Vol 2 / Issue 10 / Jul 09
/Rs 30
Subscriber copy not for sale
HOW
SOCIAL NETWORKS
HELP IMPROVE YOUR BUSINESS Includes 7 Case Studies
Entrepreneurial spirit at Bharti Basics of Registering a Company Why Use Managed IT Services? Solar PV Cells: A Growing Industry Desalination: Full of Opportunities
entrepreneur of the month/
Gurnam Arora, Kohinoor Foods investor of the month/
Sarath Naru, Ventureast innovation/
A Low-cost Clay Fridge
Doing Business in Israel
Case: Ingrid Srinath at CRY
Export Opportunities for SMEs
Does Your Venture Need a Pacemaker? 100 pages including cover
Vol 2 / Issue 10 / JUL 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 Amit Panday Aswathi Muralidharan Binesh Kutty Manu Gupta Vimarsh Bajpai
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.
/strategy
HOW
36
SOCIAL NETWORKS
HELP IMPROVE YOUR BUSINESS Includes 7 Case Studies
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 SECUNDERABAD #5,6 1st Floor, Srinath Commercial Complex, SD Road. Tel: 27841970 SINGAPORE 1, North Bridge Road, # 14-03 High Street Center Tel: +65-63369142 CORPORATE OFFICE Cyber House, B-35, Sec 32, Gurgaon, NCR Delhi-122001. Tel: 0124-4031234, Fax: 2380694.
100 pages including cover
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Evolving the entrepreneurial spirit at Bharti Enterprises
60
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/contents
32
entrepreneur of the month
opportunities/ Desalination: Full of Opportunities ........... 16 Solar PV Cells: A Growing Industry ........... 28 Opportunity in POS and Mobile Printers ... 66 strategy/ Why Use Managed IT Services? ................ 46 Basics of Registering a Company ............ 74
going global/
56
Doing Business in Israel The country’s rich talent pool and technological know-how makes Israel a lucrative place to do business.
Gurnam Arora JMD, Kohinoor Foods
Along with his brothers Jugal and Satnam, Gurnam Arora ventured into the business of Basmati rice in the 1970s. Today, Kohinoor Foods has a turnover in excess of Rs. 650 crore. He talks to DARE about his entrepreneurial journey at Kohinoor.
policy/ Export opportunities for SMEs .................. 22 Balance of Payments and your business .. 52 Textile Industry Policies Across States ...... 82 society/ The Mango Farmer.................................... 96 event/ The Summer Startups .............................. 84
blogs/columns Philip Anderson ........ 20
investor of the month/ Sarath Naru, Managing Partner, Ventureast
70
Rupin Jayal ............. 64
He has invested directly or has overseen investments in over 50 deals in growth to early stage and in sectors ranging from technology, biotech and healthcare, and consumer goods to infrastructure services.
Anurag Batra ........... 88
based
brand
capital
come
business companies
company
cost country crore customers delhi don’t entrepreneur entrepreneurs experience growth help high idea india indian industry investment
like
look
make
management market marketing money need number people products second services start team technology think time used value venture want waste work world years
innovation/ A Low-cost Clay Fridge Mansukhbhai Raghavbhai Prajapati, a Gujaratbased potter, makes this fridge that uses no electricity!
44
INSEAD/ Case: Ingrid Srinath at CRY ......................... 24
NEN / Institutes With an Entrepreneurial Streak........ 90
others / Exchange ............................................... 08 Feedback ............................................... 14 JULY 2009 5
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blogs/edit
A question of trust? Have Indian businesses suddenly lost the knack of making profits and of repaying loans? Have Indian bankers become hugely risk averse overnight?
W
e have a slightly pathetic situation at hand. If it were not for the scale of the problem, I would have even called it funny. On the one side there are businesses desperate for credit. On the other, there are the banks, flush with money and apparently willing to lend. Only, they do not seem to be willing to lend to those needing and asking for the money! Many businesses which had otherwise flourishing relationships with their banks are now being made to run from pillar to post for credit. Entrepreneurs who get a sympathetic hearing from senior officers in bank get turned away down the line, and to quote an entrepreneur that I met recently , “My bank has completely changed its colors. I do not recognize them any more. Sad fact is, they also don’t recognize me anymore” On the other hand bankers keep asking for ‘good projects’ to fund. I know of senior managers who are now tracking loan disbursements particularly to priority sectors on a daily basis; but are not able to meet targets. I know of another very large bank that is pulling out all stops at the senior most levels to lend to businesses, particularly to small and medium entrepreneurs, but on the ground are unable to meet any targets. Why this dichotomy? Have Indian businesses suddenly become huge credit risks? Have Indian businesses suddenly lost the knack of making profits and of repaying loans? Have Indian bankers become hugely risk averse overnight? My guess is that the issue is really one of trust – of the trust that the local branch manager and the officers who process the loan applications have on the applicants. My guess is that they have become too scared by what has happened globally, with trusted international bankers collapsing overnight under the weight of bad portfolios. They are also seeing the actual performance of the projects they funded, against the projections in the project reports. It will take some time and at least one round of good corporate results for the trust to come back into the banker – entrepreneur relationship.
/Krishna Kumar
JULY 2009 7
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ublished: May 2009 Ankur Seth was promoting a venture in the
stock photography industry and was looking for angel investors.
I
have a business idea that was shortlisted as one of the top 1000 business ideas in ‘Power of Ideas’
by Economics Times. I have done my ME (Software Systems) from BITS Pilani and B. Tech (Computer Engineering) from Pantnagar. I have a total of 14 years
Response: June 2009
of experience in the IT sector, out of which five years
We are interested on this project and would
experience is in developing educational software. I
like to contact Ankur Seth.
am already working on my business idea for the past Rajeswari
two years. I need finance to speed up the process. Adarsh Kumar Khare
I
am a Mumbai-based businessman dealing in timber, iron and steel and allied materials. I would
like to diversify my business into the shipping industry. I would like to contact consultants/ mentors who can guide me in getting a break in the shipping industry and some other valuable tips.
I
represent Green Earth located in Bolangir, Orissa – an area infamous for various issues like distress
migration, child selling, drought, illegal women trafficking and other such human rights violation. Green Earth is working towards mitigating those
Yusuf Eshack Memon
issues and is urgently in need of an funding partner to support livelihood and food security of the tribal women by promoting collection and marketing of
W
e have a business in the men’s garment section,
NTFP produce. Surya Dash
which has a very good growth potential. We are
distributing our franchises across India. You can visit our website at ‘www.temperaturezero.co’. We are interested in contacting franchisers as well as investors. Vikram Singh
I
am planning a startup in the education sector along with a friend. While we are convinced about
the business, we want some market research to back our understanding. We are looking for executives
W
e are working on a business plan for which
who can conduct this research for us. Being a startup,
we want a creative web designer in our team
we are bootstrapping and hence would like to balance the research vis-a-vis the costs.
based in Gurgaon. Ankit Thappa
I am looking for some guidance in terms of how to best go about getting this market research done. Are there any companies who cater to providing
I
want to start a student’s website for which I am
executives on a temporary basis? Any assistance
looking for a technology partner.
would be highly appreciated. Mio
8
JULY 2009
Nimesh
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am an entrepreneur for whom DARE is a constant source
of
motivation,
encouragement
and
P
ublished: June: 2009 Abhishek was planning to start a pre-school
innovation. I am a certified childbirth educator
plus kids activity center in Pune and was looking for a
and I have an independent childbirth education
partner for the setup.
center called PreggyJoy in Chennai. I take classes for expectant couples on their journey through
Vikash wanted to start a chain of pre-schools and needed guidance on the same.
pregnancy, childbirth and breastfeeding that enables them to know evidence-based best practices in
Response: June 2009
maternity care that ensure a fulfilling and beautiful
I am interested in contacting Abhishek and
birth experience.
Vikash, whose requests were published in
I am looking for funds to take my company
the June issue of DARE. This is regarding my interest
forward in opening full-fledged centers and also
in starting a pre-school in New-Delhi/NCR. I am
create a birthing center where birth will be more
also interested in contacting those who want to start
of a natural and family event with medicine as a life
pre-schools. I need guidance on regulations and the
guarding safety net. I am looking for angel investors
legal procedure as well. Vikas Kapoor
who are interested in funding a business that also has a social face to it. This will change birth outcomes for a whole new generation and benefit the society at large as well. Deepa Santhosh
I
have a concept on remote healthcare services— an end-to-end healthcare delivery system for the
developing world. I am looking for people who want to be a part of the core team and also angel funding
F
irst of all I would like to thank the DARE team! I
to kick off the pilot.
am interested in starting a manufacturing unit
Dr. Sanjay Sharma
related to plastic medical disposable or surgical disposable items in Kerala. I am looking for a mentor or technological knowhow person who could help me in this venture.
I
am a CA, currently working in the banking industry. I am planning to start a pre-school center in Hyderabad.
Muhammed Juhair
I want information regarding process, investment, support, requirement, etc to start the preschool. Arun Bansali
I
am looking for individuals, private or public limited companies who would like to involve
with us in doing bamboo business on a large scale. I am basically based in London and have access to UK and EU markets.
JULY 2009
bicycle/bicycle parts to enter into a joint
venture for establishing a production unit. Pranab Debnath
10
W
e are interested in meeting producers of
KP Bhawsinka
Credit Guarantee Fund Trust for
Micro and Small Enterprises (CGTMSE) n the absence of collateral or third party guarantee, adequate and timely finance at reasonable rates of interest to entrepreneurs having viable business proposals in Micro & Small Enterprise sector has been a major bottleneck. Recognizing this weakness, the Government of India (GoI) and Small Industries Development Bank of India (SIDBI) set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) in August, 2000 to provide guarantee support to banks and lending institutions for their exposure to the MSE sector. The GoI and SIDBI are contributing to the corpus of CGTMSE in the proportion of 4:1, respectively. The committed corpus of the Trust is Rs.2500 crore. Cumulatively as on June 25, 2009, 1,70,219 proposals for Rs 5734 crore have been accorded guarantee approval.
I
CREDIT GUARANTEE SCHEME (CGS) Any collateral / third party guarantee free credit facility (both fund as well as non fund based) extended by eligible institutions, to new as well as existing Micro and Small Enterprises(MSEs) with a maximum credit cap of Rs.100 lakh (Rupees Hundred lakh only) are eligible to be covered. The guarantee cover available under the scheme is upto maximum extent of 85% of the amount in default. ELIGIBLE LENDING INSTITUTIONS Institutions which are eligible under CGS are Public Sector Banks, Private Sector Banks, Foreign Banks, select Regional Rural Banks & select Financial Institutions. As on date, there are 96 Member Lending Institutions (MLIs) of the Trust. ELIGIBLE CREDIT FACILITY Credit facility upto Rs.100 lakh, both term loan and working
capital facility (fund and non-fund based) per borrowing unit extended without any collateral security and/or third party guarantee to a new or existing MSE ( both in the manufacturing & service sector excluding retail trade) is eligible to be covered under the scheme,. SECURITY FOR LOAN Loans covered under the guarantee scheme may be secured only by way of primary security. For this purpose primary security has been defined to include assets created out of the credit facility so extended and/or which are directly associated with the project or business for which the credit facility has been extended. Any facility extended against collateral facility or third party guarantee is not eligible for coverage under the scheme. TENURE OF GUARANTEE The Guarantee cover under the scheme runs through the agreed tenure of the term loan / composite credit. The tenure is 5 years or block of 5 years, in case standalone working capital facility is covered under Credit Guarantee Scheme. FEE FOR GUARANTEE The fee payable to the Trust under the scheme is a one-time guarantee fee @ 1.5% of the credit facilities sanctioned and annual service fee @ 0.75% per annum of the credit facilities sanctioned as on March 31, each year. For entrepreneurs in the North Eastern Region including Sikkim, one-time guarantee fee @ 0.75% of the credit facilities sanctioned (above Rs. 5 lakh to Rs.50 lakh) is applicable. However, for credit facilities sanctioned up to Rs. 5 lakh, one-time guarantee fee is now 1.0% and Annual Service Fee is 0.50%.
For further information visit our website www.cgtmse.in.
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ublished: June 2009 Ashutosh Agrawal represents an investment
M
ozak is a design consultancy that specializes in architecture and interior designing.
banking company in the US and was interested in
We are interior designers with an international
meeting project developers in the renewable energy,
background specialized to meet the demands of
water management, waste management and CDM
modern corporate offices, retail, hospitality and
project verticals.
residential projects. We have profound experience in conceptualization, design and development of layouts and planning with intricate integration of aesthetic,
Response: June 2009 I wish to have the contact details of Ashutosh Agrawal whose letter was published in the June 09 issue. I wish to develop a project in plastic waste management and seek his support. Vijai Bhaskar
HVAC, security systems, lighting and networking system and execution of the same. We are a young, motivated and expanding firm looking for strategic tie-up with associates/business heads from diverse fields to provide us business leads. We assure you, the decision would be win–win situation for both the organizations. Some of our
I
am a media entrepreneur with ten years of experience in various arms of media; and my own,
six-year old private limited company. The credits of the company include one of India’s earliest English
repeat esteemed clients are Onida (MIRC Electronics), LIC Housing Finance, Ogaan Publications, VIACOM18, Endemol, Plus Channel (India), Dharma Productions, Karan Johar and
Priety Zinta. We provide special
packages for aspiring and existing entrepreneurs.
feature films on digital (DV) format (which was Gaurav Mozar
showcased in two international film festivals) and a first-of-its-kind general interest English monthly magazine of my city. Now, the company has launched an (English) enewspaper. Targeted at people of Indian origin and Indophiles living across the globe, the e-newspaper
I
am a fresher in BE (electrical and electronics), waiting for my TCS call letter. My aim is to start
a company based on white LED and solar cells with my friend after three years. I want to meet somebody
is already live on the Internet. Though officially
who can give me a clear picture about the sector and
launched only a month ago, it has already attracted
how to start my work.
