blades. Fourth, compared to traditional windmills made from sturdy materials, bamboo has a shorter life. This limited its use in all seasons, especially during the rains and the winter.
The improvisation phase As the popularity of the windmill slowly spread, another innovator, Karunakanth Nath, whose innovation was already being supported by the National Innovation Foundation (NIF) North East, introduced it to the organization. The NIF awarded it a cash prize and a certificate from former President Abdul Kalam. Says Mushtaq “That was the proudest moment of my life.” The NIF supported the innovation through its offshoot Grassroots Innovations Augmentation Network (GIAN) by providing funds. It started working on the defects of the windmill. Several were installed in IIT-Guwahati for technical analysis. At around the same time, GIAN West installed a prototype of the windmill in Little Rann of Kutch in Gujarat for salt farming on an experimental basis. India, with an average annual salt production of 157 lakh tonnes, is the third largest salt producer in the world. However, according to GIAN’s estimates, for producing 1,000 tonnes of salt, a salt farmer has to spend approximately Rs 1 lakh, of which nearly Rs 60,000 is spent on fuel for diesel sets for pumping out saline water. According to Mushtaq, “The response that we received was very positive. Our windmill proved to be cheaper as well as effective.”
The improved model After some trials, several structural defects were identified, and the NIF– GIAN team worked on improvising the model to make it commercially viable. The result was a multidirectional
Comparison Chart Multi-directional Windmill
Conventional Windmills
Low height - 15 ft
Height - 35 ft
Simple crank mechanism (does not require major maintence)
Gear mechanism (requires high maintence)
Easy to assemble and dismantle
Difficult to shift once erected
Low initial investment
High initial investment
windmill. This model consists of a tower-like structure, turbine blades with a tail, and a crank mechanism for converting the rotation of the blades into reciprocating motion. The aluminum blades have been replaced by lightweight fiber-reinforced plastic and the bamboo poles by steel for greater effectiveness. Besides this, in order to protect the windmill from high-velocity winds and for easy installation, a tilting mechanism has been added. This enables the windmill to be tilted down during high-speed wind. The water discharge capacity of this model is approximately 1,500 to 1,600 liters/hour at a wind speed of 8 to 10 km/hr, if the water level is at 50 to 60 feet. If the wind speed is around 12 km/hr, the water discharge capacity is about 2,500 litres/hr.
Current status and cost A provisional patent has been filed for the improvised windmill model. The innovator has already sold 30 to 35 units of the static model, which is priced at Rs 6,000. On the other hand, the improvised version will carry a price tag of approximately Rs 40,000. When asked why the price of this model is more than six times the original, Mahesh Patel, Chief Innovation Manager of GIAN, explained, “We have made the windmill multi-directional. We have used advanced good-quality bearings and iron material, thereby increasing its overall life to a minimum of 10 years. We are currently manufacturing it with the help of a local fabricator.” The innovators are currently on the lookout for technology partners for the improDAR E vised model. MARCH 2009 61
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Vineet Rai
Chief Executive Officer, Aavishkaar Venture Management Services 62
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funding/strategy The Aavishkaar India Micro Venture Capital Fund (Aavishkaar) is a venture fund founded to promote development in rural and semi-urban India. Vineet Rai is a founder and the CEO of Aavishkaar. Rai is responsible for overall management of the fund. Prior to Aavishkaar, Rai was a founder and the CEO of GIAN, an incubator for rural innovations and ventures based in Ahmedabad, Gujarat. At GIAN, Rai was responsible for identifying, evaluating, nurturing and launching grassroot-innovation-based micro-level enterprises for poverty alleviation.
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re you evaluating new business plans irrespective of the slowdown? How much money do you have for investment? We have US$10 million committed in a micro-finance fund out of $18 million. We will do two to three more investments. We have a large part of a micro-credit fund that is still available. We could do around 25 more investments in the next couple of years.
completely driven by money? We have a concept of greed management. We believe that venture capital, as a pure play activity, is completely driven by greed. Profit maximization is a very good idea but it does not normally create robust, long-term companies. I can be completely disputed because people have created very good companies despite getting venture capital. When promoters start their business, profit maximization at any cost is not their sole strategy. Most VCs are focused on profit maximization at any cost, but we believe that we are here to optimize the profits and not maximize it. While doing so, we also look at how the promoter is trying to optimize their returns and the returns to society. We donâ&#x20AC;&#x2122;t believe that we can build businesses exclusive of the society. They have to be inclusive. We are looking at something called inclusive capitalism. We are looking beyond one promoter. We try to look at it as if everybody has an ownership in the company and that is not limited to some ESOPs given to two or five people. We are for ownership across a cross-section, including your vendor and supplier. So this way, your ecosystem is so strong that your chances of failure are much less. In the current environment what is clear is that greed as a co-driver cannot sustain even the capitalist model. It has taken us nine years and that is very unfortunate. You need to control greed at some point in time.
investor of the month Are most of the companies you invest in located in semiurban and rural areas? Not necessarily. Take the example of rangSutra Crafts. It is headquartered in Delhi, but 98% of its employees, staff, and owners live in remote villages of Bikaner. Aavishkaar does not really believe in investing in rural India just for the sake of investment. We invest in a company and the people working in it could be coming from anywhere. But it is their motivation, it is the product and the service that should be either sourced out of rural India or delivered in rural India. What is your investment strategy? What do you look for before deciding to invest? We have a fairly elaborate structure. One, we are very clear on the area and space we are looking at. Avishkaar started as a fund that would provide investments to those who donâ&#x20AC;&#x2122;t get them. However, there are a lot of people who do not get investments, and we canâ&#x20AC;&#x2122;t provide money to everybody. We provide investments at a very early stage, sometimes even when the idea is conceptual. How is your investment strategy different from those of other VC funds? We first look at whether we get along with the entrepreneur. Second, does the entrepreneur have a mindset that is not
Can you give examples of some of the companies you have invested in that reflect the ideology behind the fund? Servals Automation, the company that makes stove burners. These are used by people in the lower strata both in urban and rural India. This company was initially based in Chennai and used to produce and sell both in rural and urban India. Then it outsourced its entire production to villages. The promoter of the company said that he did not believe in mass production, he believed in production by masses. Thus, this company has created employment in places where none existed; it has found a way of including villages in its production sources, which cuts its cost of production. They continue to sell in both rural and urban India. So, here is a production mechanism that is coming out of rural India and selling in both urban and rural India, while the company is technically based in Chennai. rangSutra has 26% ownership by artisans. They are based in Delhi, but in the villages in and around Bikaner is where it manufactures all its products. They put it together and then sell it in Delhi, and then it goes to Fabindia and many other places. It is sold in urban India and abroad, but it is produced in extremely remote areas. Vatsalya has set up hospitals in tier-II and -III cities. They have a hub-and-spoke model where they set up clinics in small towns. Their idea is to provide high-quality service to MARCH 2009 63
DARE.CO.IN people in the lower strata of the society; it’s like the highquality service of Apollo at much lower prices. What is the minimum ticket size of your investments? We do investments as small as Rs 15 lakh, and in the first round we normally stop our investment at Rs 2 crore. We can do more than that, but we will never cross Rs 5 to 6 crore. That is the largest we will do. In the first round we normally invest Rs 2 to 2.5 crore. What percentage of your investments have failed? Isn’t there a higher risk to the investments that you make? We have two companies out of 20 that have failed. One has actually failed, while the other may still recover. Technically, a higher degree of risk does exist, but actually higher degree of risk in what? How you define risk is the first challenge. The type of risk depends on what outcome you are looking for. If the outcome you are looking for is a Rs 10,000 crore company, then it carries a very high risk. We have small companies that have the potential to reach Rs 100 crore or Rs 200 crore or Rs 400 crore, but if you actually define reaching Rs 100 crore, then may be two of our companies will reach it or may be five. Of the 20 companies, I may have five that may reach Rs 100 crore. But a large number of our companies will be between Rs 20 and Rs 80 crore after five to seven years. This according to a mainstream fund would be a failure. A large number of these people would not be able to do an IPO. For us, it is not a failure because we have created these companies when we invested in the pre-revenue stage, in geographies and areas and businesses that are not mainstream. These are not businesses that can follow a hockey stick growth. We are working at creating small enterprises that we believe have a much higher level of job creation. Plus with the kind of model our investee companies have, they are also making a difference to the lives of the people. For us, it is more important than getting a Rs 1000 crore company. Are you reassessing your business strategy? How is the slowdown affecting it? We have increased the stress on some of our companies. Special emphasis is on artisan companies because the export market has gone down. Pressure on the top line and bottom line has gone up immensely. Micro-finance companies have seen tremendous pressure because banks are not lending to them, equity market valuations have gone down, and investing in the pre-revenue stage is looking much more difficult than it was eight months back. We are also becoming cautious of investing into pre-revenue stage companies. How are your companies reacting to the slowdown? Are you in touch with them all the time and telling them how they should handle things? They know business better than we do. We can help them in certain areas that they don’t understand but we do; or 64
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funding/strategy even if we don’t know, we may reach out to people. If there is a strong demand or desire for someone to understand something, we make an effort. The impact has not been dramatic. We follow a conservative approach irrespectively. We are not the kind of investors that Subhiksha is seeing, push people from 500 to 1,000. We are the kind of investors who look at pushing a company which is at 500 to 700. We believe that pushing from 700 to 1,000 may build a kind of risk that we don’t understand. This is also about size differences because we do small investments as we are more conservative. We don’t have deep pockets. There is a perception that when investors come in they try to have their way. Have you seen your companies getting skeptical about this? All the companies we have invested in are very worried about investments. All investors are equally worried about companies they invest in. Investors are born skeptics. Otherwise they will never make good investments. The art is actually to not demonstrate to the companies that you are a skeptic. Unfortunately, not many VCs actually understand that not showing your skepticism actually helps you in doing a better deal. Otherwise, the other guy loses confidence in you. He thinks you are always trying to run him down. We believe that the company you invest in knows best what is to be done. At the same time, in case they don’t, we don’t hesitate in telling them, politely as well as harshly, depending on the level of resistance to what we are saying. If it becomes a fight then I don’t think there is a winner. Both sides stand to lose. Thus, we try to avoid a fight. Even though we have a social mandate, we don’t believe it is the reason for us to actually be polite all the time. We are not pushy, we are not very hard. We try to be very considerate. Our legal agreements are not offensive. We hear our companies out to the extent they can tell us that they are seeing problems. What is the time horizon for investments? We have a six-year investment horizon. We look at an exit after the seventh year. It varies. Today I am looking at five to six years for exit. Two years down the line, I will be looking at four years. As an investor, what are some of the challenges that you face? The companies we invest in feel they are challenged. They are actually raising money only once or twice. We are investing money every day. We are skeptical on a daily basis. The investors are also skeptical about your ability to deliver. And then you don’t have the capability to either be the rich guy (the core investor or the limited partner) or actually run the company. Your ability to really influence changes is very limited. In that case, it is a balancing act. There is a ‘God and Dog Theory’. The venture capitalists feel like God till the time they send the check; after that they are treated DAR E like the dog.
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event/report
HeadStart Launches Startup Saturday Kolkata Entrepreneurship witnessed a new bloom this Valentine’s Day in the form of Startup Saturday
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itherto held across five Indian cities, namely, Bangalore, Mumbai, Hyderabad, Ahmedabad, and Delhi, now Kolkata has been added to the list. Held on the second Saturday of every month, Startup Saturdays are events organized by the HeadStart Foundation, to facilitate networking among entrepreneurs and promote entrepreneurship at the grassroots level in India, and attracts a large number of established and aspiring entrepreneurs. Kolkata became the sixth Indian city to host a Startup Saturday, where Anurup Singhal gave a talk on “Opportunities for Product Sales among SMEs in India.” “The audience feedback was very enthusiastic and detailed in nature. The Kolkata crowd is really ex-
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cited about it,” says Mitesh Ashar, the chief organizer of the event. The event was well received with a good firsttime attendance of 20 people, which included five startups and Rajat Aggarwala of Scrabulous fame. Startup Saturday Bangalore celebrated its anniversary edition with a cake-cutting ceremony. Over 80 people gathered at N S Raghavan Centre for Entrepreneurial Learning (NSRCEL), IIMB to participate in the event. Kreeo.com was the first company to demonstrate their knowledge management platform. The founder and CEO of Kreeo, Sumeet Anand, educated the audience about the concept of collective intelligence and how their purely Ajax-based Web platform harnesses the same. Then Jyotsna Pattabiraman dem-
onstrated Moovie Shoovie, which aims to be the world’s largest community of Indian films and the people who love them. The last demo was on VoicePhP, by Yusuf Motiwala, CEO of TringMe. Startup Saturday Mumbai was attended by about 50 people. The venue was Shailesh J. Mehta School of Management (SJSOM), IITB.. They witnessed two concepts in User Generated Content (UGC)/Web2.0—oCricket by Brajeshwar Oinam and Inkfruit by Kashyap Dalal. There was also a talk on “Aspects and Future of UGC-based business models in India”. There was a discussion on how the entrepreneurs built their products and numerous examples by Eklavya of Contest2Win to monetize UGC. The senior entrepreneurs/technologists in the com-
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Startup Saturday Bangalore munity took time out to address a few queries from newbies on issues related to choice of technology/platform. The American Center in Delhi hosted the second Startup Saturday in the city. Attended by about 40 people, the event got underway with Vishal Chandra speaking about “The Art of Bootstrapping.” Next was a demo on HelpDesk 2.0, a software-as-a-service (SAAS) application by Shishir Jain of Netcellence Technologies. Nikhil Pahwa of Medianama then initiated a
discussion on “The Indian IT act and its Implication on Technology Companies”.Finally, Startup Saturday Hyderabad was hosted by International Institute of Information Technology Hyderabad (IIITH). Led by Ramesh Loganathan and Kavita Vemuri of CIE, IIITH, the event had a variety of talks on diverse topics ranging from “How We Won Our First Customer and Beyond” to “Creating Support Networks, Databases and Portals for Small NGOs and Social Organization.” The event had a
characteristic “social” flavor, with Nitin Rao of SKS Microfinance talking on social entrepreneurship and their fellowship program. It was attended by about 30 entrepreneurs, industry professionals, and 15 students. The HeadStart Foundation is a notfor-profit, volunteer-driven organization that is working on fostering entrepreneurship at the grassroots by bringing all stakeholders of the entrepreneurial ecosystem together. Their website is at www.headstart.in. D A R E
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/INSEAD
The TePP innovation funnel articulates the process of upgrading innovators to entrepreneurs. TePP cumulatively accessed around 7500 ideas, evaluated 1650 proposals and supported 240 innovations in the period 2007-08.
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Photo: iStock
ç TEPP STEPS UP INDIA’S INNOVATION, CONTD. FROM PG 57
Having personally handled over 60 NPD projects himself, Dr. Rao notes the evolving structure of TePP. He adds, “Three years back we took a decision to convert it into a network program. Now there are 28 TePP outreach centres. But TePP will not grow in one direction. Soon TePP Network will become TePP Open Innovation Network. There will be multiple inflows and outflows from the innovation funnel”. The TePP innovation funnel articulates the process of upgrading innovators to entrepreneurs. As illustrated in this funnel (representing the period 2007-08), TePP cumulatively accessed around 7500 ideas, evaluated 1650 proposals and supported 240 innovations in the period 2007-08. As the TePP process has two distinct phases, Dr. Rao explains the
seamless journey for an aspiring technopreneur from start to end point. “The initial screening and evaluation is done by the TePP out reach centres and later processed in Delhi. The role of the network player is well defined to avoid any duplication of effort. Phase-1 incubates the innovation. At the end of it, a successful innovator will have a function-proving prototype (we do not support dot com firms). This prototype is the innovator’s first meaningful communication with the market. Phase-11 is business incubation. Innovator gets training in preparing business plan at ISB or SPJIMR. At the end of this phase the start-up becomes VC ready”. An innovator gets through phase-I with the support provided by the incubator/TePP’s outreach centre. At every
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/INSEAD
An innovator gets through phase-I with the support provided by the incubator/ TePP’s outreach centre. At every stage from concept, design, IPR, planning, technical assistance, business development, funding for venture, infrastructure support, networking and learning tools, the incubator lives through the innovator’s RMP Jawahar, Executive Director, TREC-STEP stage from concept, design, IPR, planning, technical assistance, business development, funding for venture, infrastructure support, networking and learning tools, the incubator lives through the innovator’s creative phase. TePP’s screening committee (TSC) has a critical role to play in phase-II. This team of experts comprises scientists, heads of B-schools such as ISB and SPIJMR, educationists, IIT professors and senior management members of NABARD and NID. TSC members screen, evaluate and recommend all proposals for funding, nominate technology angels to the panel and also select TePP prototyping centres on panel. Micro budget innovations and properly-evaluated proposals coming from TePP outreach centres can be recommended by TSC without reappraisal. These members also identify and recommend new activities to make TePP accessible to most eligible innovators. And finally, keeping in mind the end
objective of transforming innovators to technopreneurs, TSC manages TePP network and carry out screening & evaluation within time limits.
TePP’s screening committee (TSC) has a critical role to play in phase-II. This team of experts comprises scientists, heads of Bschools such as ISB and SPIJMR, educationists, IIT professors and senior management members of NABARD and NID.
creative phase. To every ambitious innovator reading this, illustration 2 has the workings of the all-important Innovator+TePP= Enterpreneur formula. Responding to the speed and fairness of the TePP process, Rao avers, “Innovators can access their nearest TePP out reach centre for hand-holding, counselling and support in preparing application. They don’t have to make presentations to committees in Delhi. Phase-11 applicants are required to appear before a committee in Delhi. The 3-filter process, evaluation at local centeres, by independent technology angel and by committee ensures fair due diligence. Speed of processing depends on quality of proposal,” adding, “but we do not take approval as end of process. The very process of applying makes the innovator think through the next phase. They are all first timers and they learn fast from counselling”. Has this unique formula of Innova tor+TePP=Enterpreneur really helped MARCH 2009 69
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The whole process of seeking funds is one of self discovery and it gave me clarity on the business. My interaction with the technicallyqualified team at TePP office gave me valuable input on the technical side and the intellectual property side. — KARTHIKEYAN JAWAHAR Founder, Adhithiya Medical Systems 70
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/INSEAD
innovators learn fast? We pick a story from their thick volume of successful technopreneurs - that of Karthikeyan Jawahar’s. This engineer-MBA had over six years of corporate experience before he decided to start Adhithiya Medical Systems, a venture that manufactured X-ray generators and serviced X-ray machines. After a year of suffering losses in the manufacturing business, they shifted focus from manufacturing to servicing and trading of X-ray machines. But fortunately, as Jawahar narrates, “As a company culture, we used to do ad hoc research and undergo training in areas that can be of potential use”. And surely, he adds, “our
current venture is a fruitful output of that research and training”. Having attended a week long program conducted by TREC-STEP and infoDEV (a World Bank wing) on Entrepreneur Development in 2007, Karthikeyan recalls, “After the training, my uncle who has 35 years experience in X-ray machine servicing and I presented one of the outputs of our research to Mr. RMP Jawahar, Executive Director, TRECSTEP. The concept was a cost effective way to directly convert X-Rays to digital images. Mr. RMP Jawahar identified potential in the project and gave us incubation support at TREC-STEP and introduced us to TePP”. Never again will he have to drop his manufacturing ambition, this innovator feels as he shares that, “We are creating a new market for Digital Diagnostic X-Ray sensors today without compromising on quality and at the same time low on capital cost. By making the sensor rugged, we are opening up the rural segment and small diagnostics segment”. Having touched a turnover of INR 1 crore in two years, Karthikeyan confidently says, “We are looking at a Rs.100 crore (US$20 million) business in 3 years in India alone. The export potential for this product is high and we plan to start exports from the second year of production after getting the CE certificate.” Karthikeyan’s story substantiates the efficacy of this formula. But how did TePP tap the ingenuity of this entrepreneur? Karthikeyan explains, “TePP has helped me broadly in four ways. Firstly, the barrage of sharp, thought provoking queries that the screening committee showered on us fine-tuned our research process. Secondly, the grant money we received from TePP helped us to focus on research; unburdened by day-today monetary issues. Thirdly, intellectual Property Rights Protection. By the insistence of Dr. AS Rao, we spent time and efforts to protect our innovation. Thanks to him, Dr. Pratap Singh and the TePP team, today we have two patent filings and one design registration. And finally, supported by TePP, Department of Science and Industrial Research, Government of India,
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/INSEAD we enjoy credibility with our suppliers and potential clients”. Asked if he would recommend the TePP program to start-ups and first-time entrepreneurs, Karthikeyan nods and goes on to explain, “The whole process of seeking funds is one of self discovery and it gave me clarity on the business. My interaction with the technicallyqualified team at TePP office gave me valuable input on the technical side and the intellectual property side”, while acknowledging the support his mentor gave him by championing his cause to TePP. Karthikeyan shares a relationship of mutual respect and faith with his mentor, RMP Jawahar of Trec-Step, one of the oldest incubators in India. This mentor’s conviction in the innovation is clear. Jawahar of Trec-Step says, “Karthikeyan’s digital X Rays are available at INR 300000 to 500000 while the closest one available in the market is priced around INR 1.5 million. And there are nearly 60000 old
Micro budget innovations and properly-evaluated proposals coming from TePP outreach centres can be recommended by TSC without reappraisal. Keeping in mind the end objective of transforming innovators to technopreneurs, TSC manages TePP network and carry out screening & evaluation within time limits.