11,000+ page views from about 4300 absolutely
Civaraj, Chennai
unique visitors from over 100 countries across the globe. (Source: Google Analytics) But for it to become a benchmark global enewspaper and also spread its wings to the clearly
chandeliers. I am interested in manufacturing
defined ten other revenue (and brand equity building)
and retailing the same in NCR. Since I have no prior
verticals, the company is looking for angel/seed
business experience, I am looking
investors. To know more, angel/seed investors may
who can
kindly write back to me via DARE.
financial assistance. Anshuman Rawat
12
I
have a passion for designing lamp shades and
JULY 2009
for someone
provide me with both mentoring and
Alakananda Sikdar, Gurgaon
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Doing Business in Bahrain ARTICLE I had explored the Bahrain market way back in 1991, when many other countries including India were already taking a lot of initiative and my employers were planning exports. This [solar energy] is a large business, but not in the Gulf except Israel and Egypt. First, dust and wind are the enemies of any solar installation. These de-rate the output of any solar equipment —thermal or eletric/photovoltaic. In the Gulf, this calls for a daily inspection and dusting of panels or reflectors. With this cost of (expensive) labor added, you need big installations that will pay for such costs. Plus the reflectors and glass need to be of scratch-proof quality and that also adds to cost. Again this increases the economic size and cost of a domestic residential, corporate or hotel installation. Next, the sun provides dissipated energy, at about 2 KW per Sq M for three to four hours, which means 6 to 8 KwH per day per sq meter. Of these, solar heating devices convert about 40-60% depending upon weather, less wind and dust losses to deliver 2 to 5 KwH of energy per day per sq meter. Solar photovoltaics convert just 1015%, delivering just 200Wh to 750Wh per sq meter per day. All this makes solar energy installations affordable only for large family residences, hotels and offices, if they have 1 sq meter per occupant of shadow-free space for solar-thermal installations and 0.5 sq meter for solar electric installations. Terraces of multistoreys are inadequate, making 100% autonomous solar installations not feasible, but only supplementary. This means continued, even if reduced, dependence on the grip for power to heat and light houses. Bahrain, though a good candidate for its negligible oil resources, has plenty of natural gas resources especially from the Hawar Gas Fields (of BANAGAS?), which makes power from that source very cheap. This means larger payback period and low incentive. Israel has set an example by way 14
JULY 2009
of compulsory solar installations for any building to get a completion certificate. In India, we have (reducing instances of ) state and central subsidies for installation in No-Power Zones like Himalayan States, North-East etc that the government identifies. Plus, buyers get 100% depreciation, which means that a tax-payer practically installs the system at government’s cost. Such examples need to be emulated by the state of Bahrain too. Udit Chaudhuri A Low-cost Incense Stick Maker ARTICLE Usman Shekhani’s product should hopefully be one of the stepping stones to the slow eradication of poverty from our land. I hope some corporates buy his products and distribute it among the poor to help them in a sustained better living. Aruna 10 Out-of-the-way Hotel Concepts ARTICLE Very interesting article! It will also be easier to market yourself if you are the owner of these types of hotels. As an example, the term ‘tree house’ was searched 12,100 times on Google in May from India alone. Can you guess how many times the term ‘tree house’ was searched on Google worldwide in May? 823,000!! These are done by people looking to stay in a tree house. The owners of these hotels should tap into this large online market. It will be worth it. All these hotels are fantastic concepts! Well written. Arjun Revival? BLOGS Stock market is in fact being manipulated by stock brokers who play “Satta” (not a healthy sign for an average Indian) in shares. The real worth of companies in most cases is much below than their share prices at the stock exchange. The Sensex is not a barometer of economic development and prosperity. Moreover, the accumulation of wealth from shares is an unproductive activity, because it does not contribute
to the nation’s wealth. The share prices of only a few selected companies determine the overall Sensex. How then can it be called the true index of progress of our country or the barometer of our economic health? Mahesh Kapasi What next for an entrepreneurial husband and wife? ARTICLE It is really a motivating piece of write up especially for me because me and my husband Vinay Yadav are in the same business running a software company VinayRas Infotech. In the begining we had problems but it is running smoothly and is profitable now. Rashmi 15 reasons to tie up with TiE ARTICLE Its really a great organization. I attended the program held on Feb 3, 2009 at Nagpur, Maharashtra. The story of Sanjeev Bikhchandani, CEO, Naukri.com and R. Sriram, Co-founder, Crossword Book Stores really motivated me a lot. Rashmi Priya Managing ATMs ARTICLE Very relevant article. Cash dispensing machines are becoming very popular these days. The impact of its importance in rural/unbanked areas is yet to be tapped. Innovative and cost-effective approach is needed for this purpose. Ashish Kolarkar Why loans for women entrepreneurs are not taking off ARTICLE Hi, I am impressed, but what is the rate of interest, guidance for which industry to start for an architect in construction industry, scope of that industry, margin amount of loan, etc. Mahima Srinivas Pai
SMS “DARE <your comments, questions or suggestions>” to 56677 or Drop us an email: dare@cybermedia.co.in
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opportunity/water
Water and desalination: Key figures
D
esalination is the process of removing excess salt and other minerals from water to render it fit for human consumption. This is easier said then done, for desalination requires use of technologies and machineries. While governments in Spain, the Middle East, and Australia are commissioning big desalination plants to turn seawater into drinking water, there are people who oppose the move, terming it expensive and detrimental to the environment. India has so far installed 175 plants, starting with one at Andaman in 1946. Desalination plants have proved to be an elixir for places like Lakshadweep, Andaman, and some places in Gujarat, Tamil Nadu, and Andhra Pradesh.
Main Technologies â&#x20AC;&#x153;Two basic technologies are used in the desalination plants. They are either 16
JULY 2009
thermal based or membrane based,â&#x20AC;? says M.P. Ramaswamy, Managing Director, SWS&GB Saline Water Specialists. Membrane-based technologies include reverse osmosis (RO) and electro-dialysis (ED), while thermal-based technologies include multistage flash evaporation (MSE), multi-effect distillation (MED), multi-stage flash distillation (MSF), and vapor compression (VC). Which technology is to be used where depends entirely on local conditions. Both the technologies have proved to be quite popular, with RO accounting for 59 percent of contracted desalination capacity till 2008. It has grown at a rate of 17 percent year-on-year since 1990. RO produces drinking water by forcing seawater against a semi-permeable membrane, producing pure water on one side and concentrated brine on the other. In contrast, MSF process in-
Demand for fresh water in India (annual) Fresh water available in India (annual) Population with no access to safe drinking water in India Number of plants installed in India so far Global desalination market by 2015 Annual desalination market in Middle East Current global water treatment market Current size of Indian water market Current share of desalination in water market Share of RO in desalination technologies
900 billion cu m 500-600 billion cu m 22.5 crore
175 US$ 95 billion US$ 8 billion US$ 400 billion US$ 1 billion 0.10% 59%
volves both evaporation and condensation split into several stages, which is repeated many times. Seawater is heated and evaporated, and the steam is condensed to produce desalinated water in this process. As the water va-
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opportunity/water
Desalination: Debatable, Yet Full of Opportunities Fresh water is becoming scarce and a water crisis looms large not just over India but over several countries in the world. The way forward seems to be desalination. /Ambrish Jha “For portable requirements, and for municipality uses, one should opt for RO. For industrial uses, thermal desalination plants should be preferred,” Ramaswamy says.
Economics of desalination
Location: Guadalupe (France) Unit : Mvc Desalination Capacity: 250m3/day
Water quality (TDS in ppm) From RO plants
300
From thermal plants
>2
WHO recommends
300-500
por is being condensed, its latent heat is used to heat incoming seawater. The benefit of MSF is that it can produce large amounts of water at a time. Ramaswamy says, “Thermal is an age-old technology and is still practiced by people all over the world. It gives you the best water quality.” With thermal desalination plants, it is possible to get water output of TDS (total dissolved solids) less than 2 ppm (parts per million), important for industrial uses. In case of RO plants TDS count of water produced is normally around 300 ppm. This is acceptable as WHO recommends drinking water to have TDS of 300 to 500 ppm.
Desalination plants are quite capital intensive. Not only are initial capital investment costs high, but there are considerable investments required for putting up proper water intake systems, whereby seawater is procured and brine is disposed. Operating and maintenance costs need to be borne as well. Thus, project costs depend on a number of factors, namely, type of technology, costs of energy, geographic location, plant capacity, feedwater quality, and cost of water intake from source to desalination plan. According to Tamim Younos of the Virginia Polytechnic Institute and State University, USA, building costs, freight and insurance costs, construction overhead costs like labor, temporary facilities, construction equipment, etc, contingency costs, and owner’s costs also affect the economics of a desalination plant. Ramaswamy has a method of estimating project costs: “You can take a thumb rule that for 1 MLD (million liters daily; equal to 1,000 cu m per day), costs may come to around Rs 5 to 6 crore for thermal and Rs 4 to 5 crore for RO.” When it comes to power consumption, a major component in desalination, RO-based plants consume more power. According to Ramaswamy, RO plants consume almost 4 units of electricity for every cubic meter of water. “Thermal plants consume only 0.7 to 1 unit for generating the same amount.”
On an average, for every liter of fresh water produced, desalination plants need around 2.5 L of sea water. The remaining 1.5 L (brine) is dumped back into the sea. “In RO-based plants the reject becomes chemically polluted and this has to be cleaned before dumping back to sea,” Ramaswamy says. Capital investments for setting up desalination plants may be high, but desalination experts like Ramaswamy and H. Subramaniam, an executive of a water consultancy firm, insist that these are definitely not as high as quoted in developed countries. Ramaswami says, "I have been doing a lot of exercise on calculating the costs of water realized from desalination plants. My assessment is that the cost of producing water from these plants would be in the order of between 3 paise to 5 paise per liter (Rs. 30 to 50 per cubic meter) – much cheaper than mineral water.” “We are capable of manufacturing everything in India. When we supply desalination machinery today, we manufacture it here, with only a few components coming from Italy,” he says. This has reduced the costs considerably in India vis-à-vis developed countries. Ramaswamy, says, "Today we can handle projects of any size, as we have the support from my collaborators."
Market size Market share of desalination in the overall water market, estimated at US$ 400 billion, is a miniscule 0.1 percent. According to the International Desalination Association (IDA), the global desalination market is expected to grow to US$ 95 billion through 2005 to 2015. JULY 2009 17
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opportunity/water
Economics of desalination 1
Project cost for setting up a plant (excluding water intake system) with 1 MLD capacity
Rs. 5-6 crore for thermal plants Rs. 4-5 crore for RO plants
2
Power consumption to produce 1 cu m of water
4 units by RO plants 0.7-1 unit by thermal plants
3
Cost of producing water (from seawater) Cost of producing water (from brackish water)
Rs. 30-50 per cu m Rs. 10-15 per cu m
According to a report by Global Water Intelligence (GWI), the worldwide desalination industry is expected to grow 140 percent over the next decade, with US$ 25 billion in capital investment by 2010 and US$ 56 billion by 2015. A report by GWI also says that in the Middle East (ME), where water availability is less than 20 percent of the world average, the desalination industry has grown into an annual market of US$ 8 billion since 2004. The report predicts that total capital expenditure on wastewater will grow from US$5.3 billion in 2009 to US$13.3 billion in 2016 in ME. While countries like the US, Spain, and the Gulf countries have been able to build mega plants, poor countries in Asia, Africa, and South America have inadequate resources to do so. But the need for water is such a basic one that they will be forced to invest in technologies either on their own or by arranging funds from financial institutions. Failing this, wars and civil wars cannot be ruled out, as many have predicted. Clashes over water has taken place in India as well, and that too in a city like Mumbai. Other probable sources of sourcing fresh water, namely, surface water and ground water, are not sufficient to quench the water needs of the ever-growing population. Desalination is thus destined to grow.
Indian scenario Around 22.5 crore people in India do not have access to safe drinking water. Requirement of freshwater in India for domestic consumption, agriculture, and industrial purposes every year is close to 900 billion cu m. What India gets at the maximum is 500 to 600 billion cu m of water. The deficit is not just there in the arid landlocked states of Rajasthan, Chhattisgarh, and Madhya Pradesh, but even in the coastal 18
JULY 2009
states of Tamil Nadu, Gujarat, Andhra Pradesh, and Maharashtra. Desalination can be a perfect solution for water problems in these coastal states. But this is talked about only after a drought, cyclone or flood. Setting up desalination plants will also prove less time consuming than any irrigation or drinking water projects involving rivers, which have to bear huge opportunity costs of displacing population from one place to another. Desalination plants at three or four places can be interconnected in a state like Tamil Nadu to form a water grid, which should be connected to the existing municipal water supply network, as Ramaswamy points out. He says dependence on rivers like the Cauvery or Rewati will end forever with this. “This
is feasible in the very budget of Tamil Nadu itself,” he adds. Bhabha Atomic Research Centre (BARC) set up a 1.8 million-liters-a-day capacity desalination plant at Kalpakkam in Tamil Nadu in 2008 and is set to comission a MSF-based plant there itself. BARC has set up several desalination plants in rural Rajasthan, Andhra Pradesh and Gujarat, producing 30,000 L a day. It has licensed its technology to as many as seven industries. IVRCL, IL&FS, Mahindra and Reliance are other companies that have set up desalination plants. Foreign players like Israel Desalination Enterprises Technologies (IDE) and GE are also setting up such plants in India. Calculations reveal that on an average the production cost from brackish water plants come to Rs 10 to15 for every cubic meter, and from seawater comes to Rs 40 to 50 per cubic meter. The production cost of desalted water from effluents comes to Rs 15 to 50 per cubic meter depending upon the TDS load. This translates to a household expenditure of Rs 300 to 400 per month on drinking water, which a family is anyway bearing in cities like Chennai, Bangalore, Hyderabad, and Mumbai.
Summary
For portable requirements, and for municipality uses, one should opt for RO. For industrial uses, thermal desalination plants should be preferred
— M.P. Ramaswamy MD, SWS&GB Saline Water Specialists
The cost of setting up desalination plants is still on the higher side. In areas that are arid and close to the sea, setting up such plants will definitely cost less compared to other alternatives. This is why it is used as a main source of drinking water through municipal supply in several parts of the world, including many pockets in India. Desalination technologies are also being increasingly used to soften mildly brackish water. Industries in India should first be discouraged from procuring water from the municipality. Shore-based power projects, like the one being built by the Tatas in Mundra, Gujarat, should be compelled to build their own desalination plants. This has been the prevalent norm all over the Middle East. “People and government will have to ultimately adopt desalination as the way forward,” Ramaswamy conDAR E cludes confidently.
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blogs/INSEAD
Does your venture need a pacemaker? /Philip Anderson
I
n many science classes, students stare in wonder at a simple experiment. Line up several metronomes, the mechanical pendulums that musicians use to maintain a consistent beat when they play. Start them off out of phase, so that, for example, one swings all the way to the right while another is at the six o-clock position and another is all the way to the left, at nine o-clock. If they are close enough and you wait long enough, you will see something astonishing. Eventually, the metronomes synchronize with one another, as if they were one, with no external intervention. This phenomenon is called “entrainment.” It occurs whenever several rhythms become locked to one another, so they share a common rate. Other examples occur in nature, and they are ubiquitous in social experience. For example, people who live together often tend to get hungry at the same time after a while, even if originally they tended to eat at different times. If you go onto a busy train and unobtrusively tap something, like your foot or a pencil, you’ll notice that after a time, others on board unconsciously adopt the same rhythm. We also become entrained to our work. One of the most revolutionary aspects of the industrial revolution was the introduction of strict time standards to coordinate interlocked
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processes such as the operation of a train network. The rhythm of village life was slow, as we can see in rural India today, and for many who grew up in the countryside, the sheer speed and relentless pace of factory work was shocking. And in the modern day, people who operated on “internet time” once stood out, but as the legions of Blackberry users has grown, more and more people live their lives at a far more hectic pace than before. Entrainment can be found everywhere in organizational life. Every organization has a characteristic metabolic rate, a pace at which things happen. As part of the division of labor, subunits interconnect with one another, constantly passing work back and forth and coordinating tasks. Interlocked processes move forward at the pace of the slowest unit, so over time people who have to work with one another adopt a common rhythm. Eventually, its typical
If you are an entrepreneur, you are your organization’s metronome. The organization’s metabolism becomes entrained to you, to the characteristic pace at which you operate.
pace becomes a distinguishing trait of an organization. Anyone who has worked in a public sector organization knows why employees say they work “on government time.” I recently worked with a stock exchange that was spun out from a government agency to become an independent company, and changing the organization’s characteristic rhythm was near the top of the new CEO‘s agenda. When they worked for the government, employees who tackled a project methodically estimated how long it would take, then added 10%. In the private sector, in contrast, one asks how long a window of opportunity will be open or how long it will take competitors to reach an objective, and that becomes the pacing mechanism. Private enterprises become entrained to their competitors. If you are an entrepreneur, you are your organization’s metronome. The organization’s metabolism becomes entrained to you, to the characteristic pace at which you operate. In part this is because people learn to send you decisions “just in time,” so they aren’t stuck in a wait loop while you ponder your options. But even more importantly, people learn unconsciously to absorb your rhythm. How rapidly you take on new tasks, complete existing ones, and change your agenda becomes the organizational norm. The length and pace of the meetings you hold become an informal standard for all other meetings in the organization. The amount of time it takes you to listen and respond to others reverberates throughout your enterprise. As the pacemaker for your organization, you are the single biggest influence on the cycle time for the key processes in the enterprise. How can you set the pace so that your venture
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blogs/INSEAD strikes the right balance so your organization gets things done without delay, but still takes the time to assure quality work? I’d like to suggest seven practices of effective organizational pacemakers that can help you make nimbleness and agility a hallmark of the company you lead. First, hire people who fit your pace, or perhaps even push you a little bit. One reason why ventures often stumble when hiring people from larger firms is that it’s difficult for executives from an established enterprise to adjust to the pace of an entrepreneurial environment. When you interview people, don’t just look for good habits and strong skills. Develop a feel for the characteristic pace at which someone gets things done. When they discuss key tasks, ask them how they set deadlines and decided whether to speed up or slow down. When you talk about the work you need them to do, ask them to give you a timeline of how they would approach key tasks and how long it has taken them to do similar things before. Find out whether they have ever had jobs where they were required to speed up their habitual cycle times. If someone is out of synch with your venture’s characteristic rhythm and has no experience adjusting to a faster pace, trouble lies ahead. Second, remember that when it comes to speed, more is not better. A relentless pressure to speed everything up all the time can backfire. This month’s INSEAD article in DARE profiles how Bharti Enterprises and its flagship brand, Airtel, preserve the entrepreneurial spirit. Airtel is an inspiring example of how a mammoth enterprise can sustain the spirit of a venture. However, Airtel’s senior executives are aware that sometimes the company’s bias for action can go too far. Said one to me, “Our characteristic mode is all too often readyfire-aim.” Airtel people are so used to working miracles overnight that proper planning can take a back seat. The sheer ability of the people who work at Airtel usually compensates for the
Keeping a venture nimble as it grows is one of the main challenges an entrepreneur faces. Whether you like it or not, people in your venture will unconsciously synchronize with you. fallout, but a key element of the professionalism that senior managers try to instil in executives is to upgrade their planning and process skills. Third, don’t substitute time for cleverness. Entrepreneurs are used to working long hours. Sometimes, this leads to a belief that any problem can be solved simply by throwing enough time at it. That path leads to burnout, unhappiness, and broken families. Eliminating waste isn’t a priority when you are used to succeeding through sheer hard work and endurance. But finding a way to do more with less, to eliminate or streamline processes that have outlived their sell-by date, is one of the most important things a good organizational pacemaker does. Fourth, manage processes by event-driven milestones, not just by the calendar. When you carry out a project, a useful habit to develop as you plan the next step in your journey is to ask, “What data would persuade me the course I’m on is wrong? How would I know that I’m ahead of, behind, or on schedule?” The next milestone then is driven by what events will generate those data. At what point would we know that the next step forward is not happening the way we thought it would? Set a milestone at that point, and you can adjust as soon
as you have the data to show you the way forward. Fifth, exploit the power of “halfway.” Some fascinating social psychology experiments with work teams show that when a group hits what it believes is the halfway point of a project phase, it suddenly develops a sense of urgency. The notion that there is less time remaining than has been spent to date changes people’s attitudes and gets them moving forward. Consequently, a series of shorter deadlines produces more progress because people hit the “halfway” point more rapidly. Every phase proceeds more quickly when you break work into simple steps with shorter time limits. Sixth, the way to speed up a process is to cut the cycle time of the slowest link. Organizations become entrained to the slowest work unit or to the step in a process that causes the most delay. You make a lot more progress by focusing on the slowest step in an activity chain than you do trying to improve all processes at the same rate. Finally, design things to succeed even if they are partially completed. A project that produces 70% of total progress in the first 40% of the time allocated is much more likely to get results than one where the benefits show up at the end. Every time you take on a lengthy task, ask yourself “What would happen if this never gets to be more than 50% finished?” If a majority of the progress can be achieved even though the project is never actually completed, you can cut off time-consuming steps at the end and move on to the next project. Keeping a venture nimble as it grows is one of the main challenges an entrepreneur faces. Whether you like it or not, people in your venture will unconsciously synchronize with you. By acting as your organization’s pacemaker and observing a few simple rules, you can make speed one of your organization’s main competitive advantages. DAR E The author is INSEAD Alumni Fund Professor of Entrepreneurship, Director, Rudolf and Valeria Maag International Center for Entrepreneurship and Director, 3i Venturelab
JULY 2009 21
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policy/exim
Export opportunities for SMEs /Manu Gupta
P
roducts that are exported by SMEs in India and in which small-scale industries (SSI) generally have the bulk of the share, are garments, engineering goods, chemicals, pharmaceuticals, leather, plastic products, processed food, gems and jewelery. Also, 95 percent of the products exported by the SSI are non traditional products. However, there is no exclusive data available for medium enterprises regarding exports, but a study by the Exim Bank reveals that both traditional and non-traditional goods constitute exports of mediumsized enterprises, and sectors like food and beverages, chemicals, autocomponents, machinery, electronics, metals, castings and forgings have witnessed an increasing export orientation trend over the last decade.
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Potential export destinations for products of SMEs are the USA, EU and Japan. There exists a huge potential in the non-traditional sectors. They may not be able to tap the advantages of economies of scale, but then they are ideal for catering to small markets and orders. These activities are often ecofriendly, which can be an added advantage. It has been identified that the US
could provide a market for textiles, leather items and engineering/electrical and electronic items. Japan is a potential market for exporting chemicals, and agricultural, marine and allied products. The European Union can be tapped for enhancing SSI exports of engineering/electrical, textiles, and electronic items. Also, the a number of markets could be accessed for various
who is an SME? Classification
Investment ceiling for plant, machinery, or equipment Manufacturing enterprises
Service enterprises
Small
More than Rs. 25 lakh and less than Rs. 5 crore
More than Rs 10 lakh and less than Rs 2 crore
Medium
More than Rs 5 crore and less than Rs 10 crore
More than Rs 2 crore and less than Rs 5 crore
SOURCE: MSMED Act 2006, www.msme.gov.in.
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policy/exim Export Destination of SSI Products Product group
Main destination (countries)
States producing these products
Readymade garments
USA, Europe, Canada, West Asia and North Africa
Punjab, Haryana, Tamil Nadu and Maharashtra
Plastic items
UAE, China, Italy, Saudi Arabia and Oman
Various
Marine products
Japan, USA, EU, China and South-East Asia.
Kerala, Tamil Nadu, West Bengal, Maharashtra and all the coastal states
Sports goods
UK, USA, Australia, Germany and South Africa
Punjab, Haryana, Tamil Nadu and Maharashtra
Spices
East Asia, EU, North African Zone and American Zone
Various
Cashew items
USA, Netherlands, UK, Japan and UAE
Maharashtra, Andhra Pradesh, Kerala and Orissa
Shellac items
Indonesia, Germany, UAE, USA and Italy
Various
Synthetic items (Madeups)
UAE, UK, Turkey, USA and Italy
Various
Leather and leather items
Germany, UK, Italy, USA and France
Uttar Pradesh
Engineering and electronic items
USA, Europe, Japan, Hong Kong, UAE, Germany, Belgium and France
Maharashtra, Tamil Nadu and Karnatka
Basic chemical and cosmetic products
USA, Japan, Saudi Arabia, China, Singapore and Netherlands
Various
Chemical and allied products
Japan, Belgium, Italy, France, Bangladesh, USA and UK
Various
Wool and woolen knitted garments
Europe, Japan, and Bangladesh
Punjab
Processed food items
USA, Europe and Japan
Various
Electronic items and computer software
USA, Hong Kong, UAE, UK, Germany, and Japan
Maharashtra, Karnataka, Andhra Pradesh, and Haryana
Tobacco and tobacco items
East Europe
Andhra Pradesh and Karnataka
SOURCE: 11th Plan, Planning Commission
goods in which given states have the bulk of market share or are suitable for those products.
provide assistance in developing skills and imparting training.
Government assistance Organizations dealing with SMEs Small Industries Development Bank of India (SIDBI) is the prime institution for financing, promoting, and developing these industries. Their main function is to provide finance and refinance assistance and development services to these industries. The State Financial Corporations (SFCs) and State Industrial Development Corporations (SIDCs) provide long-term finance assistance at the state level. The National Small Industries Corporation (NSIC) provides support in getting performance and credit ratings and 75 percent of the fees charged by rating agencies may be reimbursed under the scheme implemented by them. The Indian Institute of Entrepreneurship (IIE) and various other institutes
To increase exports of SMEs, the government provides various incentives and facilities. To avail these, units are required to submit details of their investment and turnover. Incentives and facilities include credit facilities, fiscal support, cluster-based development, technology, infrastructure, and marketing support. Some special export incentives and facilities are also provided. Products of small-scale industries are displayed in international exhibitions, the cost for which is borne by the government. Various training programs regarding packaging, marketing, etc. are conducted to help entrepreneurs. Also, assistance is provided to individuals for participating in overseas fairs, exhibitions, study programs, etc.
Sector-specific studies are carried out to help entrepreneurs. Anti-dumping cases, that is, where a foreign supplier sells goods at lower prices to capture the domestic market are initiated and contested, and significant support is provided. Also, incentives in the form of reimbursement of 75 percent of the one-time registration fee and annual fee for adoption of barcoding is provided. The Export Credit Guarantee Corporation of India (ECGCI) provides special incentives to small exporters. Special schemes for loans to SMEs are promoted by various banks. For example, the Bank of India gives preferences and incentives to SMEs like single-window dispensation. All these and others are present to promote SMEs. At the same time, they can utilize these concessions and can make huge gains as far as India is concerned as there is still lot of scope for the development DAR E and growth of this sector. JULY 2009 23
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case/INSEAD
Ingrid Srinath at CRY: combining values and viability in a social venture /Philip Anderson
I
n 1979, a 25 year old Air India purser, Rippan Kapur, founded Child Relief and You with six friends and 50 rupees of paid-in capital. A charismatic visionary, Kapur saw CRY as an enabler that would raise funds and channel resources to individuals and organizations who worked directly with and for the children of India. Kapur began selling greeting cards doorto-door, eventually attracting corporate buyers. He pioneered innovative fund-raising techniques, such as the first national contemporary Indian art exhibition staged for a social cause, and attracted a stellar board of directors. Kapur was phenomenally successful in attracting dedicated volunteers and staff to the organization, and CRY spread outward from Mumbai, evolving from a small volunteer organization to one of India’s most respected and well-known social institutions. CRY never set forth a formal mission statement; its growing staff (which reached 231 people by 1998) absorbed shared values and a vision through direct contact with its charismatic founder and through its track record of funding organizations that supported children. Consequently, when Kapur died young in 1994, many wondered whether such an organization could survive the man who had personally touched and inspired most of the people who had joined the organization during its first fifteen years. For four years, five key regional and functional heads of the organization managed CRY by committee, coordinating with
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CRY has for thirty years been one of India’s model social organizations, wellknown globally in the philanthropy community. Like many such ventures founded by a charismatic and passionate individual, CRY faced at a time in its past the challenge of how to ensure its sustainability as it grew. This case is the story of that time, from the point of view of Ingrid Srinath, who served as CEO of CRY from 20042008. My hope is that it helps others who found worthy causes anticipate the issues that arise and manage them effectively, so that more Indians can build social organization that are successful as CRY has become.
the board of trustees. In 1998, a CEO was appointed from among the management committee members. CRY was organized along two parallel lines, geographic and functional. Several regional executives were responsible for CRY’s operations on the ground throughout India, while functional executives were located in Mumbai. The two core functions were Development Support, which made grants, and Resource Mobilisation, which raised funds. CRY also had one director responsible for strategic planning, finance, and information technology while another directed human resoures and administration. Additionally, CRY operated its own shop, conducted policy research, and operated an extensive documentation facility that collected information pertaining to children in India. Ingrid Srinath joined CRY November 14, 1998 as head of the Western region. After earning an MBA at the Indian Institute of Management in Kolkota, she spent 12 years in advertising. She comments: Once I got to general manager level, I found myself getting really bored. I felt like I was writing in sand, making no permanent mark, and I thought that if I stayed in advertising, it would be more of the same. It is my dad’s fault; he raised me to believe I was born to do more than make a few shareholders richer. I knew some people who had worked at CRY, and I thought it would be more stimulating than working at any other nongovernmental organi-
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case/INSEAD zation (NGO) because CRY is a great brand. I saw a recruitment ad, which gave me the impetus to make the call. I already knew I wanted to do something in the development sector, probably with children. CRY hired Srinath because the management committee was looking for someone good at organizing who could provide more of a business perspective. Yet from the start, Srinath was viewed with caution by some of the other senior managers, particularly those who had been with CRY for many years and saw themselves as the keepers of Kapur’s vision. CRY had evolved a culture of consensus; even small decisions had to be signed off collectively. Consequently, Srinath had to learn to navigate the organizational culture even while doing what she was hired to do, improve its business results. It seemed to Srinath in 1998 that CRY was running on a wheel. She elaborates: CRY had been in a period of stasis since the founder died in 1994. There was a vacuum in leadership, a focus just on holding everything together. Everyone just concentrated on surviving the founder’s death, and the result was four years with less innovation, while other NGO’s caught up with what CRY had pioneered and how it was perceived.