version X-ray machines in India and because of high conversion costs, only 3% of them have been converted to Digital X rays.The market potential is a billion dollars. How can we ignore this? Karthikeyan’s digital X-rays use no chemicals, is portable and means no delays”. Jawahar believes he will achieve a milestone only after “Trec Step incubates 10 billion dollar ventures. I am working with 17 innovators currently and we already have 10 great products”. With 28 such incubators showing this level of commitment, TePP’s open innovation network has the capacity to bridge India’s innovation gap. DAR E Irawati Gowariker is a communications specialist with 15 years in the media and IT services industry, She started her career with an export promotion project that handheld aspiring exporters and manufacturers to export to Germany. Philip Anderson is INSEAD Alumni Fund Professor of Entrepreneurship, Director, Rudolf and Valeria Maag International Centre for Entrepreneurship and Director, 3i Venturelab
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Photo: Anemos
opportunity/manf
Designer fans The opportunity in the business of designer fans is huge provided one keeps coming up with new designs. Here is what a new player should keep in mind before entering this segment. /Aswathi Muralidharan
F
ans in their stylish avatars are no longer three-winged utility items. They have been transformed into intricately designed, multi-winged art pieces, thanks to a handful of entrepreneurs who are making a good business out of it. For Nipun Aggarwal, the idea of designer fans came up when he was renovating his house in 2003. “I was looking for different ceiling fans and nothing great was available in the market,” he says. As Aggarwal was already in the business of wooden floorings and furnishings, he decided to launch designer fans under the brand name Anemos. But the beginning was not at all smooth for Aggarwal. “Once we tied up with suppliers of such fans, we started marketing them to dealers. To our surprise, no one was interested in selling the product, citing high prices. It was then that we decided to go to the market un-
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der our own brand name, Anemos,” he signs. Today, the brand is sold through four showrooms in Mumbai, Delhi, Gurgaon, and Ahmedabad, and Aggarwal expects the business to grow 50% annually over the next five years. Another player, Prateek Kumar Sah, of The Fan Studio, has a similar story to tell, “We have been manufacturing standard fans since 1955. My father Shishir Kumar Sah, the designer of the Sangati range of fans, thought of adding a design element to his fans as he saw a large void in this market. And thus we came up with The Fan Studio in 2007.” It was started with an investment of around Rs 15 lakh, a large part of which was spent on getting a good showroom in an upmarket area of Gurgaon. The rest was spent on decoration of the showroom and marketing campaigns. Today, The Fan Studio is planning to spread its retail stores
to all major metros, and is looking for franchisees. Besides the small players, this business has also aroused a lot of interest among the big fish in the domestic fans market. Khaitan, Bajaj, and Usha have already taken initiatives to tap the opportunity. In 2007, Khaitan launched its first Khaitan Fantasy retail outlet to sell designer fans, priced between Rs 7,000 and Rs 1 lakh. At around the same time, Usha International strengthened its tie-up with the US-based Hunter Fan Company to launch the Usha Hunter collection, priced somewhere between Rs 10,000 and Rs 40,000.
The business The market for designer fans is still in a nascent stage in India. Unlike ordinary fans, designer fans, being luxury rather than utility items, are lifestyle
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opportunity/manf products with a well-defined target customers. The luxury factor also makes this a low-volume, high-price business that is non-seasonal. One of the reasons for the rise in demand for such fans is the increased spending on interior decoration. Explains Sah, “As times are changing, people are getting more design-conscious. They have a preference for antique artifacts and traditional handwork.” This is complemented by the rising income levels that gives the consumer that extra bit to spend on luxury and designer items. According to an estimate by consulting firm Technopak, in 2006 alone there were nearly 16 lakh households earning US $1 lakh or more a year and spending about US $9,000 annually on luxury items in India. This segment is expected to grow 14% annually. The increased spending potential, retail revolution, and international exposure have resulted in an increasing desire to buy luxury products, and consumers do not mind paying a premium for that. This is also getting reflected in demand for luxury fans in India, which is also witnessing an increase. According to Aggarwal, “From seven to eight models in January 2006, we are currently displaying 45 models. From paltry stocks and fans against order, we now have approximately 1,000 fans in our stock.”
ENTRY BARRIERS FOR NEW PLAYERS • Niche market • Presence of established players • Innovative designs • Marketing challenges • Current economic slowdown mented with the blades (some designs have single blade while others have numerous blades), lighting (from direct to subtle and diffused lighting), etc. What is the inspiration behind these designs? “Anything can serve as an inspiration—a crumpled piece of paper, a work of art, a beautiful tea set—anything. High design has a lot to do with art and I think that it’s important to train oneself to look at the world through an artist’s eye. I regularly expose myself to unusual experi-
Design: Design is the USP of this business and players constantly have to experiment with designs and materials to create innovative models and ranges. For example, The Fan Studio has come out with the Classic and the Contemporary ranges. “The Classic range has hand work all over the fan body using different styles and materials,” says Sah. “In the Contemporary range, we have kept very austere designs with finishes like chrome, brushed aluminum, etc. We also have fans made of modern materials like Stainless Steel 316 (Marine Grade).” On the other hand, Anemos has experi-
Photo: Anemos
What makes the business work?
ences, attending museums, shows and traveling.” says Mark Gajewski of G Squared Art, an international player in the designer fans business. Some of the players have got their designs patented to avoid them from getting copied. The price for these fans can range anywhere from Rs 2,000 to Rs 2 lakh for branded fans. Customer: As stated earlier, being more of a luxury item, there is a defined customer base. “Our typical customer is a person of some sophistication in the matters of design and lifestyle,” says Gajewski. According to Aggarwal, “The ideal target customer of such fans would be a person who is renovating his house, and has a budget of approximately Rs 2,500 per sq ft.” Besides the high-income group, these players also target luxury hotels, resorts and builders. Sah adds, “We cater to the niche profile and to all the luxury hotels and resorts.” Marketing: The nature of the enduser makes marketing of luxury products a unique challenge in itself. The customers of such products are influenced more by glamor and style, rather than its utility. Therefore, marketing to such customers is a different ball game altogether and a key challenge of this business as well. A large part of the investment has to be made into marketing. Most of the players in this space sell their products mostly through retail outlets or websites. For the retail outlet, as with most luxury items, the conversion of footfall into sales is low. When quizzed about the location of The Fan Studio, Sah says, “Location is an important factor. The Plaza Mall [in Gurgaon] is otherwise hardly crowded, but we decided to locate our studio here because the mall caters to the niche home and interiors market. Therefore, most of the people who come here are mostly architects or people who want to renovate their homes. This makes it easy for us to target them.” The players also advertise in specialty magazines. Says Gajewski, “We MARCH 2009 73
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Photo: Anemos
opportunity/manf
Some players manufacture fans only on order. “We sell more than 60 fans per month. As these fans are handmade, we don’t have mass production for the same. These are unique fans that are made against order.” Installation and maintenance: According to Sah, “We have designed our products in such a way that anyone can hang the fans like the normal ones. Our technicians install them.” There is generally a warranty of two years on the motor.
Opportunity and entry barriers Several factors are sure to drive the market of designer fans further. Rising incomes are getting people to spend a significant amount of money on the decoration of their houses. Also, five-
star hotels and high-end restaurants do not shy away from spending to add to the beauty of their premises. However, one of the entry barriers for a newcomer could be the competition from established players. Also, one needs to have an excellent marketing pitch to reach out to target customers. “Initially, we faced difficulty in marketing the product, but later we got good response through advertising and door-to-door marketing,” says Sah. And, like any other business, this segment too has been affected by the economic slowdown, with people reporting lower sales. Coming out with innovative designs to offer something new to the customer is also quite DAR E a challenge.
Photo: Anemos
appeal to the architects and readers of the magazines like Dwell or Wallpaper.” Besides these, as Sah explains, “We reach them [clients] through advertising plus we have an architects and interior designers database through whom we reach our target customers.” Manufacturing: Unlike the domestic fans market, this is a boutique business rather than a mass business. The players hire in-house designers or design the fans themselves. “The fans at The Fan Studio are designed by my father Shishir Kumar Sah, who is also the MD of the Sangati range of fans,” says Sah. They are then manufactured at the company’s fans unit in Uttar Pradesh. On the other hand, Gajewski designs the fans himself, which are then manufactured in Taiwan and China.
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ways to reduce cost of doing business online This piece looks at ways to reduce costs and tighten the purse strings if your business is primarily online
/Krishna Kumar
S
ome months back, I had written about ways to reduce costs and manage through the slowdown. That piece was for brick and mortar operations. Subsequently, I wrote about the 19 myths of doing business online. This third in the series looks at ways to reduce costs and tighten the purse strings if your business is primarily online.
1. Change your data center plan Data center costs, hardware, hosting, management (what they call managed hosting) and bandwidth, all of these form a significant part of the costs for any online business. Typically, you sign up for a given data center plan. For example, let us assume that you are on a Savvis managed compute plan. You are charged a fixed amount every month for a given menu of hardware, bandwidth and services. Typically, these contracts continue for ever, with your 76
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credit card being debited every month in advance. The first step is to renegotiate the contract downwards. No. Data center plans are not inscribed in stone. They are open to being re-negotiated. As part of the re-negotiation, there are a few other things you can do. Typically each server comes with a fixed amount of bandwidth. If you have bought tour hosting piecemeal instead of as a group, then you may be paying overage charges for some servers while you will be under-utilizing bandwidth on others. Combine all your servers and ask for the bandwidth to be pooled if that is the case. If you have limits to the number of free service tickets per server, then ask for pooling that also. If you have ordered your servers some time back, you will find that the data center would have upgraded the plan in current offerings. For example, Rackspace now offers 1TB of
bandwidth per server per month with even their basic offerings. About a year back, if I remember right, this was just 2,000 GB. You can easily ask for an upgrade to the current offering if you are paying overage charges.
2. Change data center In the good old days, when cash flow was not an issue, you could afford to be at the best of data centers and not cringe at the costs. But today, do you really need that level of service, or more importantly, do you want to pay that much? The best of data centers, say like Savvis could cost in US$ 1,000 + per server per month. One rung lower, for example Rackspace would be upwards of US$ 600 + per month. The third level, some one like ServerBeach, without the management options would be US$200 + per month range. The savings are obvious.
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For example, your core application could be at Savvis, your secondary applications could be at Rackspace and your e-mailers etc. could be at ServerBeach. You may even opt to do small volume pilots on shared hosters like BlueHost, who start at under US$10 per month!
4. Change your analytics Web analytics is a software that tells you who has come to your website, from where and what they did there. Web analytics is costly, damn costly. And that is all the more reason to replace it with a free one. Many large web sites (read websites with large traffic) use Google Analytics, which is free. If you do not like Google, Yahoo has a hosted analytics service that is offered on the SAAS model. There are many other hosted analytics providers like Compete that you could try out. If you do not want to go for a hosted option, then you could opt for AWStats, which parses your webserver logs to give you the analytics.
5. Consolidate and Virtualize
In the good old days, when cash flow was not an issue, you could afford to be at the best of data centers and not cringe at the costs. But 3. Deploy across multiple data centers Now, changing data centers is not an easy task, and in many cases just the complexity of the application you have been running would rule out a complete data center change. The way out then to reduce costs is to deploy your applications across multiple data centers. Every web business would include multiple applications. For example, there would be your core business application, and there would be add on applications like e-mailers, video hosting, microsites and so on. Now, all of
today, do you really need that level of service, or more importantly, do you want to pay that much? these do not have the same criticality or maintenance level requirements. In such a case, you could deploy them across servers with different service level agreements or even multiple data centers with different costs and service levels.
Servers for web apps have a nasty habit of proliferating. Every time you want to add a new application to the pool, it is too easy to add just another server. So, after some time, you end up with poorly loaded servers or servers that are used only for part of the time. If you have such equipment in your pool (and donâ&#x20AC;&#x2122;t assume that you donâ&#x20AC;&#x2122;t have one. Chances are high that you have), it is time to consider reducing the number of servers you have by consolidating multiple applications on to one server. You could simply run multiple applications on the same server and point them to different URLs and ports or you could go the whole hog and run them on different virtual servers. If the application architecture is complex or if it is rapidly evolving, then virtualization may be more easy to manage. Maybe there are applications that need to be run only on certain intervals? Like one that once a month, reminds members who have not logged in during the month about the goodMARCH 2009 77
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Virtualize your server with Virtual box Geek warning: You do not need to read or understand this part. Get your Technology team to do it for you. We are including this just to demonstrate how easy it is to set up virtualization. Virtual box is free software for Windows and Linux that can be used for creating and deploying virtualized environments. Here we will deploy virtualization on Ubuntu Linux (Hardy). Installing Virtual box Open a terminal window on the Ubuntu desktop, and issue the following commands. # wget http://www.virtualbox.org/download/1.5.6/virtualbox_1.5.6-28266_ Ubuntu_hardy_i386.deb # sudo dpkg -i virtualbox_1.5.6-28266_Ubuntu_hardy_i386.deb # sudo apt-get install bridge-utils This will download and install the virtual box software as well as the advanced networking features. Next you add users to the virtual box group. For this you need to click on Systems>Administration>Users and Group. This will open the user setting interface. By default it is locked. Click on the unlock button to unlock it - you will be asked to give the administrative password. Now you will be shown all the users existing on the system. Select the users who will be using virtualization and from the right pane select manage group. Now you will be shown all the groups. Here select “Vboxusers” and click on the properties button. It will open another window showing the list of users on the linux system. Select the users using virtulization and click ok. Now logout from the machine and login as the user you have configured for virtualization above. Creating Virtual machines on Virtual box From the GUI console, click on Applications menu and select System tools>Sun xVM VirtualBox. This will open a wizard Interface with the license agreement, click on the “I agree “ button. On the next page you will be asked to register the product. Give you email details to register it and click on continue button. Once registration is completed you will be able to create the virtual machine. Lets see how to build a Windows virtual machine on this. On the Sun xVM virtualbox interface click on New. This will start the new virtual machine wizard. Click next, give the machine a name and select the type of OS that you are going to install from the “OS type”. After this click on “Next” and you will be asked to set the memory requirement for the virtual machine. Set the memory using the slider. Let's say 256 MB, and click on next. Now, you specify the hard drive for the virtual machine. Either choose an existing image or press "New" to start the "Create New Virtual Disk". This will run the disk image wizard. Select create a “dynamically expanding image” and the disk image you’re creating will expand automatically when more space is needed by the virtual machine. Now select the actual size of the image. Here you need to define how much virtual hard disk space you’ll have to the virtual machine. When you click next, your new virtual hard disk will been created and will be shown in the drop down. Click next. And you will be given final confirmation. Now, click finish. Booting your virtual machine from the Windows XP installation CD Once the raw virtual machine is created, it will be like a new machine and 78
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you need to install an OS on it. Put the windows XP installer CD in the CD drive. As this is a virtual machine, you need to mount the CDROM on the virtual box, so that the virtual machine can access the physical CDROM. To do this, you need to do a few settings for the virtual machine. Select the virtual machine that you have created, and click the settings button and select the CD/DVD-ROM tab. Make sure you select the “Host CD/DVD ROM” and also select the location from the drop down. Now click ok to save the setting for the virtual machine. While you’re in the settings window, lets also setup the basic network. Click on “Network” - “cable connected” check box is selected - which enables your new virtual machine to get an INTERNET connection – and click OK. Now it's time to start the virtual machine, for this click the “Start” button from the virtual box interface. As you have provided the Windows XP bootable CD to the CD/DVDROM, the virtual machine will start the windows XP installation. Once, you are through with the installation, you are ready to use the Windows XP virtual machine. Advance Networking settings If you want to use the same virtual machine on the network, so that users on the network can access the machine resources such as web or RDP, you need to do a few more settings. First, on the Ubuntu Linux server, open the terminal window. Edit the following file using the following command. #sudo gedit /etc/network/interfaces auto eth0 iface eth0 inet manual auto br0 iface br0 inet dhcp bridge_ports eth0 vbox0 # The loopback network interface auto lo iface lo inet loopback eth0" is the name of your interface, it can be different depending on your machine. "br0" is an arbitrary name for the bridge. "vbox0" is an arbitrary name for the device VirtualBox will use, if you want more devices, you just add then like: bridge_ports eth0 vbox0 vbox1 vbox2 vbox3 vbox4 Save this file and restart the networking service using this command # sudo /etc/init.d/networking restart After this open another file on the host linux machine. To declare the virtual interfaces used by VirtualBox # sudo nano /etc/vbox/interfaces vbox0 br0 vbox1 br0 Save this file, and go the virtual box interface and select the virtual machine, now click on the setting >network. Here select the Host networking, and set the virtual interfaces name as “vbox0”. By this setting you virtual machine will be visible on the network and users on the network can access the machine resources seamlessly. Contributed by: Sanjay Majumder, Senior Manager, IT Strategy at CyberMedia
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ies available? These lend themselves particularly well to virtualization. (See 'Virtualize your server with Virtual box' How-to on the facing page).
6. Off-peak bandwidth This is of interest to you particularly if you are co-hosting in an Indian data center. Indian data centers tend to have two bandwidth rates â&#x20AC;&#x201C; peak rates and off-peak rates. Off peak rates could be 50% or lower than peak rates and typically, they run in 12 hour slabs. Can you move some of your noncritical applications to use bandwidth during off peak hours? Can you do your emailing activities during off peak hours and save on bandwidth costs.
Reduce the losses from credit card fraud, disputed orders, orders that get lost or damaged in transit
Typically, you will be able to lease fixed bandwidth ports with unlimited data transfer at fairly low rates.
7. Reduce fraud and wastage If your customers are paying online, then what is the amount of money you are losing to fraud? This includes credit card fraud, disputed orders, orders that get lost or damaged in transit and so on. If the losses from these counts are high, then you do not need me to be telling you that reducing this can reduce your costs of doing business!
8. Lease instead of co-host Indian data centers seem to prefer co hosting while foreign data centers prefer leasing. Co-hosting is where you own the hardware that is hosted and maintained at the data center. Leasing is where the data center owns the hardware and leases it to you. Obviously, there is a down payment required if you want to add new servers to a cohosting deal. Even more obviously, leasing converts that into an EMI deal that is better suited to the pocket and keeps stating costs down.
9. Re-architect Off peak bandwidth rates could be 50% or lower than peak rates and typically, they run in 12 hour slabs
Like all other software, web applications too tend to grow haphazardly over time. Functionality tends to get duplicated, parts that are no longer working or are required tend to hang around unused, but consuming resources. If your application has grown long on the tooth, then this may be a good time to re-architect it and make it nimbler and DAR E smarter for future benefits
SMS: â&#x20AC;&#x153;DARE <your comments, questions or suggestions>â&#x20AC;? to 56677 Email: dare@cybermedia.co.in Website:
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/stats
How much can you trust a partner's network? A
s organizations get more and more IT enabled, they extend their enterprise networks to connect to their partners. This makes working easier. Applications from once side can access the other and transactions can be enabled across both. Is that all? A study by Verizon Business seems to indicate that there is a darker side to such extended networks. According to The 2008 Data Breach Investigations Report, the trusted business partner poses a significant risk of attacks on your network. The percentage of attacks arising from partners has been steadily rising and was at 44% in 2007 as compared to just 8% in 2004. At 18 %, internal sources of data breach are not insignificant either. And taken together, internal and partner sources present a very significant level of problem.
Over time, threats from partner sources have grown, while enterprises have managed to reduce threat levels from internal and external sources.
Source of data breach â&#x20AC;&#x201C; Industry
According to the study, the food industry seems to be the most targeted by partners, followed by the financial sector. IT seems to be the industry who has the least problems. Food meanwhile, has the least percentage of threats coming from internal sources. Is the food industry not security savvy enough?
Source of data breach (same break may have multiple sources)
Data types compromised
No surprises here. Payment card data seems to be the most compromised data by far. Surprisingly, intellectual property, medical data and corporate financial data does not seem to be as attractive as credit card data. This seems to indicate that the culprits are more in it for personal gain than for organizational gain or for corporate fraud. D A R E Trends in Data Breach Sources 2004 â&#x20AC;&#x201C; 2007 80
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Source : The 2008 Data Breach Investigations Report by Verizon Business
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/blogs
The Political Puzzle
/Paranjoy Guha Thakurta
E
lections are round the corner and the political rhetoric is rising, pregnant with possibilities. Few are willing to hazard a guess about the shape of the next coalition government in New Delhi. Political leaders are full of bluster. But talk to them in confidence and they will confess that they don’t really know what could happen. One opinion poll (conducted by the Center for the Study of Developing Societies for the CNN-IBN television channel) indicated that a United-Progressive-Alliance-kind-of-coalition, led by the Congress and including the Samajwadi Party, would fall short of the 272 majority mark in the Lok Sabha and may need the support of the Left as well as other smaller regional political parties to form the government. Another poll (by CVOTER) does not rule out the possibility of a ‘third front’ government led by Mayawati of the Bahujan Samaj Party and supported by the Left as well as the Telugu Desam Party, the All India Anna Dravida Munnetra Kazhagam, and others. The Bharatiya-Janata-Party-led National Democratic Alliance coalition seems to be on the defensive. Why? Here are a few reasons. The BJP is still a house divided. First, it was veteran Bhairon Singh Shekhawat who was sniping at his party. Then, Kalyan Singh ditched the BJP for his ‘friend’ Mulayam Singh Yadav. The Muslims are not exactly overjoyed with this development—after 82
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all Kalyan Singh was chief minister of Uttar Pradesh when the Babri Masjid was demolished in December 1992. The BJP is certainly not amused. Lal Krishna Advani knows this may be his last chance to become PM. Narendra Modi is waiting in the wings. The BJP hopes to perform better in Gujarat (where it obtained 14 out of the 26 Lok Sabha seats in the state in the 2004 elections), Karnataka (18 out of 28), Jharkhand (one out of 14), Haryana (one out of 10), and Maharashtra (13 out of 48). Its ally hopes to gain in Bihar—the Janata Dal (United) led by current chief minister, Nitish Kumar, won only six out of 40 seats in 2004. The Shiv Sena is divided and may not get more than the 12 Lok Sabha seats it won five years ago. Where else does the NDA hope to gain? Nowhere. Can the NDA then return to power with the support of the TDP and the AIADMK, and a few opportunistic parties in the UPA such as Ram Vilas Paswan’s Lok Janshakti Party? The BJP hopes this will happen, but it is far from confident about such a denouement. If a Congress-led UPA coalition returns to power that is dependent on both the Left and the SP, would Manmohan Singh again become prime minister? Yes and no. General secretary of the Communist Party of India – Marxist, Prakash Karat, has gone on record saying that while his party would prefer a non-Congress, non-BJP coalition to form the government, if it came to a choice between a coalition of which the Congress is a part and a coalition with the BJP, the former would certainly be chosen. Karat was then asked whether the CPI-M would then support Dr Manmohan Singh as a prime ministerial candidate after the bad blood that was created over the nuclear deal with the United States, to which he responded that policies and ideology mattered more than personalities. If not Manmohan Singh, who, then, could become the next PM? Sonia Gandhi? Seems unlikely. Pranab Mukherjee? That’s a good possibility as the Bengali-babu’s personal relations
with the Communists are not all that bad. What about Rahul Gandhi? Well, he could become a minister perhaps? Is there any possibility of the socalled ‘third front’ forming the next government? Mayawati has made no secret of her ambition to become PM. Here’s how the arithmetic may work out. The number of MPs owing allegiance to the Left parties shrinks in size from 60 to 40 (with the Communists losing 20-odd seats in West Bengal and Kerala). The BSP wins around 40 Lok Sabha seats in comparison to the 19 it won in 2004. The number of MPs with the TDP rises from five at present to, say, 20 out of the 42 Lok Sabha seats in Andhra Pradesh. After all, the TDP is being supported this time around by both the Left (that won two seats in 2004) as well as the Telengana Rashtra Samithi (that won five seats). As for Tamil Nadu, the big question is whether Jayalalitha will be able to convincingly defeat the ruling DMK after her party was completely wiped out in the 2004 elections—the AIADMK unable to win even a single Lok Sabha seat out of the 39 in the state. If the AIADMK bounces back, the number of MPs owing allegiance to Left, the BSP, the TDP, and the AIADMK put together could cross the 120 mark. What happens then? Would the Congress and the so-called ‘secular’ political forces come together and support the ‘third front’? Would particular constituents of both the UPA and the NDA—such as the Nationalist Congress Party led by Sharad Pawar or the JD(U) led by Nitish Kumar—choose to support such an amorphous coalition? In other words, would the country then go through a period of unstable politics as it did between 1996 and 1998 when the post of prime minister was held by no less than four individuals (PV Narasimha Rao, AB Vajpayee, HD Deve Gowda, and IK Gujral)? Well, in the world’s largest democracy, DAR E anything is possible. The author is an educator, an economic analyst and a journalist with over 30 years of experience in various media—print, radio, television, Internet and documentary cinema.