CRY’s drift was perhaps a direct result of the charisma and success of its founder, for his death made it clear that the organization had been built around him, with all his strengths and weaknesses. Srinath explains: Before the founder’s death, many in the second line of management had left. Consequently, he had put together an inside team of middle managers. No one was a functional expert at what he or she did. After 1994, CRY imported a couple of CEO’s from the outside who eventually became frustrated and left. The staff feared that CRY would disintegrate, and everyone agreed not to voice fierce disagreements lest they lose more people. The lack of technical skills led to a consensus culture throughout the organization, a sense of ‘let’s not rock the boat.’ A colleague of Srinath’s from business school, Ila Hukku, joined CRY as head of planning at about the same time, and the two became close collaborators. The two had to overcome the ingrained suspicion some other CRY executives had of someone with their background and commercial experience. Says Srinath, “The stereotype of an MBA in many non-governmental organizations is that they are arrogant, elitist, ruthless relative to the rest of the population, not in touch with ground reality, theoretical not practical, but
very intelligent.” Understanding CRY’s people and how to help the organization proved challenging for an MBA. Srinath relates: Ila and I both came from forthright corporate cultures, so CRY was a bit of a shock. Everyone was polite, agreed it was a good idea to do this or that, but when you tried to implement it, you would run into a road block. Despite all the nodding, there were 101 reasons why something couldn’t happen. You could never get a change done right the first time; you had to iterate everything, and it was tedious having to do things many times over. Many of the staff mistrusted MBA’s, because their experience had been that such people fly in, stir things up, then fly off, leaving others to pick up the pieces. We had to go through a long period of establishing our commitment and credentials, signaling that we would be here for at least the medium haul instead of doing what they thought MBA’s would do to CRY. Srinath stepped into a challenging situation in 1998. India was going through an economic dip, and CRY’s revenues were impacted sharply because its top line had been temporarily inflated by disaster relief revenues. Resource generation was stagnant, creating serious financial pressure. It was difficult at first for Srinath to get a han-
Srinath stepped into a challenging situation in 1998. India was going through an economic dip, and CRY’s revenues were impacted sharply because its top line had been temporarily inflated by disaster relief revenues. Resource generation was stagnant, creating serious financial pressure. It was difficult at first for Srinath to get a handle on the situation
Ingrid Srinath
and sort through options. JULY 2009 25
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Photo: www.cry.org
case/INSEAD
About CRY CRY raises funds through donations, events, and by selling products such as greeting cards (the core product that built its brand recognition), desktop calendars, and stationery. It also gains some revenues from licensing and partnerships. For example, Citicorp offers a CRY affinity credit card, and Titan makes and sells a CRY wristwatch, for which it pays CRY a royalty. Procter & Gamble India has pledged a percentage of its sales to CRY, and retail chains offer CRY shopping bags with child art for a small extra charge. CRY has a small shop in Mumbai and another online selling products from the nonprofit organizations it funds, typically objects made by children. CRY dispenses funds to a variety of other nonprofit organizations and individuals that work directly with children. Many think of CRY as a “social venture capitalist,” because it has seed-funded hundreds of fledgling organizations through its grants. According to Ingrid Srinath, CEO of CRY since 2004, the organization prioritizes people who are unlikely to be funded by other sources. “The more different their model, the more likely we are to fund them,” she says. “We incubate people who have passion and a dream, helping them start an organization, put in structure, add accountability mechanisms, measure impact, and so on, so they get to the point where serious sources of funds will back them.“ An average seed grant is $15,000. CRY looks for applicants to fit its priorities and investigates them extensively before it funds them. Says Srinath, “We look for someone’s social capital in his or her neighborhood; we talk to a lot of people to establish whether someone is a good egg.” Once CRY funds an individual or organization, it stays intensively engaged, paying four visits per year, each lasting three days, to provide mentoring, build leadership, and help develop strategies and management systems. Approximately 200 non-governmental organizations (NGOs) are recipients of direct grants and another 2500 belong to CRYfunded alliances. Says Srinath, “We see venture investing as having a multiplier effect—the same amount of money put into running schools or clinics would have less effect, given the scale of problems India is dealing with, like 200 million malnourished children. We are stringent monitors, and we reward achievement and penalize nonachievement, but our performance parameters focus on things like gender ratio in schools, not market share.” About 40% of CRY’s revenues are absorbed by administrative costs with 60% disbursed as grants. Says Srinath, “We are within US norms that say fund raising costs should not exceed 35% and deployment costs should not exceed 15% of revenues, but our costs are higher than they could be because we have chosen to raise money from the public. Our average donation size is under $50 per year. We could be a lot more efficient if we got a large grant from Bill Gates, but that doesn’t change anything; it just throws band-aids at the problem. You have to change attitudes by working with the public. That also keeps us autonomous, so we can take controversial positions if necessary.”
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dle on the situation and sort through options. She says: Going through documents and talking to people gave me no picture of CRY. It was running faster on a treadmill, trying to sell more cards, send out more mailings, meet more people, and do more of the same. Just talking to people didn’t get me answers since CRY had a non-confrontational culture--all you got was the official line. If you came in with a business degree and experience, you’d come up against passive resistance. Srinath found that to move forward, more than sound analysis and action steps would be required. She recounts: At first I sought only intellectual solutions and respected only intellectual abilities. I was disdainful of people skills and micro-operational stuff. It took a while for me to learn that putting a blueprint into place is only a first step. It was easy to get respect, but trust was missing. I had to do more than intellectualize; I had to work with people to get them to follow through on broad agreements, for reasons other than their liking me. I had to respect their skills in people management, operations, and the organization’s ethics and values. As Srinath moved from running the western region into brand communications before taking over resource generation, she helped shake up CRY. The organization added new products and new distribution channels while bringing down its cost structure. CRY outsourced face-to-face fundraising to Support Direct, a UK-based direct marketing agency, which greatly extended its reach at lower cost. Support Direct’s efforts brought in 16,000 new donors, many from outside India. CRY also outsourced card manufacture and distribution to Archies Gifts and Greetings, Ltd., which extended its reach from 500 outlets to 6000 outlets while adding an online sales presence. Data entry, processing and mailing were also outsourced, bringing cost and revenue growth more in line. One consequence was a staff reduction. Although CRY instituted a voluntary retirement scheme, provided financial support for those who left and helped
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case/INSEAD
We had to get into the soul of CRY. The core strengths of the organization were that it was genuinely Indian, present across the country, had a viable brand, and had a reputation as an innovator with high levels of integrity. We had to go into ourselves as humans, turn ourselves inside out. We had to stop being analytical and do what felt right, not what sounded right. many find jobs, it was still traumatic for an organization that relied so much on committed people to let some of them go. CRY’s employee base was reduced by about 1/3 over a 2-3 year period. Although these measures helped keep CRY solvent, they created organizational stresses that in some ways made life worse for Srinath. “I learned how to keep picking myself off the floor,” she says. “I learned the power of perversity, of cussedness that says ‘I will not let myself be defeated.’ That counted for more than my education.” The organization was cleaving into two camps that were becoming alienated from one another. It seemed to Srinath that CRY would remain in a holding pattern instead of moving forward if the two could not be brought together. She explains: Before 1998, we were very touchyfeely, then the pendulum swung to efficiency and a business focus. That created two factions, which quite often pulled us in different directions. You had business-oriented people who thought we should hire the most skilled person for each job and that it was OK to do alliances with partners who might not have the same ethical commitments you do. You also had values-oriented people, who were deeply disturbed by sacking people and who thought we should hire people primarily because they share CRY’s values. To most in the organization, I represented the business-oriented people, who had become more powerful. There was a real risk that we would become a super-efficient, scalable entity while losing what we stood for. We had
to pull these two groups together, get each to appreciate the contribution of the other to CRY and to the movement for India’s children. To be acceptable as someone who could bring people together, I had to demonstrate not only business competence but that my values were also sound. Srinath began spending significant amount of time working with others to rethink and re-commit to a vision for CRY, instead of focusing on communications or new revenue generation ideas. She says: We had to get into the soul of CRY. The core strengths of the organization were that it was genuinely Indian, present across the country, had a viable brand, and had a reputation as an innovator with high levels of integrity. We had to go into ourselves as humans, turn ourselves inside out. We had to stop being analytical and do what felt right, not what sounded right. We had to bring 140 people (down from 250) on board by getting them to go beyond their mundane jobs to see the vision of the future for India’s children. I have always wanted to change the world and fight the good fight. CRY allowed me to do that, but the only way I could do that is if everyone could feel the same. Every day you have to look at what must be done and say, ‘Let’s do it.’ CRY had instituted an annual, bottom-up planning process that Srinath thought could become an engine for renewal. Each individual completed a plan that was consolidated into the organization’s plan, so each individual knew what s/he was contributing to
the organization and how that made up the overall mission. By starting with the organization’s mission, Srinath thought it would be possible to integrate planning and institution-building into one process, allowing each individual in the system to understand the motivations of one another. Beginning in 2003, the company asked its second-level managers across each function to evolve a strategy brief from the bottom up, ensuring that all staff were involved. This was turned over to a task force that was chartered to produce a longer-term strategy and direction for CRY. As this process moved forward, Srinath was about to step in as CRY’s new CEO in 2004. She says, “I had been approached about this before, but I felt I needed to finish some things in marketing and sales. By 2004, I realized that I couldn’t do anything more until I could overcome road blocks from other functions, and I thought the way to get everyone aligned was to be CEO.” Srinath’s immediate challenge was to articulate a unifying vision that would bring together the two camps the institution needed. Only a clear statement of values would reassure people that Srinath’s appointment represented more than the victory of CRY’s business-oriented faction. How, she wondered, could she unify the organization, its board of trustees, and its thousands of donors behind a re-conceived statement of mission and purpose that would keep the grand dame of Indian NGO’s thriving and growing? INGRID SRINATH AT CRY CONTD. ON PG 80 ç JULY 2009 27
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opportunity/solar energy
Solar Photovolatic Cells: A Growing Industry Interest in solar energy might have begun slowly as a possible alternative to fossil energy sources, but years of research and investment have turned the solar photovolatic industry into a multi-billion dollar interest now. /Ambrish Jha
F
ossil fuels are depleting and becoming costlier. Dependence on these fuels essentially means playing into the hands of a few countries. In addition, there is the compulsion to reduce greenhouse gases. All these factors combined have turned global attention towards renewable energy sources and solar energy is an essential component of this. From a small beginning, the solar photovolatic (PV) or solar cell industry has already grown into a multi-billion one today. Developed countries, led by Europe, the US, and Japan, have embraced solar technologies in a big way and are funding lots of R&D in this area. India had been slow to take off, even though the Ministry of New and Renewable Energy (MNRE) launched a countrywide Solar PV Program almost two decades ago. In recent years, with active government support, the solar PV industry has started showing an upward curve. The government has also set up the Indian Renewable Energy Development Agency Limited (IREDA) to promote, develop and extend financial assistance to renewable energy projects, which include the solar projects. The National Solar Mission has laid out an ambitious roadmap for India’s solar energy quest.
Solar PV in India Generation of power through solar PV is quite costly mainly because the 28
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costs of equipments are high. An IREDA spokesperson says, “For producing one mega watt [MW] through [a] solar plant, [the] investment required is almost Rs 18 to 20 crore. This is almost four to five times the investment required for producing 1 MW through thermal power plants.” Under the National Solar Mission, the government aims to install solar generation capacity of 20,000 MW by 2020, 1,00,000 MW by 2030 and 2,00,000 MW by 2050. The government has estimated that the funding required for this will be anything between Rs 85,000 crore and Rs 105,000 crore. “The government is mulling to raise funds for the solar program to Rs 12,000 -15,000 crore under the 12th Five Year Plan,” says an IREDA official. The first phase (2009-12) of the mission focus is on scaling manufacturing of solar products to reduce costs. The target set under this phase is 100 MW. Commercial-scale solar utility plants is promoted under this program and it is being made mandatory to have solar rooftop PV applications in buildings and establishments of government and PSUs, hospitals, hotels, guest houses and nursing homes. Residential complexes with a minimum plot area of 500 sq m will also be included under this. In the second phase (2012-17), the mission will focus on commercial deployment of solar thermal power
India’s Power Stats Power generated in 2007: 140,301 MW Deficiency in power: 9-14% Power requirement by 2012: 210 GW Power requirement by 2032: 800 GW Target from solar energy by 2012: 500 MW Target from solar energy by 2017: 4,000 MW Per capita consumption of power: 632 units Per capita consumption worldwide: 2,516 units Capacity of solar cells (2007): 45 MW Capacity of solar PV modules (2007): 80 MW PV products exported (2002-07): 225 MWp Investment expected for PV manufacturing under Semiconductor Policy 2007: Rs. 66,394 crore for 2,170 MW plants. Large-scale promotion of solar lighting and heating systems will be undertaken. Subsidies will cease to exist in this phase, though the government may provide micro-finance facilities. In the third phase (2017-20), the mission has set a target to achieve grid tariff parity and achieve an installed capacity of 20 GW by 2020. It also envisages to install 10 lakh rooftop systems with an average capacity of three kilowatts (kW) by 2020. India has projected its demand for electricity to go up to 210 GW by 2012 and to 800 GW by 2032. There is already a shortage of 9 to 14%, but the government has set a target of providing power to all by 2012 with a mini-
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opportunity/solar energy mum consumption of 1 kW per day per household. MNRE has announced the Generation Based Incentive (GBI) Scheme to support a solar capacity of 50 MWp by 2012 (a solar PV system of 1 MWp produces 1 MW under ideal conditions). Under this scheme, the minimum installed capacity of solar PV power generation plants should be 1 MWp per plant. This capacity of 1 MWp may be set up as a single unit or through modular units at a single location. GBI is available for a maximum cumulative capacity of 10 MWp of grid-based solar PV power generation projects for any state. Any developer can, however, set up grid interactive projects of a maximum capacity of 5 MWp, either through a single project or multiple projects of a minimum capacity of 1 MWp each. The scheme guarantees an overall tariff of Rs 15 per kWh for solar PV, which consists of GBI and the preferential tariff offered by the state utility. The ministry has received Expressions of Interest for more than 1,000 MW of GBI projects. The MNRE is targeting a capacity of 500 MW through solar by 2012. The MNRE expects India’s solar capacity to touch 4 GW by 2017. According to the 2008 annual report of India Semiconductor Association (ISA), which is compiled by PricewaterhouseCoopers (PwC), there were around 90 companies into solar PV manufacturing in India in 2007. Of these, nine manufacture solar cells and
Investment Proposals Under Semiconductor Policy 2007 Company
Investment (Rs. crore)
KSK Surya
3,211
Lanco Solar
12,938
PV Technologies India
6,000
Phoenix Solar India
1,200
Reliance Industries
11,631
Signet Solar, Inc. Solar Semiconductor TF Solar Power
9,672 11,821 2,348
Tata BP Solar India
1,692.8
Titan Energy System
5,880.58
SOURCE: India Infoline Ltd.