DARE.CO.IN id you know it from the beginning that you want to be an entrepreneur?
D
I was brought up in Chennai and when I was young, I always thought that I would get a solid job with a good pay check. I used to think I would be happy with that. If you would have asked me this question when I was in college, I would have said—No, I do not plan to be an entrepreneur [laughs]. Entrepreneurship happened to me because of a set of people I was hanging out with at the Bay area, San Francisco. I am sure that we have lots of youngsters in cities like Bangalore, Pune, etc. who are bitten by the entrepreneurial bug. Similarly, in the Bay Area, everyone around was pretty much charged up about it. It was the company that I kept that got me into it too. Then, once I tried it, I was never happier.
Tell us about the genesis of Snapfish. Snapfish is the fourth startup that I have been associated with. Back then I was based in the Bay area, San Francisco. My first company was Digital Link in 1991. The second one that I started was in 1994 called Wyatt River Software, which I sold off in 1997. After that I took a year off and traveled around the world. After I came back, I was involved in this startup called iSelect during 1998-1999. It was after iSelect that Snapfish happened. Snapfish was started by four of us — Rajil Kapoor, Suneet Wadhwa, Shripati Acharya, and me. We were all friends looking to start up an interesting venture during the dotcom boom. We were looking at various ideas. These included starting a cell phone company, for example. We had
/bio Was friendship the only factor behind forming the team of founders for Snapfish? Actually, I was friends with one of the founders, Shripati Acharya, who studied at Indian Institute of Technology, Chennai. The other two founders were his friends from Harvard Business School. The reason we got together was because we had complimentary skills for this startup. I was the technology guy. Shripati was the user-interface and product management wing for our company. The other two founders, Rajil Kapoor and Suneet Wadhwa, were very strong in business development. So it was not only friendship, but more importantly the complimentary skill sets that brought us together as a team.
After the team was formed, what was your next step? First, we met every week and weeded out ideas that would not lead to building a real business. We agreed to go ahead with Snapfish because it was one idea that was persistent and we could not shoot down. However, in order to be different from the 120 companies that were already in the space, it was difficult for us to execute. Because taking in a roll of film, processing prints, putting it in a scanner, uploading them... all these become complicated as we were thinking in scales—tens of millions of pictures. There were a lot of operational aspects to make sure that the business worked. We had to go about setting up the idea to do a feasibility check. We found a supplier who could actually do that kind of work, made sure that they were honest and capable people to work with, etc. This was basically the homework stage.
entrepreneur of the month funding, had term sheets prepared for this idea, but we decided not to go ahead with it. One important criterion for all of us to start up was to build a good, fundamental, and real business; not something that we will build to sell out. This helped us in weeding out many ‘spur of the moment’ ideas. The idea of Snapfish came from one of the founders who was into photography. At that time, there was also a lot of noise about online photos, and there were about 120 other companies that were doing business around it. However, we took up his idea, had discussions, and shaped up a concept that was slightly different from the others. At that time, people were at large taking pictures using film cameras. The idea that we had was to give the people an opportunity to put pictures from film cameras online. So the idea was to get people to send us their film rolls, which we would process. While we would send the prints and original film roll back to them, at the same time we would also scan those pictures and put them online. This was the idea that got Snapfish started. Later, of course, the use of film cameras started declining. We adapted ourselves to this change, and as time has proved, we did well. 84
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The next step was to actually build and roll out the business. Like most people, we had to go out and seek funds to raise capital. We were lucky to get funding easily because those were the days of the dotcom boom. Besides that, we had an excellent team to win over the venture capitalists. I had been in the Silicon Valley for a long time, and had a lot of contacts, so was able to bring in strong engineers and architects to work for us. Then we launched, of course, and we have been doing good business for the past 10 years now.
Sans HP, how much were you able to scale the business? What were the challenges you faced? The biggest challenge was the dotcom bubble burst, without a doubt. In 2000, we had about 100 employees working for us. In 2001, when the dotcom market crashed, a lot of competitors went out of business. We dealt with it by scaling down the company from 100-plus people to a very small group of 20 very smart people. Doing this was the toughest thing by far. We also changed the original business model, which was based on films, to a complete shift to digital photo prints. Then we built the business around digital photo prints and products.
/bio
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BALA PARTHASARATHY SNAPFISH
Bala Parthasarathy set up many startups in the Bay Area, San Francisco, and went on to build Snapfishâ&#x20AC;&#x201D;a leading online photo service. After its acquisition by Hewlett-Packard in 2005, it has spread across 22 countries and has a user base of 70 million. Parthasarathy talks about his entrepreneurial ventures, his successes and challenges, and his gradual decision to be Managing Director, Asia Pacific, Snapfish, HP
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/bio SUCCESS MANTRAS/ "HUMILITY. HIRE PEOPLE SMARTER THAN ONESELF. I HAVE A POINT OF VIEW, BUT I DO NOT HAVE TO BE RIGHT ALL THE TIME. TAKE EGO OUT OF DECISIONS. IT IS NOT WHO YOU KNOW, IT IS WHAT YOU KNOW THAT IS IMPORTANT."
At the time HP acquired us, we had about 13 million members. Back then, we were fully operational only in the United States with some experimenting being done in the United Kingdom. HP is the next part of the Snapfish story. In the last four years we have been able to kick up the member count to 70 million spread across 22 countries.
When, why, and how did you arrive upon the decision to let the business be acquired? Quite honestly, arriving upon this decision was one of the toughest calls. We were running a profitable business in digital photo printing and products. We had not built this business with ‘sell it out later’ on our minds. During 2004-05 we signed up with some big retailers ( Walgreen, Wal-Mart, Cosco, etc.) in the United States. These retailers had started to see the value in the service that we offered. It is at this point that we felt the need to go to the next level. The UK business was taking off well, but to be able to reach across to tens of countries, we needed to get to the next level of scale. It is very hard being on your own to launch the product in different countries. The business of Snapfish is not just about putting up a website or localizing it to the regional language. We have to actually set up a physical plant. In India, for example, there is a physical plant that makes the prints. We all thought that in order to scale, if we were to find a right partner for a right price, it would be okay with us. This is when HP came along. In early 2005, one of my co-founders was speaking at a party about Snapfish. This caught the attention of an investment banker of HP who was present there. She got interested and contacted us. That is how HPSnapfish happened.
How does it feel to yield your brainchild to someone else? It is really hard. It is like this trade-off in which you get certain things and lose certain things. You absolutely lose the independence, there is no doubt about it. You lose a little bit of the speed that you have as a small company. However, there are a lot of benefits too. Like I said, going from 13 million users to 70 million users, from one country to 22 countries, are numbers that speak for themselves. The feelings that I was going through? The biggest doubt was about autonomy—when you are running a show on your own, you enjoy it and get to make all the decisions. When you are acquired, will I have that level of freedom? Will I have fun? Will I be comfortable with someone breath86
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ing over my shoulder, telling me what to do next? Would I be caught up in red tape and bureaucracy? I got over with all these doubts by talking to people from HP Division of Image and Printing group—because ultimately it boils down to the people and trust. These people who sat with us at the table had been with HP for about 10 to 20 years and were really enjoying what they were doing. To me, that was something—somebody who has been in the company for those many years and you can see it in their face that they are not making up stuff. Also, prior to the acquisition, I was not sure if this would be a big success. Because in large companies, the acquired company on many occasions collects dust sitting in a corner somewhere. Back then, life had been all about startups. For me the idea of wearing a badge and going into large office was something that was never thought of. I was nervous about the freedom that we would have. HP assured us to not worry, and that we will be given a lot of independence, etc, which has turned out to be true. But at that time, one always has the doubts, and did not know that four years later I would be sitting at HP-Snapfish talking to you about it.
What were the noticeable differences in the way things were done in HP as compared to Snapfish as a startup? Actually, the part of Snapfish that I am most involved in is very much like a startup. I am running the business in Asia Pacific. We launched Snapfish in India about a year ago. So we are creating the business. It is as though we are launching six different startups in six different countries in Asia. For example, the most recent country that we launched in is Japan. The beauty is that I have the benefit of HP backing me to start from scratch for things such as looking for an office space, setting up phone connections, etc. People have also heard about HP-Snapfish. So you get off the ground much faster than I would if I were a startup without HP. The products themselves are pretty similar, but the processes are much simpler. I do not have to deal with the grunge part of starting a business like product development, business development, setup the financial systems, paying the taxes, accounting, and such. To do all this in an unfamiliar country like China, for instance, which has special laws for photography, becomes much easier with HP behind you.
Why did you decide to stick around with HP? I do ask myself every now and then, ‘Am I having fun or not?’ I am having fun—that is the only reason. Many people
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/bio whom I had hired have stuck around. I like the people I am working with.
How is the business of online photo printing doing in India? Our business is doing really well since its launch about a year back. It is fundamentally a good business around the world, and I do not think India is any different from the US or UK. There are other companies who are operating in the same area or are copying Snapfish, and that is really fine. If there is a good business, there will always be competition, which keeps you on your toes. The audience in India, which pretty much like elsewhere, is people with digital cameras and young children. In United States, for example, 85% of the users are young mothers. India is a little bit more male skewed, which is changing very rapidly. The Indian user is very picky and not very shy in telling you what they like and what they dislike. They are very demanding, which is a good thing. India and China are the emerging markets for us. We believe these are the countries where the innovations will come from. I believe, in the next three to five years, this should be a huge business in India.
What is the next big thing to happen in the online photo printing business? The world is moving towards camera phones. Having a good set of solutions for camera phones is what will make it big next. However, there is not much innovation happening in that space yet.
“
ers, for instance, concerning prices. This is the time, where you should look at every cost with a microscopic view. Also when you try to cut costs, you tend to innovate more because you are trying to make do with less, which is always good for a business.