19 manufacture PV modules. Another 60 companies were engaged in assembly and supply of solar PV systems. Almost all these are, at best, partially integrated, which proves that bulk of the value addition does not take place in India. Scaling and integration are, thus, two issues for Indian players. In 2007, the Government of India announced the Semiconductor Policy to encourage solar PV manufacturing. It offers a capital subsidy of 20% for manufacturing plants in SEZs and 25% for manufacturing plants outside SEZs. The subsidy is, however, on the condition that the investment is at least of Rs 1,000 crore. So far the government has received 12 applications from players like Reliance, Moser Baer, Lanco and Tata BP Solar. These will bring a combined investment of about
Rs 66,394 crore. Reliance Industries is targeting an integrated 1 GW facility in India, while Moser Baer is in the process of commissioning a 200 MW thin film module plant that would produce the world’s largest non-flexible thin film modules. According to the MNRE, almost 11 lakh solar PV-based systems had been installed by 2007. This includes 5.85 lakh solar lanterns, 3.64 lakh solar home lighting systems, 69,500 street lighting systems, 7,068 solar water pumps and 4.75 MWp of standalone and grid-interactive solar PV power plants. Potential market segments that have been identified as most lucrative in India include grid-interactive solar PV power plants, rural electrification through Decentralized Distributed Generation (DDG), backup power for telecom and roof-based solar PV. Under the “power for all” program, 18,000 remote villages would be electrified using non-conventional power sources. According to the ISA study, solar PV costs (Rs 145/Wp) at present is a far more attractive electrification option for a village than extending the grid by around 12 km or more. According to PwC, the potential for roof-based solar PV for future commercial space will increase from 130 MW in 2008 to 286 MW in 2012. India is seen as a hub for low-cost manufacturing and production of solar PV modules. Despite low production levels, it exported over 60 MW of solar PV products in 2007. During
Characterstics of the Solar Value Chain Silicon Feedstock
Ingots and wafers
PV Cells
PV Modules
PV System Integration
Access to high quality sand for manufacturing silicon is not a constrain in India. However, production of refined metallurgical silicon is costly, complicated and energy-intensive.
Players like Reliance and Moser Baer have shown interest in setting up wafer fabrication plants. Reliance plans to set up $2.8 billion plant to manufacture ingots, wafers and modules.
India had a cumulative capacity of 15 MW for solar cells in 2006-07. MNRE projects installed capacity of 500 MW by 2012. Tata BP Solar, Moser Baer, RIL and Signet Solar entering this segment.
19 solar PV module players in India as of now. Installed production capacity in 2006-07 was nearly 180 MW in 2007-08. MNRE projects a capacity of 4GW by 2017. Moser Baer, RIL and Signet Solar entering this segment.
Easiest market segment to be in. India has over 60 players. New players like RIL and Signet Solar are toiling hard to give tough competition to established players like Tata BP Solar and Moser Baer.
SOURCE: ISA 2008 Annual Report JULY 2009 29
DARE.CO.IN 2002-07, India produced 335 MWp and exported 225 MWp of PV products. The Punjab government has declared plans to set up solar power projects with an aggregate capacity of 25 MW by 2020. The state government has decided to forgo octroi on electricity generation and devices used for this. The state government has also decided to provide land at a nominal rent of Re. 1 per sq m for 33 years. Gujarat is going to see the world’s largest solar park as the Clinton Foundation has chosen the state for this. The capacity of this park is going to be between 3000 and 5000 MW.
The global scenario According to the Earth Policy Institute, Washington DC, the five largest solar PV cell-producing countries globally in 2007 were Japan, China, Germany, Taiwan and the USA. Germany’s model has been hailed as something developing economies like India should emulate. It has adopted an innovative ‘Feed-in Tariff’ structure to create a readymade market for PV manufacturing as well. The rooftop program in Germany was a mega success after it was made mandatory on power utilities to purchase all available renewable energy-based power. Manufacturers are also encouraged to systematically reduce production costs and offer efficient products. Germany produces solar PV components across the value chain — silicon production (10,000 tons equivalent to 1,000 MW), wafer production (around 1,300 MW), solar cell production (around 1,300 to 1,400 MW), and production of modules with capacity of around 1,000 MW. The future of solar energy depends largely on how the costs of the panels are brought down and efficiency of solar panels increased. As of now, solar PV panels use about 10 gm of polycrystalline silicon to produce 1 Wp (watt/ peak) of energy. This is down from 13 gm a few years ago and this will probably keep coming down further. The European Union (EU) has actually set a target of polysilicon consumption below 5, 3, and 2 g/Wp in the short, medium and long term respectively. 30
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opportunity/solar energy Solar PV: Efficiency & Manufacturing Cost Sl. No.
Technology type
1
Crystalline
Monocrystalline Polycrystalline
2
Thin films
Amorphous silicon Tandem microcrystalline CdTe CIGS
Current conversion efficiency (%)
Cost of manufacture (US$ per W)
17-23 15-18
2.4 2.15
6.0 8.5 11 12
1.35 1.35 1.15 1.75
SOURCE: ISA-NMCC 2008 Annual Research Report.
Technologies involved Solar cells are commonly made from polycrystalline silicon or polysilicon wafers. Polysilicon, which may be mono-crystalline or multi-crystalline, is manufactured from metallurgical grade silicon. Almost 90% of solar PV cells and modules at present are made using polysilicon, and this has created a huge gap in the demand and supply, pushing up its price. While it used to cost $20 per kg in 2001, prices have jumped to over $50 per kg today. With polysilicon in short supply, an alternative was found in PV cells and modules based on thin film technologies. Thin film modules are created by depositing layers of photosensitive materials on low-cost bases, called substrate, made of glass, stainless steel or plastic. Main materials used for creating thin film-based solar cells are cadmium telluride (CdTe), copper indium gallium selenide (CIGS), amorphous silicon and micro-amorphous silicon. Thin films use only 1% of the active material compared to crystalline silicon. Recent figures show that of the 8 GW of global PV cell manufacturing capacity in 2008, 1 GW was that of thin capacity. Two major players, First Solar and Sharp hope to have thin films with a capacity of 1 GW by 2012. Researchers are working on newer technologies to produce PV cells with efficiency between 30 and60%. Nanotechnology is now being used to enhance efficiency of solar PV cells, as nano materials exhibit superior properties, such as high strength and flexibility and trap more energy than conventional solar PV cells. A solar expert
working with Moser Baer says, “Nanotechnology will take at least five years to bring the cost of production down and efficiency higher for the solar PV products.” Global solar PV players like Emcore Photovoltaics and Spectrolab have managed to manufacture triple junction solar cells with commercial efficiency of around 38%.
Road Ahead The global solar PV market is expected to grow at 40% till 2010, after which it will fall to 20%. Market size as estimated in 2007 was $12.9 billion, and according to a study by the ISA and PwC, it is going to swell to $20 billion by 2010 and 32.2 billion by 2012. The good news is that the polysilicon demand–supply gap is decreasing. According to Morgan Stanley research, this will happen on increase in production capacity and more recycling of polysilicon from scrap, dust and broken wafers. According to iSuppli Corp, global production of PV cells will rise to as much as 12 GW by 2010, up from 3.5 GW in 2007. Factories capable of 1GW of annual PV production will not remain unheard of. There has been suggestions that India should allow entrepreneurs to develop solar farms with a minimum capacity of 50 MW like Ultra Mega Power Projects (UMPP). The National Solar Mission seems to have taken a leaf out of the successful German model. Predictions are that grid parity is probably possible by 2012 in nations where sunshine is plentiful and by 2018 in areas with adequate or meDAR E dium sun exposure.
th
4 Asia Pacific Conference on Business Incubation
Global Recession : An Opportunity for Business Incubation? 14th AABI General Assembly Training Programme :
Marketing for Incubator Managers and their Clients
August 6-8, 2009 Hotel Residency, Coimbatore, India
Organized by :
Supported by : NSTEDB, DST, GOVT. OF INDIA
Asian Association of Business Incubation
Secretariat Asia Pacific Incubation Network PSG-Science & Technology Entrepreneurial Park (PSG-STEP) PSG College of Technology, Coimbatore 641 004,Tamilnadu, India
www.incubationasia.com
DARE.CO.IN an we begin with the genesis of Kohinoor?
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Kohinoor was formed by my brothers, Jugal Arora and Satnam Arora, and I. We come from Amritsar, Punjab, and were looking to start a business based from the city. Our parents were already in the business of foodgrains, and rice raw-material was one of them. Around 1978-79, the government of India allowed and encouraged Basmati to be exported by private parties. Since we were already familiar with this business, and the opportunity looked huge, we decided to get into it. Like any other business, we had our share of start-up challenges. Since we were entering a business that was very new, there were no people with knowledge of the business to learn from, so every small detail of the business is something we had to discover ourselves. Also, those days, there was not much of funding available from bankers for rice trade. However, we concentrated on creating brands and procuring a good scale of orders. Once we did that, we had many banks approach us. To keep it short, we not only had the passion to make a big business from Basmati, but also the skills and ability to make it happen â&#x20AC;&#x201C; and that is how Kohinoor came into being.
/bio
GURNAM ARORA JMD, KOHINOOR FOODS Along with his brothers Jugal and Satnam, Gurnam Arora ventured into the business of Basmati rice in the 1970s. Today, Kohinoor Foods has a turnover in excess of Rs. 650 crore. Gurnam handles domestic marketing, purchase, administration, quality control, new product development, and corporate affairs of the company. He talks to DARE about his entrepreneurial journey at Kohinoor.
entrepreneur of the month Where did you find your early support coming from? The biggest support that we got was the credibility in the business circles created by our father, the late Teerath Ram Arora. He had an extremely good rapport in the industry, and was known for his honesty, innovations, and hardworking nature. He passed on these and a lot of other values to all the three of us, which I believe has been the key strength and has contributed a lot in the success of our organization.
Running a business with your brothers, how do you manage differences in opinions and strategies? This factor can be challenging at times. There have been occasions where we have had differences in opinion. However, the confidence we have in each other and the strong commitment to work out those differences and be together helps in tiding over this challenge. For every difference in opinion, we have a healthy debate and anybody who can come up with the most logical explanation is allowed to take a lead in that matter. Once this decision is taken, there is no room for further arguments on the topic. Since the beginning, we have had our responsibilities clearly delegated on the basis of expertise in a certain aspect of the business. For instance, I am good at marketing and brand-building, and hence I took up that challenge myself. Satnam always has been good with the export aspect and networking, so he took over those responsibilities. Jugal is an expert in procurements and running factories, 32
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so that responsibility was taken over by him. That said, we do discuss and decide business affairs on a day-to-day basis.
In the Basmati business how does one brand differentiate from others? Is it only advertising or is there something more? It is said that a brand is something that is in the mind. The consistency in quality brings about the perception of brands out there in the markets. And it is the perception that helps you in selling it. Over a period of time, brand loyalty can be won only if the consumer sees the same quality, same length, same color, and so on. Innovation is another factor that helps not only in differentiating, but also in growing the business. There is a lot that can done in this regard, and we have been very strong with our innovations.
So what kind of innovation happens in this line of business? There is a lot of scope for innovation in packaging the product. With time one has to bring about advanced packaging that clicks with the consumers. Also, one has to constantly roll out new product lines, using new technologies and techniques. All these innovations need to make sure that when the rice is cooked it is top quality â&#x20AC;&#x201C; in
/bio
DARE.CO.IN terms of length, breadth, aroma, taste, etc. When we started our business, the quality of Basmati was a big concern. For instance, it used to be very yellow in color. We were among the first ones to import machinery from Japan and make the rice whiter, look like pearls and feel like silk. Another big area for innovation is the marketing of the product. Basmati was sold in 100 kg bags in an extremely unorganized manner. Innovation is when you can bring it to the table of the consumer by being present on all the best shelves in the world. We also brought into the market concepts such as that of pre-cooked Basmati rice, where we put in a lot of vegetables and spices into it, such that you can make pulao effortlessly in a microwave. This clicked with foreign consumers, who wanted to eat Basmati but did not know how to actually go on about making it.
Where are the big markets? Historically, the biggest market for Basmati has been Saudi Arabia. However, there are new one opening up where the scope is as huge, such as the Iranian market these days. This is followed by Europe, the United States, and the Middle East countries. Even India is a big market. However, the Indian customer is a very price-conscious one. Our middle-class and upper middleclass families are budget conscious and do eat Basmati, but as soon as the price goes up, they tend to fall back to smaller broken Basmati rice.
How is the processed food business doing? It has a huge market. We are doing very well and are largely successful in this segment as well. We have launched these products in about 20 to 22 countries as of date. We are looking at JULY 2009 33
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/bio
reaching out to 5 to 6 new countries every year hereon. We have made it a point to be present in every country with the Indian diaspora. We have number of products to offer in this segment, such as ready-to-eat meals, ready-to-eat combo meals, frozen curries, pastes, spices, etc. We have come to realize that these are being widely accepted and liked by consumers.
What in your opinion is the reason for the failure of many small players in the processed food segment? One has to realize that this line of business is not a cottage industry, but a global business. Indian food has tremendous business potential when exported. However, for someone entering this segment, it is extremely important to know that the global market needs products that are of good quality, hygienic, etc. Now, if the people starting this business they need to keep all these things in mind, and add a strong marketing inclination. There is no reason for them to fail.
What are you doing differently in the processed food business?
“
As for the processed food business, I would again say the biggest challenge is the government policies one has to deal with. We are in talks with the government to consider a tax holiday for this segment of business. It is wrong of them to treat processed food as a luxury segment, as these foods are meant even for the common man. Now, unless and until this happens, this industry cannot flourish. Thailand as of today processes more than 60 percent of its food. You see, food not processed and not consumed is wastage. In India we are only processing 10 to 12 percent of food as of now. The challenge is again favorable policies to create a huge market out of this.
What do you think is the key element that helps in taking your brand abroad?
SUCCESS MANTRA/
First of all, we have a state-of-the-art factory in place. A good example of the quality of our plants would be that at no point of time is the food touched by hand. We have had many foreign buyers who have visited our factories and accredited them as the best in the country. Secondly, food needs be tasty. We have a team of excellent chefs who help us in developing new products and improvising on current ones. We also have a blind tasting exercise in place to ensure the quality of our products is matchless. Hence, in short, what we do differently is produce the best of quality, best of taste, and best of packaging.
ONE HAS TO BE HONEST AND HARDWORKING. THESE TWO THINGS ARE VERY IMPORTANT – THE REST IS YOUR DESTINY.
What would you say are the key challenges in the Basmati and processed food businesses? Today, there are three types of Basmati approved by the government, namely, platinum, gold, and silver. One of the biggest challenges is to educate the consumer about these. Secondly, the government policy of taxing in this business is a big challenge to deal with. 34
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”
You can only spread a business if you have a brand. If you do not have a brand, then you are a mere trader. We decided to create a brand, and that is what we did. First, we created the brand in India, and we took that overseas. When creating a brand, put in all that is required to make it a big brand. You have to be prepared to spend a lot of money, time, and effort in advertising, infrastructure, traveling, distribution channels, etc.
On the personal side, how much of time do you get to yourself now as compared to the beginning?
Well, in the beginning there was no set limit to the work hours. It used to stretch from 14 to 16 hours when we started off, but now about 8 hours is enough. One thing that I love doing in my free time is to play golf, which is a passion for me.
Are there any offshoot business ideas in your line of business for the aspiring entrepreneurs? In my opinion, the food business in India is growing fast and will grow much bigger in the near future. This calls for an increase in the need for good packaging, good bottling, good bottle cap manufacturers, labels, cans, etc. We do not have enough people doing the right things when it comes to these, and these are in short supply. It is in these areas that a huge potential for aspiring entrepreneurs lies. So that when the food business grows big, they will be ready with all these DAR E provisions to make a good business themselves.