What was the one challenge that you faced in all the startups you had? It is always nice to be in the middle of the world where it is nice and warm, but to actually go out on the edge of the world where it is more risky is something else. The biggest challenge was to get out of the comfort zone. We had to do this several times, for example, laying off people in 2001. It was difficult as these were your friends, but it was the right thing to do. Also, even a thing like me moving to India to be in the center of the action, than sitting back in the comfort of my home in California, is getting out of the comfort zone.
What was the one big failure that you learned a lot from in your startups phase?
The world is moving towards camera phones. Having a good set of solutions for camera phones is what will make it big next. However, there is not much innovation happening in that space
What do you think will be the impact of the current slowdown on online services? I think there is going to be an impact. We have not felt it significantly in the online photos space. I think it will be the same impact where overall expense will come down. The things that are affecting general industries will hold true for online services as well. People are questioning anything that is non-essential. Our position in the market is that we provide the best value. In fact, in the United States, where the economy felt the slowdown immediately, our business grew much faster than our competitors. Maybe this is why we have not felt the slowdown yet. However, we are questioning our costs and balancing that with our growth plans. Whenever you are cutting costs, you are typically shortchanging something else. But we always go for efficiency. We are renegotiating with our suppli-
”
I think it would be hiring the wrong people and keeping them around for a long time. I have made my share of bad hiring. You become soft and think that people will change, but ultimately it is a small team and you want everyone at their maximum productivity levels. If you do not see this happening with your employees or even your co-founders for that matter, you have to accept the fact that you have made a mistake and move fast.
What is the time or incident that you can say was your biggest success as an entrepreneur? The acquisition by HP was a good time, full of excitement. It happened when we had to scale the business. I remember when HP bought us, I went and told my team, “Guys, we are doing well but we need to assume that in a few years our revenues and volume will be 10 times higher.” That was very exciting. In fact, four years now, we are in that very position.
Would you want to be an entrepreneur again? Yes, absolutely! Like I said, I am having fun in HP. I am starting new businesses that are really starting from zero. I do not have the upside of owning the business, but I have the freedom. Even though personally I am not making as much money as I would have upon this level of success, as a business, it does. That aspect is what is driving me. The minute I stop enjoying this feeling, I will start up something of my own again. D A R E MARCH 2009 87
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case/INSEAD
ç TELIBRAHMA, CONTD. FROM PG 33
such as perhaps a television channel or a retail store for mobile content. As summer turned to fall in 2008, Suresh pondered these options. Passion, an excellent team, a clever strategy for differentiating the firm, and the venture’s ability to morph from a technology solutions provider into a media company with a growing network made Telibrahma quite potentially attractive for several different types of investors who might give KITVEN a profitable exit. What was the best way forward?
We continue on a different page
ICICI Bank wanted to excite its customers to download a mobile banking application. Telibrahma created a “BluFi” network across branches of the bank and put a poster in each branch encouraging clients to turn on Bluetooth while they were waiting in line. Over 100,000 customers downloaded the application over two months 88
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tising agency or media company that could increase the company’s footprint or the range of services it offered. “We were a medium, not a full-fledged advertising agency,” Suresh notes. “Customers appreciate the services we deliver to them, creating an opportunity for creative agencies to work with us and design engagements for brands.” Should Telibrahma continue with that model, or find an investor who could add more creative depth to the enterprise? Second, how should the company employ a new round of funding in order to grow? One alternative would be to continue offering the same range of services and focus capital on expanding the network to more and more locations. A second would be to allocate some resources to increasing the range of services offered over the network, such as developing social network applications or a mobile content distribution platform. A third might be building a Telibrahma-owned brand that could be offered over the network,
Suresh and his partners decided to look for high-quality venture capital investors for their next round of funding. “I had a lot of trust in the investment banker who helped us find KITVEN, so we worked with him to examine our options,” Suresh says. “KITVEN was a very nice investor to have. They support and trust entrepreneurs, and they add no nonsense to the equation. We needed investors like them who could also add a lot of value. The economy may not be as good as it was in the spring of 2008, so we needed someone to help with bigger clients as we kept deploying our infrastructure in more high-traffic locations. That required resources, financial stability, and good connections.” In September 2008, Telibrahma announced that it had raised $2 million from Inventus Capital Partners and Ojas Venture Fund. Samir Kumar of Inventus and Pavan Krishnamurthy of Ojas joined the board. “We asked ourselves with whom we could have a better relationship,” Suresh says, explaining why he chose to work with these two investors. “I had known them for some time, and people I talked to said they were well-networked within the venture capital community. They are well-suited to the stage we are in, and they bring a lot of connections and knowledge from the market. A lot of innovations are happening in the retail sector, and they come to know about these entrepreneurs quickly, so we get a chance to work with those ventures to create different media properties. Our
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case/INSEAD investors also give us great guidance in terms of corporate governance.” Suresh firmly rejected the idea of becoming an advertising agency or tying up with an agency as its primary investor. “We create more value than a software company, but we have a lot of opportunity to scale by working with several different advertising firms,” he explains. “We will not be an ad agency, because we will not move away from our core philosophy of building an alternative media network. There is no point confusing the market about whether we want to become our brands’ advertising agency.” While adding more locations, Suresh also intends to expand the range of services that Telibrahma offers. “The network is fundamental to what we are trying to do, and there is no point creating a huge network if you don’t monetize it properly,” he says. “You cannot just build out a network—you also need to provide more revenue-generating solutions. We may do a lot to push social networking or we might distribute mobile content,
We create more value than a software company, but we have a lot of opportunity to scale by working with several different advertising firms for example, but these are fairly different business models.” The most important asset Telibrahma needs to exploit, in Suresh’s view, is the information it has compiled. “We have a lot of consumer profiles, so we will do a
lot of work on analytics,” he says. “We think we can scale well for the next few years by using what we already have, finding ways for our customers to use analytics to create even more value as DAR E they engage end-users.”
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blogs/opinion
Looking at the Silver Lining /Anurag Batra
M
ost people that I meet these days are pessimistic about the short-term future. Believe me, I share their concern – the days ahead are not going to be easy. Companies have already been hit by the downturn, and many companies have started to begin consolidating their resources and streamlining their organizations. All non-essential expenses are being curtailed; this, unfortunately, has also resulted in some job losses, as organizations struggle to survive and attempt to tide over these low times. I know a lot of friends in well-paying jobs who are jittery about their futures. Fresh graduates are looking for opportunities to enter the workforce, with few avenues in sight. The outlook on recruitment is bleak. However, this presents an excellent opportunity for an entrepreneur to start and incubate a new venture. I know it sounds like an oxymoron, so let me explain. Any new enterprise requires a significant amount of capital while being set up, and the business environment today presents an opportunity to set up an enterprise at a substantially lower cost than, say, a year ago. Cost of renting office space in the metros have come down substantially, even in prime locations. Since many offices are now shifting
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out to cheaper locations, it is possible to even get a good place with modest fit-outs at the cost of a bare-shell location. Staffing today is much easier, as the expectations of employees have been tempered to a significant level. People are content to receive their salaries in time and work in a secure environment rather than jumping from one job to another in search of a higher salary. For the next few months, the magnitude of business will remain low, which presents a perfect opportunity to set up your enterprise and streamline the system to take care of any problems. The revenue steam may take some time to start flowing, but let’s not forget that rarely in a business does it start flowing in from day one. As time passes and things improve, the new business will get a chance to adapt to the situation and scale up with the environment, rather than jumping in head first into a roaring business environment. This is a good time to look at franchising as an option, both for existing entrepreneurs wanting to expand their business, and for new entrants looking at starting their entrepreneurial journey. Franchising is an effective way of expanding the business without significant capital investment and getting healthy returns. The franchisor makes money on signing up a new franchisee (upfront cost), incurs no additional cost on capital expenses, and has a sizable portion of the operating expenses taken care of by the franchisee. In return for sharing the brand equity of the product in a controlled manner (both the product and the services associated with the product are delivered in a predefined manner), the franchisor takes away a handsome percentage of the profits, while at the same time getting someone to share the risks with him. In return, the
franchisee gets to start a business of a known brand, which has substantially higher chances of success vis-à-vis a fresh startup. Given that some banks are now extending unsecured loans to franchisees for starting up a franchise (reputed), it is a good option to start one’s own business. All businesses have associated risks – franchising is no different. The franchisor must risk sharing his brand with someone else who might be an efficient person, dedicated at growing the brand equity and the business. If the selection of the franchisee is poor, it may lead to closure of the outlet, which significantly impacts the franchisor as there would be opportunity loss, and also the brand equity of the product would be eroded in the area. The franchisee, on the other hand, must evaluate the business plan carefully to understand if it is a viable option – it may look good on paper, but the real world is an entirely different setup. Still, if the entrepreneurial bug has bit you, then it is time to jump into the fray. A friend of mine recently told me that if any organization was caught this year by the slowdown, it was bad luck and unfortunate. However, if someone gets caught in the slowdown next year, then it is bad planning, simply because all business plans should take into account recessionary trends while planning for the future. So if your business plans take into account the effects of the slowdown and still manage to show a profit, this is the perfect opportunity DAR E to start your business. Anurag Batra is real life, first generation entrepreneur who is Much Below Average (MBA) from the prestigious Management Development Institute, MDI. When he is not busy writing such columns, he can be reached at anuragbatrayo@gmail.com. Anurag is the co founder and editor-in-chief of exchange4media group which includes exchange4media.com.
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E-Week 09 Makes the World Go Green Lakhs of students unleash their entrepreneurial spirit in E-Week India 09
Students of Institute of Engineering and Management pose with their robot creations
T
he National Entrepreneurship Network-initiated flagship event Entrepreneurship Week 2009 grew to become a national movement for entrepreneurship this year, involving 350,000 students from 400 institutes across the country. Showcasing the theme ‘Go Green – The World is our Business’, over 2,500 events were held from Feb 7 to 14, encompassing not only colleges but entire cities as well. In Indore, Jaipur and Durgapur, thousands of citizens enthusiastically joined in mammoth rallies on main roads to promote the importance of eco-preneurship. Chennai
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witnessed a three-kilometer human chain formed by city leaders, filmstars, environmentalists and over 2,000 students, their placards chanting the same message. In Kolkata, students ventured into villages, advising farmers to use cleantech processes of farming. MBA students held street plays in residential societies and outside railway stations in Mumbai, teaching people to be eco-aware. In Bangalore, one college held marathon events on entrepreneurship that ran non-stop for 30 hours. NEN blogger Shubha Narayanan accompanied by photographer Sujith Sujan embarked on their E-Week yatra,
capturing the sights and sounds from across seven cities in seven days. Here’s a snapshot.
Day 1: Indore IPS Academy Indore was painted green this E-Week. The IPS Academy, in very imaginative ways, touched the nerve centers of the town—its public buses, shopping malls, top branded stores and the streets - with its patriotic campaign 'Mera Indore Green’. The inaugural day saw a thousand green-thinking Indore citizens hit the streets running. A Go Green marathon, much publicized beforehand on leading
DARE.CO.IN radio channel Radio Mirchi, local media and posters, witnessed scores of school children, collegians, Lion Club members and municipality officials join in. Meanwhile, all the 95 public buses plying across Indore carried the message of ecopreneurship on their back during E-Week. Large flexes, portraying the ills of pollution and energy wastage using caricatures, were placed behind the rear windows of these buses. Batches of two students, working on five hour shifts, travelled on these buses—talking to passengers on entrepreneurship and making them sign the E-Week pledge. Students reached out to at least a lakh people this way. The week-long program was launched in association with Indore City Transport Corporation Limited. Shopping malls, including Treasure Island, the biggest shopping complex in Indore, also came on board to support the E-Week initiative. Leading brands like Reliance Web World, Adidas, Provogue, Blackberry’s, United Colors of Benetton and Mufti showcased E-Week posters next to the 50 % discount announcements.
Day 2: Mumbai Atharva College of Engineering The Atharva team felt their biggest achievement this E-Week lay in the windmill they were building on the terrace of their college complex. The proposed windmill, whose blades are carved out of PVC pipes and expected to weigh about 120 kgs, will generate enough energy to run two computers. “We wanted to create something sustainable this E Week, and a windmill turned out to be a feasible idea, considering our campus is sea-facing. We are happy that we are in some way contributing to harness energy and save electricity. If our pilot is successful, we will construct more of them,” said an excited Amit, one of the organizers at Atharva. High energy output, that one!
Day 3: Pune Hiraben Nanavati Institute of Management and Research Entrepreneurship was discussed like never before in the HNIMR cam-
Students of Atharva College of Engineering pose with their windmill design pus, and it was more than mere talk. Students did some serious business this E Week. Seven students of the institute have started green businesses on their own. Rucha Sharma has already taken the first steps. With the help of her father, she is setting up a roof water harvesting business in her draught-prone hometown Jalgaon. Currently, she is on a hiring spree, recruiting plumbers for the job, while her father is finalizing their first deal with an interested
client in Jalgaon. “There is a loss of about one lakh liter of water for every 1000 sq ft area not covered under roof water harvesting. By venturing into this space, I hope to contribute to a sustainable future,” she says. Shraddha Zende, an agriculture student, is market-testing her business idea of providing kitchen gardening services. “Homegrown vegetables are desired by many, but not many have the skills to grow and maintain them. I hope to provide my gardening services MARCH 2009 95
DARE.CO.IN to people living in houses and apartments,” she shared. Another student, Rasika Roman, whose family owns land in Maharashtra, wanted to start a vegetable and fruit processing unit in her village and provide local jobs. Meanwhile, Amrutha Opte planned to produce sapling packing made of rice starch. Her friends, Priyanka Patil, Deepti Motivale and Tillotama Rajale, are also planning their businesses on similar lines. Tillotama is planning to sell scented wrapping paper, while Priyanka and Motivale will build their biodegradable packing business using paper waste.
Day 4: Kolkata Institute of Engineering and Management and Heritage Group of Institutions This E-Week, engineering students of Kolkata were all set to become the technology innovators of tomorrow. Experimenting with energy solutions that can be commercialized, the students came up with models and prototypes that have the potential to solve some of the biggest problems we face today. Dr M Das of Heritage Institute of Engineering, along with his team of chemical engineering students, has successfully tested an experiment where they could compress air, and later release two streams of air—hot and cold. Dr Das said the methodology can be used in freezing units and kitchens, without harming the environment. Also, the same methodology can be used to segregate gases into carbon dioxide, nitrogen and oxygen. If this can be successfully commercialized, the result will be revolutionary— gas spewing industrial units will have a way to recycle their own exhaust! Meanwhile, a team of students at Institute of Engineering and Management, led by Prof Biswajoy Chatterjee of the Department of Robotics, created a robot that can track, recognize and follow a human; follow voice commands and has speech functions. Its differentiating factor is the Mobile Exploration Robotic Platform on which the robot is 96
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The following institutes were recognized at the E-Week Closing Ceremony for their drive, enthusiasm and innovation displayed during E-Week. E Week Champions • Bengal College of Engineering & Technology, Durgapur • Heritage Institute of Technology, Kolkata • Institute of Engineering & Management, Kolkata • IPS Academy, Indore • ISBR, Bangalore • Muffakham Jah College of Engineering & Technology, Hyderabad • Sree Bhagwan Mahavir Jain College, Bangalore E Week Runners-up • BC Roy Engineering College, Durgapur • Dr DY Patil Institute, Mumbai • Eastern Institute for Integrated Learning in Management, Kolkata • Jaipuria Institute of Management, Delhi • Jyoti Nivas College, Bangalore • Mount Carmel College, Bangalore • PSG College of Technology, Coimbatore • Swami Keshvanand Institute of Technology, Management & Gramothan, Jaipur • VLB Janakiammal College of Arts & Science, Coimbatore Special Awards • Nilima Rovshen Creativity and Innovation Award: Atharva College of Engineering • Most Effective Public Awareness Campaign: IPS Academy, Indore based—an open platform that allows programmers to write additional functions in any code language. The department, which has a track record of winning every robotics competition in the country, is hoping to commercialize the robot for blind people. As Dr Das rightly says, “Such classroom experiments, which focus on innovation, will lead to much bigger things. We hope that students are inspired to make India a leader in product innovation in the years to come.”
Day 5: Durgapur Bengal College of Engineering and Technology Bright-eyed and hugely excited after the 5000 people strong public rally, which shook the sleepy steel town on Sunday, the E-Week buzz continued to rule in the Bengal College of Engineering and Technology.
With 150-plus events lined up, the campus never seemed to rest. While case studies, paper presentations, panel discussions and group competitions continued to be crowd pullers, the students did some serious social entrepreneurship with a clean-tech angle as well. The students adopted a neighboring slum that didn’t have electricity, and provided indigenously created solar panels to light over 100 houses. The project was not easy as students had to take time out of study hours to conduct research and build the panels. The materials itself cost them Rs 70,000. However, the entire student community came together, organized campaigns and cultural fests and collected the funds needed to make the project work. There couldn’t have been a better celebration of the E-Week spirit!
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Students of Shri Bhagwaan Mahaveer Jain College
Day 6: Hyderabad Muffakham Jah College of Engineering and Technology For an infrequent visitor of Hyderabad like me, MJCET’s treasure hunt was a delightful treat. Staying off the typical tourist routes, this hunt traced the inspiring green buildings of Hyderabad. I was pleasantly surprised to realize that Hyderabad had so many ecobuildings. The simplest clue turned out to be ‘The world’s third greenest building’, referring to the self-sustainable Sohrabji Godrej Green Building Center. The Yogi Bear Park, a favourite picnic spot for kids, was an easy guess too, as its mini golf park is known to have the largest green cover. The hunt also touched upon Our Place that won the Best Eco Friendly Restaurant in 2003; KBR Park, the largest green spot in Hyderabad; Doctor’s Colony, that won the Best Eco-friendly
Colony Award twice; Save the Rocks Society that is campaigning to protect the city’s rock formations and Greenko, a company doing research in biodiesels and carbon creadit. As cars vroomed past me on the chase for the city’s greenest treasures, a student next to me was suddenly struck by a business idea, “Hey, why don’t we start a business using this route and call it an ecotour package?” Now, did I just witness the beginning of a new startup?
Day 7: Bangalore Shri Bhagwaan Mahaveer Jain College The students of Jain College were out with a loudspeaker, shouting out the message of E-Week to everyone within earshot. While competitions, panel discussions and entrepreneurial talks ruled the week, the students also initiated
programs that were high on the sustainability factor. For example, the students have installed a rainwater harvesting plant in Jain Residential School in Kanakapura, at the cost of Rs 82,000. The entire amount is sponsored by the institute. The college has also formed an Eco Club, in association with Bangalore’s leading NGO Eco Watch, to build environment awareness. The club is open for membership to other colleges too. The hottest event of the week was Entrabiente, an entrepreneurial-cumentertainment three-day program, which attracted participation from 11 colleges. With intensive lobbying, the students managed to rope in Cognizant as the main sponsor and raised Rs 3 lakh in sponsorship money. DAR E We love this noise, people! More articles on www.nenonline.org. Content provided by NEN MARCH 2009 97
Organizations DARE.CO.IN
covered in this issue, in alphabetic order; first appearance
Aavishkaar India Micro Venture Capital Fund ............ 63 ABG Shipyard ............................................................ 26 Adhithiya Medical Systems........................................ 70 Adidas........................................................................ 95 All India Anna Dravida Munnetra Kazhagam ............. 82 American Center in Delhi........................................... 67 Anemos ..................................................................... 72 Apollo......................................................................... 64 Atharva College of Engineering ................................. 95 Bahujan Samaj Party ................................................. 82 Bajaj........................................................................... 72 Bajaj Auto .................................................................. 48 Ben and Jerry ............................................................ 59 Bengal College of Engineering and Technology ........ 96 Bharat Refrigeration .................................................. 16 Bharati Shipyard ........................................................ 26 Bitzer ......................................................................... 16 Blue Star .................................................................... 16 Cafe Coffee Day ........................................................ 50 Cambridge International Examinations ..................... 53 Central Board of Secondary Education ..................... 52 Centre for the Study of Developing Societies ............ 82 Chase Manhattan ...................................................... 28 Citrix ......................................................................... 38 CNN-IBN.................................................................... 82 Coca Cola .................................................................. 32 Confederation of Indian Industries............................. 54 Congress ................................................................... 82 Contest2Win .............................................................. 66 Cosco ........................................................................ 86 Council for the Indian School Certificate Examinations............................................ 52 Daewoo ..................................................................... 26 Dempo ....................................................................... 26 Department of Science and Technology .................... 56 Department of Scientific and Industrial Research.................................................... 56 Digital Link ................................................................. 84 DLF ............................................................................ 46 Eastern Institute for Integrated Learning in Management........................................... 96 eCapital ..................................................................... 28 Eco Watch ................................................................. 97 Eklavya ...................................................................... 66 Entrabiente ................................................................ 97 eVector ...................................................................... 29 Evergreen Foods ....................................................... 17 Finman Ventures........................................................ 44 Freedonia Group........................................................ 16 G Squared Art ........................................................... 73 General Mills.............................................................. 58 GIAN .......................................................................... 61 Godrej & Boyce ......................................................... 16 Google ....................................................................... 31 Greenko ..................................................................... 97 Haier .......................................................................... 16 Harvard Business School .......................................... 84 HDFC Bank ............................................................... 46 HeadStart Foundation ............................................... 66 98
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Heritage Institute of Technology ................................ 96 Hewlett-Packard ........................................................ 85 Hiraben Nanavati Institute of Management and Research ...................................... 95 Hunter Fan Company ................................................ 72 Hyundai ..................................................................... 26 ICICI .................................................................... 32, 88 IIITH ........................................................................... 67 IIMB ........................................................................... 66 IIT (Guwahati) ............................................................ 61 IITB ............................................................................ 66 Indian Institute of Technology, Chennai ..................... 84 Indore City Transport Corporation Limited. ................ 95 Inkfruit ........................................................................ 66 Institute of Engineering and Management and Heritage Group of Institutions ............................. 96 International Baccalaureate Organization ................. 53 International Maritime Organization .......................... 26 Inventus Capital Partners .......................................... 88 IPS Academy ............................................................. 94 ISB ............................................................................. 69 ISBR .......................................................................... 96 iSelect ........................................................................ 84 Jain Residential School ............................................ 97 Jaipuria Institute of Management .............................. 96 Jyoti Nivas College .................................................... 96 Khaitan ...................................................................... 72 Kitven......................................................................... 31 Konig and Cie ............................................................ 27 Kraft ........................................................................... 58 Kreeo.com ................................................................. 66 KTM Power Sports .................................................... 48 L& T ........................................................................... 26 Lion Club ................................................................... 95 LOBA Finchemie ....................................................... 48 London Business School ........................................... 58 Mayur Uniquoters ...................................................... 36 McDonalds................................................................. 43 McDougall.................................................................. 59 Medianama ................................................................ 67 Middlesex University .................................................. 59 Miller .......................................................................... 58 Ministry of Science and Technology .......................... 55 Mobile Exploration Robotic Platform ......................... 96 Moovie Shoovie ......................................................... 66 Mount Carmel College............................................... 96 Muffakham Jah College of Engineering and Technology.......................................................... 97 NABARD.................................................................... 69 National Innovation Foundation ................................. 61 National Institute of Open Schooling ......................... 52 National Institute of Pharmaceutical Education and Research ........................................... 55 Netcellence Technologies .......................................... 67 NewLogic ................................................................... 48 NID ............................................................................ 69 oCricket ..................................................................... 66 Ojas Venture .............................................................. 88 Outsourced CFO & Business Advisory Services....... 44