Asia Pacific Incubation Network (APIN) Supported by infoDev, World Bank and Department of Science & Technology, Government of India
ASIA PACIFIC INCUBATION NETWORK (APIN) – AN OVERVIEW he Asia Pacific Incubation Network (APIN) was established with energy and commitment from leading incubator managers in the region and with support from the World Bank’s infoDev Program and the Department of Science and Technology in India. Its purpose is to help promote, support and develop quality business incubation in the region, developing management and policy capacities, sharing experiences and complementing the work of the Asian Association of Business Incubators (AABI), with whom a formal Memorandum of Understanding has been signed. The network is owned and driven by incubator managers, giving incubation professionals their own vehicle to learn from each other, undertake practical activities and to advocate for policy and other improvements.
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OBJECTIVES The core objective of the Asia Pacific Incubation Network is to create a dynamic incubation environment in the Asia Pacific Region by bringing in learning, sharing and working coordination among the business incubation practice communities for networking, exchanging and partnership to promote Innovation and Entrepreneurship in the Asia Pacific region on a sustainable basis. For this, it is proposed to establish a central secretariat directed by a Steering Committee consisting of major stake holders and national representatives from different countries and to carry out a series of focused activities to create snowballing development mission in incubation in the Asia Pacific Region.
As with the entrepreneurs they help, incubation managers learn best from each other, through networks such as APIN. The regions rich experience over the past 20 years, with a diversity of business incubation, is a source of important learning for new incubators and countries embarking on the business incubation journey. At the same time older incubators continue to innovate, learning from their own experience as well as from new business incubators with fresh thinking, in the drive to improve performance and relevance to changing socio economic needs.
The objectives of the Incubation Asia Pacific include the following: 1. Promotion of Network, its services, bulk dissemination and targeted canvassing, new member registration etc. 2. Servicing the steering committee and conducting periodic steering committee meetings in different locations to develop vision, strategy, objectives and action plans in close coordination with members and promoters. 3. Capacity building for incubation managers and creation of learning platforms including e learning, incubator, incubatee databases including mapping of expertise, resources and interest for soft-landing. 4. Periodical participation triggers including policy makers forums and other events. 5. Promoting, conducting and leveraging events and programmes. 6. Incubator help line for advice on practices, strategies, standards, norms and connectivity. 7. Incubation client help line and linkage to mentor networks and facilitation. 8. Periodical membership and participation drives. 9. Advocacy, policy exchange, lobbying and development assistance. 10. Development and maintenance of www.incubationasia.com the network’s website, building upon what has been done to date in iDisc and others. 11. Development and execution of plans for the financial self sustainability of the network. 12. Liaison and working closely with iDisc and infoDev’s Asia Regional Facilitator.
Within the broader infoDev incubator network, regional networks have been formed in Latin America, the Caribbean, Africa, Eastern and Central Europe, the Middle East and North Africa as well as in Asia; the largest of them all. APIN works closely with infoDev and the other regional networks, coming together as the infoDev global incubator network, for which the landmark event from October 26 to 30 2009 is the infoDev Global Incubation Forum in Florianopolis Brazil APIN’s activities are controlled by a Steering Committee, working closely with the APIN secretariat at PSG-Science & Technology Entrepreneurial Park (PSG-STEP), PSG College of Technology in Coimbatore India and infoDev’s Asia Region Facilitator Julian Webb and incubator specialist Amanda Kenyon. The Steering Committee members are; • Ms Mercedes (Michi) Barcelon, Ayala Foundation Technology Business Incubator Network, Philippines. Michi is the designated spokesperson for APIN. • Mr HK Mittal, Head of the National Technology Entrepreneurship Development Board, Department of Science and Technology, India. • Dr Tuan M Pham, TOPICA, Vietnam • Ms Naowarat Ayawongs, National Science and Technology Development Agency, and Thai Business Incubator and Science Park Association, Thailand. • Mr Annuar Saffar, Kulim Technology Management and National Incubator Network Association Malaysia and also the President of the Asian Association of Business Incubators (AABI). • Mr Wang Zhen, Shanghai Technology Innovation Centre and AABI secretariat, China. The secretariat is managed by Mr Suresh Kumar, PSG-STEP, Coimbatore, India. Any incubator in the Asia Pacific Region is eligible to become a member of the network, which also gives membership of AABI.
ACTIVITIES The APIN has planned its initiatives to strengthen the Business Incubation movements across and within each country and also develop new synergistic learning and participation across and within the business incubation players of each country in the region. The activities of APIN include: • Asia Pacific Conference & Policy makers forum on business incubation. • AABI annual conference. • Capacity building program for business incubator managers. • Online training programme for business incubator professionals. • Webcasts. • Video Conferencing. • Newsletter on initiatives and achievements in business incubation.
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strategy/IT
How to grow your business using social networks /Krishna Kumar
S
ocial networks have been touted as the next big marketing tool for any business. So we all have a profile on MySpace and Orkut, and have even tried to answer a question or two on LinkedIn. Our contact details are on Plaxo and we have even made the occasional Tweet. But nothing has changed in our business. Meanwhile, the world at large is talking about how social networks can be leveraged to build business. Exactly how will that happen, and why left with a feeling that all this is just a waste of time
Welcome to the real world. If you are confused about which social networks to be on, you are not alone. There are hundreds and hundreds of social networks out there, catering to every type of choice, audience, need, and fashion. Given the profusion of networks and the fact that the flavor of the season changes so fast, there is bound to be confusion, not to mention where to find time for them. Each season seems to have its own flavor of social networking. It was Facebook and Orkut sometime back, 36
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and then the buzz moved on to LinkedIn till it moved to the current favorite Twitter. Meanwhile, the once-pioneer MySpace is more or less forgotten. This piece explores how social networks can really help improve your business. This is written in an Indian context, but uses American case studies. Is that an anachronism? Not exactly. While social networks can be used to enhance your business potential, there are limitations to how much it can be used, and almost all experts agree that there are very few Indian companies that have got it right. Internet connectivity in India is still at low penetration levels, leave aside social media usage. Out of the billion-plus population in the country, about 4 percent have an Internet connection and Mahesh Murty (@maheshmurthy on Twitter) of Pinstorm estimates that about 600,000 are on Twitter. (You can Tweet â&#x20AC;&#x201C; post a message to Twitter â&#x20AC;&#x201C; using a cellphone. So the two numbers do not match.)
Eleven rules of social media engagement There are no fixed rules of what you can do in social media. Each one has
its own fair use policy. But as a business, there are some rules that will help you get along. 1. Temper your expectations according to the audience available. If you are in a niche industry that sells directly to five clients in the world, then perhaps, social media may not be able to help you too much. If your customers are in rural towns and villages in India, then social media is definitely not your vehicle. 2. You need to be simultaneously active on multiple networks that reach your target audience. Just being active in one will not further your cause. You need to find out and be active in networks that target your own industry, as well as in networks that have your target audience to get the best results. 3. Do not expect miracles overnight. You need to build up the trust of your audience. Social media have their on trust and reputation cycles, and it will take time to build up your reputation in a network and to get people to respond to you.
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4. Do not be sporadic. Appearing and disappearing at random is the surest way of putting off your audience since they cannot be sure about you and cannot trust you. If you get into a social network, be prepared to be there for the long haul. Be prepared to commit time, resources, and energy for this. 5. Do not delegate it to the juniormost employees. Involvement in social media is like making PR appearances. That cannot be done by junior employees who do not have the power to talk or take decisions on behalf of the business. Social media interactions should be carried out by senior stakeholders and employees, and by those who are authorized to decide or talk on behalf of the business. 6. Whatever happens, do not fight. Remember that you are talking in front of a potentially large audience. It is too tempting for others not to take the side of the little guy taking on the organization. You just cannot win even if you are right and the other guy is completely nuts. So,
what ever happens, do not fight. If anything, go out of your way to be helpful and resolve issues. 7. One person cannot represent a brand. If you use social media, then you need to put enough resources behind it. Ideally, all employees in the organization should contribute. In real life, enough employees should be tasked to the project. 8. Keep your ears open, not just your mouth. From the perspective of a brand, social media is not just about getting your message out. It is more about hearing what others have to say about it. It is also about molding that opinion and finally about getting your message amplified by others. For all this to happen, you need to first keep your ears open and listening to what others are saying about your brand. 9. Cross-link your social media activity. Rule two asks you to be active on multiple social media. But do not keep each isolated from the other. You should cross-link and cross-post to each other to derive the maximum benefits.
10. Make it personal. Do not use corporatized jargon or PR-speak. You are talking to people and they expect a real person at the other end, not an uncaring automation. Add a personal touch to your messages, particularly your replies. Rule Zero. This is the most sacrosanct of all rules for social media engagement, and so I have kept it to the last. Do not sell directly. You can give links to deals, you can offer discount codes, you can mention special offers, or mention specific products in response to queries, but the unwritten rule of social media is â&#x20AC;&#x201C; do not sell directly. Doing that is the surest way of making yourselves unwelcome. Having set out the rules of engagement, lets see some examples of social networks that can be used for business and how.
Twitter Twitter is the hottest social network currently. Twitter takes messages of up to 140 characters at a time and you can access it not just from the Internet, but also from your cellphone. JULY 2009 37
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140 CHAR INTERVIEW Shashank Nigam is the Founder & CEO of SimpliFlying.com, a blog on airline branding. This interview with Shashank was conducted by direct messaging on twitter (d simpliflying) over three days and across different twitter clients. Being done on twitter, both questions and answers have a 140 character limit. @daretostartup: Can u tell us abt the start of simplyflying? @simpliflying: There was a gap - no one did airline branding. And in airlines, most still don’t have much clue about social media @simpliflying: SimpliFlying serves the niche of aviation + branding + technology. The 1st break was when 6X model published by interbrand @daretostartup: Which all social networks hv u used to popularize simplyflying? Is it just twitter or are there more? @simpliflying: Facebook groups, LinkedIn groups + discussions, Twitter, Blogs, Flickr + Ovi all have helped spread the SimpliFlying word @daretostartup: Hv u been abl to measure relevance of traffic fm diff soc media sources? how? whch gv most relevant trfc? wh gv max trfc? @simpliflying: Yes, LinkedIn gives max traffic, followed by Google. However, most relevant traffic is from Twitter and referencing blogs/sites @daretostartup: How do you keep up such high activity levels on twitter? is there any one tweeting for you is some of it automated? @simpliflying: Just me tweeting personally. I’m on twitter not more than 3 times a day, not spending more that 15 mins each time. Can be addictive :) @daretostartup: And linkedin? @simpliflying: I have a secretary who helps post new discussion topics. Then u take the comments @daretostartup: What is your revenue model? @simpliflying: (1) Aviation Consulting on branding/social media (2) Speaking (3) Writing. And emerging business in training too @daretostartup: What share of business can be attributed 2 hv originated fm or is b’cause of ur presence in social media @simpliflying: Over 70%. I meet people online, then meet them in person. I’ve built a strong brand online, which translates into offline busines @daretostartup: How do you advice an established brand handle its presence in social media? @simpliflying: Handle it as part of the integrated marketing strategy - it adds wings to your traditional marketing mediums.... @simpliflying: 1) They need to start listening to there customers online. On Twitter, Facebook, LinkedIn or blogs @simpliflying: 2) They need to start engaging these customers, starting small then scaling up @simpliflying: 3) Once a community has been built, they can then be tapped on for suggestions, research, feedback, and focused selling @daretostartup: Examples of brands doing it right? @simpliflying: Brands doing it right: Zappos, Ford, JetBlue, Dell, Comcast, Salesforce.com, Starbucks, AirAsia....not a lot of Indian companies The real power of Twitter is when you combine it with URL shorteners like bit.ly or tinyurl. They let you embed links within your tweet. Guy Kawasaki (@GuyKawasaki) former Apple fellow and now Managing Director of Garage Technology Ventures, is putting out hundreds of Tweets these days that embed interesting URLS from alltop.com, of which he is co-founder. 38
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One of the advantages of Twitter is that there are a number of tools out there that enhance your ability to use the platform. For example, Twitterfeed lets you automatically Tweet the update of, say, a blog on Twitter. Tweetlater, as the name indicates, lets you schedule Tweets, and so on. Yammer is the closed corporate version of Twitter. It lets you Tweet to closed user
groups as identified by your corporate e-mail ID.
LinkedIn LinkedIn is positioned as a professional network. One of its key features is its answers section where people ask questions on a variety of subjects and others can answer, as well as its profile section that is more like a professional resume.
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strategy/IT Those who ask questions can also rate the answers, and those who gave the best answers gain “expertise” that shows up in their profile.
Cybermedia (the publisher of DARE) wanted to revamp all their Websites, upgrading them to the latest technologies and features. A question to this effect on LinkedIn got 22 vendors to show an interest in bidding for the work, and half a dozen of them actually responded to the RFP that is currently under evaluation.
Orkut/Facebook/MySpace Orkut is the most used social network in India according to Comscore, with almost 12.9 million unique visitors in December 2008, followed by Facebook with about 4 million unique visits. LinkedIn by comparison had 513,000 visitors from India. Thus, if you have a mass-based or a youth-based product, it is all the more necessary that you have a brand presence on Orkut and Facebook.
Help a Reporter (helpareporter.com) Help a Reporter (HARO) is a rather unique resource. It connects reporters looking for sources (people to talk to) with people willing to talk to them. While HARO is not used that much by Indian reporters and journalists, it is still a worthwhile resource that can maybe get you quoted in the US or Canada.
ALL THE US CASE STUDIES IN THIS ARTICLE HAPPENED AS A RESULT OF A POST IN HARO
We created a new game/app called MasterpieceYourself to market our services as a creative branding and interactive design firm. We used social networking services Twitter, Facebook, LinkedIn, and e-mails to bloggers and Websites to build up interest in our work. MasterpieceYourself.com allows users to insert their own photo into the face of a masterpiece portrait like the Mona Lisa. We put together this game as a self-promotion to emphasize our David Langton interactive capabilities. For our beta launch, we emailed an announcement Principal, Langton Cherubino Group, New York to 1,000 people on our client/prospect e-mail list, and we received about 125 hits. Then we promoted the website to bloggers, publications, and media outlets, and we started getting hundreds of hits per day. We are very popular in Italy and Canada, where thousands of users have played the MasterpieceYourself game. We then beefed up the Website and added content about the artists. How exactly did you promote the Website to bloggers? We did four things: 1. Sent a PR-style e-mail out to editors, bloggers at magazines, newspapers, etc. 2. Sent a self-promotional HTML e-mail to all of our clients, prospects, and friends on our e-mailing list. 3. Sent targeted e-mails with messaging like “Check out this cool new game” to bloggers who cover design, tech, and news media. 4. Started discussions on LinkedIn Groups promoting the URL. What tools do you use to track new blog recommendations? We use Google Alerts to track when we are mentioned on blogs... and we Google “masterpieceyourself” regularly to see what comes up in the searches. We have increased traffic to the site and recently had 5,000 hits in one day. More importantly, we have had over 10,000 engaged users who have made their own “masterpiece’ and shared them via e-mails and Facebook postings.