Panasonic .................................................................. 46 Patton Refrigeration................................................... 17 PES Institute of Technology ....................................... 28 Pipavav Shipyard ....................................................... 26 Prarthana Society ...................................................... 52 Provogue ................................................................... 95 PSG College of Technology ....................................... 96 Quaker ....................................................................... 59 Radio Mirchi............................................................... 95 rangSutra Crafts ........................................................ 63 Reliance..................................................................... 26 Reliance Web World .................................................. 95 Rory Sutherland ............................................................ Royal Challengers .................................................... 28 Sainsbury................................................................... 58 Salvage Settlers ........................................................ 45 Samajwadi Party........................................................ 82 Scrabulous................................................................. 66 Shemaroo Entertainment .......................................... 38 Shilpa Medicare ......................................................... 48 Shipyards Association of India................................... 26 Shiv Sena .................................................................. 82 Shri Bhagwaan Mahaveer Jain College..................... 97 Siemens..................................................................... 28 SKS Microfinance ...................................................... 67 Small Industries Development Bank of India ............. 31 Snapfish..................................................................... 85 Sohrabji Godrej Green Building Centre ..................... 97 Sony Entertainment Television, India......................... 38 SPIJMR ..................................................................... 69 Sree Bhagwan Mahavir Jain College......................... 96 Steelcast .................................................................... 26 Subhiksha .................................................................. 46 Swami Keshvanand Institute of Technology, Management & Gramothan ....................................... 96 Technology Information, Forecasting and Assessment Council ........................................... 56 Technopak ................................................................. 73 Technopreneurship Promotion program .................... 55 Telibrahma ................................................................. 28 The Fan Studio .......................................................... 72 TREC-STEP .............................................................. 69 TringMe ...................................................................... 66 Twitchell ..................................................................... 59 Unilever...................................................................... 59 United Colors of Benetton ......................................... 95 Usha .......................................................................... 72 V.L.B.Janakiammal College of Arts & Science .......... 96 Vatsalya ..................................................................... 63 VoicePhP ................................................................... 66 Voltas ......................................................................... 17 Wal-Mart .................................................................... 86 Walgreen ................................................................... 86 Walker........................................................................ 58 Wipro ......................................................................... 48 Wipro ......................................................................... 29 World Bank ................................................................ 44 Wyatt River Software ................................................. 84
People DARE.CO.IN
covered in this issue, in alphabetic order; first appearance
A.B. Vajpayee..................................... 82
Nitin Rao ............................................ 67
Amrutha Opte .................................... 96
Nitish Kumar ...................................... 82
Anil Gupta .......................................... 56
P.V. Narasimha Rao ........................... 82
Anshul Gupta ..................................... 45
Pankaj Jain ........................................ 44
Anurup Singhal .................................. 66
Patrick Barwise .................................. 58
Ashish Ahuja...................................... 46
Pavan Krishnamurthy ....................... 88
Atul Maru ........................................... 38
Philip Morris ....................................... 59
B.C. Roy............................................. 96
Prakash Karat .................................... 82
Bala Parthasarathy ........................... 85
Pranab Mukherjee ............................. 82
Bhairon Singh Shekhawat ................. 82
Prateek Kumar Sah ........................... 72
Biswajoy Chatterjee ........................... 96
President Abdul Kalam ...................... 61
Brajeshwar Oinam ............................. 66
Priyanka Patil ..................................... 96
Buddhichand H. Maroo ..................... 38
Prof. Y.S. Rajan .................................. 54
Deepak Chopra ................................. 40
R Subramanian.................................. 46
Deepti Motivale .................................. 96
R. B. Adityodaya Karna ...................... 52
Dr. M Das ........................................... 96
Rahul Gandhi..................................... 82
Dr Manmohan Singh.......................... 82
Rajat Aggarwala ................................ 66
Dr. A. S. Rao ...................................... 55 Dr. D.Y. Patil Institute.......................... 96 Dr. Parikshit Bansal ........................... 55 Dr. Pratap Singh ................................ 70 G.V. Sudarshan.................................. 35 Gagan Seth ....................................... 17 H.D. Deve Gowda .............................. 82 I.K. Gujral ........................................... 82 Jai Maroo ........................................... 38 Jayant K Tewari ................................. 44 John Stuart ........................................ 59 Jonah Bloom...................................... 58 Jyotsna Pattabiraman ........................ 66 Kalyan Singh ..................................... 82 Karan Girotra ..................................... 23 Karin Newman ................................... 59 Karthikeyan Jawahar ......................... 70 Karunakanth Nath.............................. 61 Kashyap Dalal.................................... 66 Kavita Vemuri..................................... 67
Rajil Kapoor ....................................... 84 Rakesh Singh .................................... 53 Ram Vilas Paswan ............................. 82 Raman Maroo .................................... 38 Ramesh Loganathan ......................... 67 Rank Hovis ........................................ 59 Rasika Roman ................................... 96 Ravi BR ............................................. 30 Rishabh Jain ...................................... 36 RMP Jawahar .................................... 69 Rory Sutherland ................................ 59
DARE is not an acronym. It represents the daring spirit of the entrepreneur. The red color for the R of DARE represents the fire in the belly of the entrepreneur. You could think of the D representing the face, A representing the chest, R representing the belly and E representing the feet of the human body. Hence the red R.
Rucha Sharma .................................. 95 Samir Kumar...................................... 88 Sen Meehan ...................................... 58 Sharad Pawar .................................... 82
The entrepreneur dares to do things. (S)he dares to do things differently
Shaun Smith ...................................... 58 Shishir Jain ........................................ 67 Shishir Kumar Sah............................. 72 Shraddha Zende ................................ 95
Khimji Bhai Kanadia .......................... 55
Shripati Acharya ................................ 84
Lal Krishna Advani............................. 82
Shubha Narayanan ............................ 94
Lee Ryan ........................................... 59
Sonia Gandhi ..................................... 82
Mahesh Patel ..................................... 61
Sujith Sujan ....................................... 94
Malcolm Gladwell .............................. 59
Sumeet Anand ................................... 66
Mark Gajewski ................................... 73
Suneet Wadhwa ................................ 84
Mark Leong........................................ 59
Suraj Sharma................................... 100
Max Blackston ................................... 59
Tillotama Rajale ................................. 96
Mitesh Ashar...................................... 66
TM Venu ............................................ 16
Mushtaq Ahmad ................................ 60
Vinayaka Pandi .................................. 55
Narasimha Suresh ............................ 28
Vineet Rai .......................................... 62
Narendra Modi ................................... 82
Vinod Kumar Rekhi............................ 17
Nikhil Pahwa ...................................... 67
Vishal Chandra .................................. 67
Nipun Aggarwal ................................. 72
Yusuf Motiwala................................... 66
SMS â&#x20AC;&#x153;DARE <your comments, questions or suggestions>â&#x20AC;? to
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/society
S
uraj Sharma might not be digging gold mines, but this 47-year-old is content dealing in gold foils. Born in a small town of Jaipur, Sharma is the self-confessed black sheep of his family. A consistently disastrous academic performance convinced his well-wishers that he was good for
Gold On Marble An intricate work of gold foil on marble makes for a good business venture for Suraj Sharma a Rajasthani artisan /Mohita Nagpal nothing. While he somehow managed to complete his schooling, he opted to bid adieu to studies just one year into college. However, he believes that this decision to quit was a blessing in disguise because it forced him to look out for business opportunities. He found his calling in handicrafts. With designs inspired from the Mughal era, he began making marble handicrafts with gold foil work. But that, of course, is not a dayâ&#x20AC;&#x2122;s labor. It took him years to establish the right contacts and get good artisans. It has been more than 20 years since he started the business and it is now going strong.
The process Marble handicrafts are quite common, but marble handicrafts with gold foil work are not. The raw materials used include herbal glue (pevadi), gold foil, stone colors, and lacquer. Marble is sourced from Jaipur and other areas 100
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/society of Rajasthan. The small pieces come at Rs 2,000 per tonne, while the big ones cost Rs 5,000 per tonne. The herbal glue is prepared in-house. Gold foil is manufactured by some families in Jaipur. The foil is pasted on paper from one side to give it uniformity. A 3-inch foil costs Rs 60. Sharma buys gold foil
worth Rs 1 to 1.5 lakh every month. As far as stone colors are concerned, he tries to keep them as natural as possible, using kajal for black, haldi for yellow. And where natural colors are not available, he makes do with enamel paints. The designs are made on the marble, and then the herbal glue is applied on it on which the gold foil can easily stick. Outlining and shading follows. If some stones are required to be painted, it is done so. Finally, lacquer is used for finishing as well as to protect against environmental hazards. As these handicrafts are popular as gifting items, these need to be framed and packed in velvet boxes.
The business These handicrafts are priced between Rs 100 for a small elephant and Rs 1 lakh for a pot. However, Sharma believes that the price depends entirely on the order. Most of his customers place orders for their requirements. He has a team of 25 laborers working under him. Their salary ranges from Rs 2,000 to Rs 8,000, depending on their experience. After paying up salaries, working out logistics, losing out on stock, and buying the expensive raw material, Sharma claims a profit margin of 20%. He manages to sell handicrafts worth Rs 6 lakh a month. He is happy with his profits and believes that “it is all about keeping the customers happy.”
Recession-proof? Sharma showcased his marble handicrafts at the Surajkund Crafts Mela in New Delhi this year for the third time in a row.
While most of his counterparts were unhappy with the dip in sales this year, Sharma believes he has done better than any previous year. Sit with him even for half an hour and one understands why he says so. In the course of this interview, a lady wanted to buy 15 identical pieces of a wall hanging. Unfortunately, there are only 10 left, but he assured her that the remaining pieces would be delivered at her home. He says his business has picked up in the last four years. Ask him if the slowdown has affected the business and you would get an honest reply, “Ha thoda manda hai, par humko koi fark nahi pada” (Yes, the market is down, but I am unaffected). Sharma says more and more middle-class customers buy his products now. He cites the government as his customer too. He claims to have been invited to Rashtrapati Bhavan and the prime minister’s residence on a regular basis to showcase his products. A lot of them are bought for the visiting foreign dignitaries. Corporate buyers too have shown interest in his products. He hasn’t tried his hand at exporting so far. But it is definitely on the cards, DAR E he affirms. MARCH 2009 101
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/exit
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RNI No.DELENG/2007/22197. Posting Date: 5th & 6th of every month. Posted at Lodi Road HPO.
DL(S)-17/3314/2008-09-2010