Derrick Hayes derrickhayes.com
I was looking for a way to cost-effectively market my business. I have a gift to turn names into positive messages (each letter of the name converted into a word reading together as a message). I came across HARO in September 2008. The community has uplifted my talents and taken me to international status through my Gift Bag Requests service at derrickhayes.com. I have had tremendous success in a short amount of time. I have been blogged on, interviewed on a radio show, and will be quoted in a book this fall. Through HARO my work has been seen in the US, Canada, and next month will be in the UK. JULY 2009 39
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YouTube
Ryze
Youtube is well-known as a video sharing service. It is a good place to host videos on your products and services, including product demos, ads, howtos in video form, and so on. Many viral marketing campaigns have also included YouTube videos. SlideShare is to presentations what YouTube is to videos. SlideShare lets you upload slide presentations and share them.
Our social networking program contributed first to holding traffic to our Website steady during the height of the recession, and then building traffic up to above previous levels, while reducing the cost of advertising. Worldwidebrands.com developed free videos covering selling on Amazon, selling from Yahoo! Stores, improving SEO, etc. We also did some Webinars. Each time we were in production with one of the major contributors, our president, director of operations, director of business development, and affiliate manager would Tweet interesting comments as teasers about the programs being developed. We linked each video on YouTube with links to our Website. Matching articles appeared in Squidoo, again with links to our site. Our affiliates were encouraged to post articles and comments in MySpace. Each time a video was released on YouTube or an article in Squidoo, our team would Tweet comments about the content, value, and location of the videos and articles. People now arrived on the site specifically looking for something that had attracted their interest in the Tweet. As a result, visitors started spending more time on the site and visited more pages. Traffic to the order page also increased, while the conversion percentage remained the same. We were able to decrease our spend on PPC (pay per click) advertising. — Les Cowie Director of Business Development, Worldwide brands.com
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I’ve been social networking online since 1995, and since 1996, it’s been my single largest source of clients in my copywriting and marketing consulting business. The social network that brings me the most work is an old-fashioned one: e-mail discussion groups. A major advantage they have over the newer networks is that they reach everyone on the list, rather than those who happen to be checking their network at that moment. Which means, over time, you can establish a very clear brand in the minds of those participants. E-mail Shel Horowitz discussion lists are the social media frugalmarketing.com tool that changed my own business from a local to an international service provider. I do use the modern communities as well. Usually, I start to see results within about six months of joining a new community. But I once got a client from my first post to a group – and I’ve also had the experience of participating for several years and then suddenly landing clients. To my social media clients starting out, I advise concentrating first on Twitter. The user experience is easy, it provides two-way communication, and you don’t have to wade through junk like in Facebook or MySpace. I also suggest finding and participating actively on one or two Yahoo! Groups. In all of it, I recommend being strategic: know your goals, let all your posts advance your goals (which doesn’t mean you only post business – that’s counterproductive), and avoid being sucked into reputation-destroying catfights. And the most strategic thing you can do is to be consistently helpful, friendly, and informative.
Wikipedia One does not naturally think of Wikipedia when one thinks of social networks. But it has emerged as a more or less standard source of basic information on almost everything given its high ranking in any Google search. The question is: does your brand have a page on Wikipedia? In today’s search-centered world, a Wikipedia page may be as important as having your own Website
Flickr One of the original sharing sites, Flickr is about posting photographs and
sharing them. Now, how do you use Flickr if you’re not a photographer? Let’s say you are doing a new product launch. What about photographs on Flickr, an instructional or demo video on YouTube, a discussion on LinkedIn, and Tweets about all these on Twitter?
Networks for your industry Finally, do not forget to find and become active in the social network for your own industry. Like with any industry meeting, that is a good way of not just keeping track of what is happening in your industry, but also for doing deals and swapping leads.
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strategy/IT I own a real estate brokerage firm in New Jersey. I have helped Indian professionals, among others, lease commercial space and sell residential homes, and currently have Indian clients who are seeking to buy. These client relationships were first established on social media.
I
Which social media do you have an active presence in? In what way are you active? I participate on may social media, some specific to the real estate industry, and many major social media sites. I divide social media into the following categories: 1. General social media: Facebook, LinkedIn, Twitter. 2. Secondary participation: Those sites where I comment, but do not generate posts, like NYTimes and Asbury Park Press.
Deborah Madey Peninsula Realty Group
3. Industry-specific sites: For real estate these include Trulia.com for connecting consumers with professionals, and AgentGenius.com that connects agents to agents. Is it purely for business? I have several objectives for my participation in social media. 1. Connect with consumers and talk about the real estate market. When I write on Trulia, my objective is to demonstrate proficiency in what I do professionally. I do not “solicit” any business. Consumers who read my answers may determine that they wish to contact me. I have noticed that many Indian professionals have contacted me as result of information about the industry that I have provided. 2. Connect with consumers and talk about the local community; not necessarily about real estate. The goal here is both for connections and fun. I don’t push that I am in the real estate biz, nor do I solicit business. People may meet me because we talk online about a community event, and at a later time they ask me about real estate. 3. Connect with real estate agents anywhere in the country. This helps my business in two ways: referrals and trade advice. What is the closure rate of contacts initiated through social media and how does it compare with contacts initiated through other sources? Contacts through social media are not necessarily all leads. The metrics of contacts made versus closing is not viable for social media. The metric that I utilize is the budget of time established against the value of contacts made for short-term analysis, and value of closed business over the long term. Currently, I budget 15 hours a week to spend on social media. Some weeks it works out to be less, other weeks more. My ROI is measured in terms of volume of engagements made for the month, and business tracked to social media YTD. Any specific comments on the quality/nature of client contacts initiated through social media? The quality and nature of the client is often related to the site. On a Q&A site, such as Trulia, clients tend to seek more fact and analysis. Engineers and techies tend to be more analytical. My ability to run an excel sheet and talk numbers establishes me as credible for them. On a site such as Facebook, a discussion about the local music festival may connect friends of friends, or reconnect friends who have lost touch. These clients tend to ask less tough questions, and also are not as loyal. When a client chooses me because they are looking for expertise and find what they believe they want in me, the loyalty increases. Any advice for other small businesses trying to build up clientele through social media? Don’t sell. Don’t solicit. Social media is about sharing information, NOT solicitation. If one solicits, they will quickly find themselves shut out. Demonstrate expertise in your area. Build relationships. Treat social media as you would participation in networks such as Chambers of Commerce, Rotary, NetIP, or volunteering on the board or committee of a local community or charity group. You first meet people, and later relationships evolve. Establish a Twitter account. Use search.twitter.com to search keywords of relevance to you. Follow people with whom you share interests. The discussions on Twitter will take you to other relevant social media sites where you can build relationships and connections. If you are really serious about exploring social media, find a local social media club. Your best results will come from posting your original content, but posting links with valuable info can also be beneficial. DAR E
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ON STANDS IN JULY
INNOVATION
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A Low-cost Clay Fridge Mansukhbhai Raghavbhai Prajapati, a Gujarat-based potter, makes this fridge that uses no electricity! /Aswathi Muralidharan
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hen the killer earthquake hit Gujarat in the winter chill of 2001, Mansukhbhai Raghavbhai Prajapati, a potter in the nondescript town of Wankaner, was among those who were left to pick the ruins. His warehouse that stored pots and pans besides other articles of clay had been crushed to the ground, with hardly anything left to sell in the ensuing summer. As the world media poured into the state to report the plight of the victims, Mansukhbhai’s story of survival appeared in the form of a photograph in a Gujarati newspaper with him sitting next to the broken clay pots with the caption reading, ‘The fridge of the poor breaks into pieces.’ The photo-caption gave birth to the idea of a clay fridge that would be affordable to the poor. After the idea struck, 38-year-old Mansukhbhai set about working on different prototypes of the fridge for almost three years. The result was a refrigerator that was not only low cost, but also worked without electricity. In fact, Mansukhbhai is a serial innovator. In 1995, after passing out of the 10th grade, he started working in a roof tiles manufacturing unit. Being a potter by profession, he observed that if roof tiles can be manufactured in large quantities using a hand press, then why not earthen pans, which were till then being manufactured manually by potters. In 1998, he finally developed his first innovation – a motorized hand press machine that increased the capacity of potters from 100 to 700 earthen pans in a day. Among the other innovations made by Mansukhbhai, the most popular have been the non-stick earthen pans and the clay water filter, which have also won national awards. Currently, he in working on a pressure cooker made of clay that he hopes to bring to market within a month. Called the Mitti Cool Refrigerator, Mansukhbhai’s clay fridge has a capacity of 50 L. The innovative fridge cools water naturally while keeping food such as vegetables, fruits, and liquids fresh for several days. The innovator claims, “You can cool 20 L of water, 5 kg of fruits or vegetables, and 5 L of liquids such as milk at a given time.”
INNOVATION
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Other innovations by Mansukhbhai Earthen water filter Non-stick clay pan Hand press for making earthen pans
Factsheet Innovator Innovation Description Advantages
Price
Mansukhbhai Raghavbhai Prajapati Mitti Cool Refrigerator A fridge made of clay that does not require any electricity to run; keeps food fresh by evaporation Does not require electricity, hence no recurring costs. Can be used to store fruits and vegetables for 5 to 6 days and milk for 3 days. Does not require any maintenance. Can store up to 20 L of water, 5 kg of fruits and vegetable, and 5 L of milk or any liquid. Rs. 2,000
The most amazing part about this innovation is that it does not use any electricity to cool – a feature that imparts several advantages to this fridge. It is low on maintenance. Says the innovator, “For the poor, the cost of the fridge is not the only consideration, additional maintenance costs such as electricity is also a big concern. My fridge takes care of these problems as well.” It helps save a considerable amount of energy. Moreover, with electricity still being a luxury in many Indian villages, this fridge can be used in rural areas as well. “In fact,” says Mansukhbhai jokingly, “my fridge is attracting more customers from urban areas than rural areas.”
On being asked about the durability and strength of the fridge, he says, “I have sold many fridges in the market, but haven’t received any complaints so far. But if you ask me I would say that the fridge will last for five years, because over the years, the cooling decreases.” Baking the clay used for manufacturing the fridge at 1200 ºC makes it very strong. Hence, no special care needs to be taken. However, he adds, the fridge gives better cooling if placed near a fan.
How does the fridge work? The refrigerator works on the principle of evaporation. It has two large tanks,
one at the top and and the other at the bottom with a capacity to store approximately 20 L of water. The fridge also has a cabinet to store food items. The water tanks cool the sides of the fridge in the same manner as clay pots used to cool water during summers. The water from the upper chamber drips down to the sides, taking the heat from the inside thus leaving the chambers cool. This helps to preserve the food for days. “The refrigerator is a natural cooler. Unlike the fridges used normally in homes, the water that is stored in the clay tanks is cooled naturally. This has several health benefits as well. This also helps preserve food items like fruits and vegetables, which can be stored up to six days, and liquids like milk up to three days.” The fridge gives a higher cooling effect in a dry climate compared to a humid one.
What is its price? Mansukhbhai has applied for a design patent on his innovation with the help of the National Innovation Foundation. The fridge is priced at an affordable Rs 2,000. Till date, Mansukhbhai has sold 700 such clay fridges. He says, “I sell my products throughout India by participating in various fairs and exhibitions. In fact, I have even sold my fridge abroad as well through the NIF.” As with most innovators, Mansukhbhai constantly tries various methods to improve his fridge. He says, “In my latest model, I have fitted two small fans inside. These fans help in the cooling process. Again to save on power, I have attached these fans to solar panels that provide energy to run these fans. The NIF has also helped me a lot for improving the model.” When asked about his future plans, he says: “I dream to make a big house that will DAR E use no electricity.” JULY 2009 45
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Why Use Managed IT Services? Business houses are increasingly resorting to outsourcing IT services, thanks to the cost advantages and a host of other benefits. /Vimarsh Bajpai and Aswathi Muralidharan
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hen G.M. Pens International, a prominent player in the writing instruments and accessories business, reviewed its IT infrastructure three years ago, the needle stopped on two prime concerns – high cost of running its IT operations and connectivity hassles between its offices located across the subcontinent.
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The company, which is an exclusive licensee of Reynolds of France, has its data center sitting at its headquarters in Chennai and runs ERP to track its supply chain. “Since IT is not our mainstay, we were looking for someone who could support us and manage our IT infrastructure” says K. Ganapathy, CTO of the company. At this
point G.M. Pens evaluated a number of vendors with offerings on managed IT services only to zero in on Wipro Infotech. The two signed an annual contract that has seen renewal every year. While Sify takes care of its connectivity, Wipro manages the data center and other infrastructure remotely from its Global Service Management Center
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strategy/IT (GSMC) in Mysore. Ganapathy now vouches for the usefulness of outsourcing IT infrastructure management to a third-party vendor. Take the case of Overseas Infrastructure Alliance, a project development and management company with offices in India and Africa. The company undertakes analysis, exploration, development, and delivery of infrastructure projects across all industrial sectors. To curtail the high cost and intricacies in maintaining its data centers, the company roped in Netmagic, a major player in the data center management space, in 2008. Netmagic provides its customer hosted servers and rack space besides Internet bandwidth, power backup, and monitoring and security services, besides roundthe-clock technical expertise.
What’s on offer Data center management Storage Application services Security services Remote infrastructure management
Why outsource? There are a number of reasons why more and more companies, both big and small, are outsourcing the management of their IT infrastructure. These include cost advantage, access to technical expertise, getting more time to focus on core business activities, and greater efficiency and accountability. “With enterprises facing issues such as manpower retention, and deployment of complex applica-
Printing services Helpdesk tions, thus causing issues like 24x7 monitoring, security, business continuity, etc. along with the growing need to provide quality services both to customers and employees, outsourcing IT infrastructure is becoming a key driver to survival,” says Sharad Sanghi, MD and CEO of Netmagic Solutions.
“Outsourcing is good for everybody but it is very effective in small and medium-sized companies. So I would say an organization with 50 to 5,000 users is ideal for switching over to managed IT services. In large organizations what happens is that there is a lot of work and lot of data, so there people do partial outsourcing, not 100 percent outsourcing,” says Sunil Bhatt, CTO, Allied Digital. Cost advantages: Saving cost on IT is one of the big reasons why companies outsource in a big way. There are costs related to the setting up of IT infrastructure, right from installing PCs to data centers, besides ACs and other power equipment used inside a data center. Add to this the cost of real estate, employees on role, upgrading of infrastructure and monitoring, etc. With the slowdown already making it hard for companies to preserve cash, saving money on the IT front has become crucial. “We have done total cost of ownership (TCO) analysis for many of our customers. So whenever we outsource a service vis-à-vis their internal support, we have seen tangible benefits of 30 to 50 percent,” says Bhatt. Suppose an entrepreneur sets up a new office with a headcount of 50. He would require around Rs. 15 lakh for 50 computers, besides servers, etc. In-
If you are giving your entire IT to somebody, basically what you are doing is giving him a key. Obviously you would not like to pass on the key of your organization to someone you cannot trust, and the trust in this case comes from brand reputation. — Aditya Singhal Country Manager, Infrastructure Services IBM India/S Asia JULY 2009 47
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stead of spending so much money on IT, which is not the core area for him, he can approach a managed IT vendor who would make the infrastructure available to him at a monthly charge. “We give the infrastructure to the customer and recover the cost in three years or five years depending on the contract. The customer will be charged on a monthly basis. In other words, the customer need not invest on anything on capex,” says Bhatt. This is the opex model to which the industry is now moving rapidly. It is gaining traction given the slowdown where companies are falling short of money to spend on setting up IT infrastructure. However, the capex model also exists in which case the entrepreneur would have to spend his money on setting up infrastructure while outsourcing the managing part to the vendor. Similarly, there are substantial cost benefits in the case of printing solutions. “Outsourcing imaging and printing related needs can lead to substantial amount of savings for large enterprises. If enterprises choose the right partner, they will be empowered to better manage their printing costs while reducing the need for frequent maintenance,” says Nitin Hiranandani, Director, Enterprise Sales & Services, Imaging & Printing Group, HP India.
Benefits of outsourcing managed IT services Cost advantage Access to technical expertise More time to focus on core business Greater efficiency Higher accountability No need to recruit/train/manage specialized skill sets Staff-related Issues: Outsourcing your IT infrastructure not only saves on costs, but also the hassle of managing your IT team. This also includes their training, salary-related hassles, and so on. Once you outsource to a vendor, they deploy their staff in
There are a few tasks that should be handled internally by the own IT team, for reasons of convenience and the nature of the work like new user enrollment and user removal. This should be part of normal user joining/ leaving activity. — Nitin Hiranandani Director – Enterprise Sales & Services, Imaging & Printing Group, HP India 48
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your facility. Alternatively, in the case of total outsourcing model, your employees would migrate on to the rolls of the vendor, saving you the trouble of managing their salaries and benefits. “What we offer to our customers is that those employees who work on our client’s payrolls are transferred on to our payroll. So for a customer it is a contract, and they need not worry about laying off their employee, their PF, their gratuity, etc. The entire burden is taken care of by us,” says Bhatt. Moreover, as infrastructure is a broad issue, getting experts on all aspects would be a difficult task. The knowledge is limited to a select few that the company hires. Once you outsource to a vendor, it would ensure that specialized talent is made available to troubleshoot. Focus on core business: IT is one area that many companies find too complex to handle. It makes business sense to focus on your core competencies instead of concentrating on IT, which in many organizations is a support function. “Even if IT is an enterprise’s core business, setting up your own data center is increasingly becoming an unaffordable proposition both in terms of money, time and deployment of human resources,” says Sanghi. “Aside from the high capital
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model would reduce at least by onethird. And they do not have to manage the infrastructure,” she adds.
costs, there are the high day-to-day management costs too. Routinely adding new services or upgrading to the latest technology is also not feasible. In this scenario, it makes absolute sense to outsource this service to a managed IT service provider.”
What not to outsource?
What are the types of services available? Data center management: In this case, companies outsource the operations and management of data centers. These services include disaster management, storage management, hardware and network operations, etc. The latest in this is co-location services. In this case, the customer’s data center is placed at the vendor’s premises. This eases the burden on the customer to look for space and other aspects related to the security of data center. Managed security services: This is a hot sector that is gaining a lot of prominence of late. Security is of prime importance because being connected to the outside world like the Internet requires round-the-clock monitoring. If a customer has to do this in-house, first, they have to deploy people who are skilled to do this service on a 24x7 basis; second, the knowledge is limited to those people who are working within the organization; and third, the customer might also need sophisticated tools to do this. Whereas in case of outsourcing, a customer has to just pay per security device per month and leave the rest to the outsourcing company. Remote infrastructure management: This service is also gaining popularity these days. In this case, a vendor manages the customer’s IT infrastructure from its own location, which could be situated in another city. Application services: Companies these days use complex applications that may need 24x7 support. Thus, managing application services involves application maintenance, service management, application production support, etc. Managed printing services: This involves end-to-end management of an enterprise’s imaging and printing
Steps to signing up a vendor Step 1: Vendors visit the facility and seek information of the existing infrastructure and the requirements of the customers. Step 2: Based on the initial assessment, they quote a price at which they would provide the service. Step 3: The customer evaluates various tenders, services offered, the track record of the vendor, etc. Step 4: Discussions on SLAs and negotiations on cost, and terms of agreements of the contract. Step 5: Signing on the dotted line. environment, including total document outsourcing and enterprise print management. Software as the service (SaaS): Also known as cloud computing. This is an emerging trend at present. Chandra Prabhakar, Global Business Head, OnDemand Solutions, Ramco says, “The customer tends to use the application from his own premises, wherever he might be. He is continuously monitoring his business requirements from his own location and at the same time he does not need to worry either the software or the hardware, management of the infrastructure. He also does not have to invest in any of this. He is paying for the usage. So he gets all the benefits of managed IT without incurring capital expenditure. At the same time, he gets a continuous upgrades.” “The overall costs that companies would incur by moving on to a SaaS
While outsourcing is the best way out to a seamless running of IT infrastructure, the big question is what not to outsource. Applications that involve confidential data or intellectual property-related aspects could well be managed in-house. “For example, a telecom company may outsource services, towers, etc., but the core switching, or telecom service, is kept with the company because the revenues come from these areas,” says Bhatt of Allied Digital. “There are a few tasks that should be handled internally by the enterprise IT team, for the reason of convenience and for the nature of the work that these activities include. Helpdesk activity related to new user enrollment and user removal activities. This should be part of normal user joining/leaving activity done by IT helpdesk, not the MPS vendor,” says Hiranandani of HP.
What to look for in a vendor? Before signing up a managed services provider, it is advisable to weigh the competencies and track record of vendors that offer managed IT services. “CIOs/CTOs usually approach MPS vendors through word-of-mouth testimonials, or on the basis of the feedback from third-party research houses. Since outsourcing forms an important part of the IT infrastructure costs of any company, it is critical to know how successful the MPS vendor’s offerings will prove to be for the enterprise,” says Hiranandani. While opting for a smaller player may give you cost benefits, the larger players give you the advantage of the brand name. “If you are giving your entire IT to somebody, basically what you are doing is giving him a key. Obviously, you would not like to pass on the key of your organization to someone you cannot trust, and the trust in this case comes from brand reputation. So if you opt for an established brand, they have a reputation at stake, so they will always be JULY 2009 49
DARE.CO.IN careful,” says Aditya Singhal, Country Manager, Infrastructure Services, IBM India/South Asia. Another major issue would be the experience of the vendor. “The experience that the managed IT vendor – whether they have been providing these kind of services in the past locally in India or internationally – is important. A large enterprise may look for a global experience, whereas a smaller and medium-sized enterprise may look for local experience,” says Singhal. Checking for proper skill availability is also important. “Industry knowledge in similar industry environment is important. The other thing a customer looks at is whether you are just focused in deploying bodies to the customer, or you use automation or remote deliveries, or certain tools so that the cost of delivery can be reduced year-on-year basis,” says Kiran Desai, General Manager and Business Head, Managed IT Services, Wipro Infotech. Cost comparisons also matter a lot in the long run. Vendors quote their price based on their initial assessment of the facility of the customer. “One aspect is how we will go about delivering the service. This involves intense discussion in explaining the scope of the work, identifying what we
strategy/IT Head, Managed Infrastructure Services, Tata Communications. Also, the level of escalation in case of problems with the vendor is an important consideration. Some customers seek direct approach to the CEO of the company in case of laxity in service. “Then there is the SLA-related discussions in terms of how our response would be, how the resolution would be,” adds Robin.
Before and after closing the deal What to look for in a managed IT provider Reputation Similar industry experience Qualified manpower Financial prowess Infrastructure to support customer requirements across various locations Proper mechanism to deal with escalations Ability to upgrade infrastructure as an when required will do, and what is to be in customer domain, what level of service domain that we offer,” says Simon Robin,
There are several things that go into the contract. Before the contract is signed, several rounds of discussions take place between the customer and the vendor. A typical initial meeting is a discussion between the the salesperson of the vendor and the CTO of the company. During this meeting, the client discusses with the vendor the existing infrastructure of the company as well as the requirements. Based on the requirements, the vendor gives a quote. Then the terms and conditions of the service level agreement (SLA) are discussed in the subsequent meetings before signing the contract. The SLA is a legal document that clearly defines the terms and conditions of the contract. Needless to say, it has to be throughly reviewed before signing on the dotted line. The first
For delivering managed IT services, knowledge in a similar industry environment is important. The other important thing is whether you are just focused in deploying bodies, or do you use automation remote delivery or tools that can reduce cost of delivery on a year-on-year basis. — Kiran Desai GM & Business Head-Managed IT Services, Wipro Infotech 50
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strategy/IT
With enterprises facing issues like manpower retention, complex applications, 24x7 monitoring, security, business continuity, etc. along with the need to provide quality services to customers and employees, outsourcing IT infrastructure is becoming a key driver for survival. — Sharad Sanghi MD and CEO of Netmagic Solutions and the foremost thing is the description of the asset sheet and the services that would be provided by the vendor. There are some key parameters of the SLA that a customer must throughly negotiate before signing the contract. “At the time of signing up there is a through discussion on the scope of work. There is a detailed document in terms of what we will be doing in front of the customer before the actual service is rolled out. The agreement will contain what will be delivered to the customers, how will it be delivered, how will we report that to the customers if there is a SLA violation, then the penalty for that, if there is a problem in how much time will it be resolved in, etc. These deliverables will form the part of the contract,” says Robin. There is intense discussion on the response time, which refers to the time taken to resolve a problem when it arises, depending on its sensitivity. For example, a vendor may say that the time for the initial response (telephonic) to the query is 15 minutes, if the problem still persists then a person will visit the site within 30 minutes, and if still the problem is not resolved, the PC will be taken to the labs. Parameters such as the response/resolution time are monitored during the contract. “These parameters are measured during the
contract. You cannot have violations of those commitments. These are issues that customers show concern on and insist on signing in a contract. Once an SLA is signed, you have to give reports every month to show that we have achieved the targets,” says Bhatt of Allied Digital. Another important point in the SLA is how the problem will be escalated and the frequency of the review meetings. “We have an operations manager attached to a program. Depending on what work we are having, he tracks the services. For example, we track on a daily basis the calls that are coming in and which are the calls that have been closed as per the SLA. They are flashed on a daily basis to the customer. Then there is a monthly operational review that happens with the customer. Then there is a quarterly steering committee meeting where the entire program governance team meets,” says Bhatt. There is a penalty for non-achievement of the targets as well. These points have to be well-defined and well-understood in the agreement. An SLA is generally signed on for a period of three to five years. However, if a customer is apprehensive and wants to check the service provided by a vendor before signing him in for a longer period, he can opt for a one-
year contract as well. In the SLA there are clauses that clearly mentions the exit option as well. If the services provided by the vendor is unsatisfactory, the contract can be broken before its term ends. The cost, a key component of the deal, varies according to the services opted for. Like, for example, a customer might want a dedicated storage that could run into crores of rupees. “If you go for a opex model, the portion of funds would be paid over a period of three years. Above this, we have certain tools that are deployed, which are utilized to monitor and manage the infrastructure, so there is a cost pertaining to that. Our services are 24x7, so there is a service component that goes into the overall cost. Broadly, the cost would include hardware, financing the hardware, tools, as well as effort,” says Robin. “If a customer were to come to us with a couple of servers in the opex model with the cost of hardware, the data center service, etc., the overall cost would come to anywhere around Rs 2.3 to 10 lakh per year.” “The thumb rule is that for a customer having multiple end-users, several servers at three or four locations, etc., the cost per end-user is anywhere between US$ 10 to 15 a month,” DAR E says Bhatt. JULY 2009 51
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policy/economy
What is Balance of Payments and What Does it Mean for Your Business? /Manu Gupta
B
alance of payment (BoP) is a statistical statement that summarizes, for a specific period, transactions between residents of a country and the rest of the world. BoP positions indicate various signals to businesses. BoP comprises current account, capital account and financial account. Current account consists of transactions of goods and services, income and current transfers. In the capital account, transactions of capital transfers, capital acquisition and non-produced non-financial assets like buildings and patents are included, while in the financial account, transactions relating to financial assets and liabilities like portfolio investments and foreign exchange reserves are included. However, the BoP account of most countries still classify transactions under two heads onlyâ&#x20AC;&#x201D;capital account
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and current account. In such a case, financial and capital accounts are treated as one. Transactions in BoP are recorded on a double-entry bookkeeping system that is, a transaction is recorded on each sideâ&#x20AC;&#x201D;debit and credit of the BoP account. There are many signals that the BoP account of a country gives out. For example, large current account transactions indicate towards openness of an economy. This was the case with India as reduction in trade restrictions and duties led to increase in both exports and imports after 1991. Also large capital account transactions may indicate well-developed capital markets of an economy. Healthy BoP positions or surplus in capital and current account keeps confidence in the economy and among investors. However, healthy BoP po-
sitions may be different for different countries. For example, surplus in current account is often more important for developed countries than surplus in capital account as most of them have sufficient capital to fund their investments. On the other hand, developing countries like India may place more importance on capital account as reserves and funding for investment is crucial for them at present. Large balances often attract foreign investors into an economy, thus bringing in precious foreign exchange. Often credit ratings are based on BoP positions, thereby affecting the flows of credit to businesses. Businesses can make predictions about exchange rates by studying BoP positions. A healthy BoP position can signal domestic currency appreciation, hence encouraging businesses to engage in future contracts
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policy/economy accordingly. Also, the BoP position influences the decisions of policy makers, which are crucial for any business.
How does BoP influence economic policy? The policies of a nation are highly affected and determined by the position and status of its BoP. While formulating or deciding any economic policy, BoP position and policy effect on BoP is given special consideration. While all the policies affect BoP, policies like tariff policy, those related to foreign flows etc affect it in greater magnitude. Earlier, trade-related policies used to have special focus. But over the years the share of current account transactions in total BoP transactions has decreased. For example, in India its share was almost 60% in 1991-92, but reduced to around 44% in 2007-08. Also, mismatch has been much greater in capital account in recent years, which gave rise to India’s foreign exchange reserves. Over the years, these trends have forced policy makers to make policies keeping in mind foreign flows (capital) and effects of policies on them. However, policies at the same time could be held responsible for such flows.
To improve BoP positions countries have lately often leaned towards the capital account side. The trend has shifted from import substituting policies, that is, policies in which imports are discouraged by way of tariffs, quotas toward more of foreign inflows enhancing policies in the belief that such inflows may make a country crisis-proof and lead to investments that would increase productive capacity and also may increase exports that would earn foreign exchange in future. However, BoP position in itself affects decisions of policy makers. Often, a deteriorating current account is supported by capital or financial account. A healthy BoP position often allows countries to open up their trade and to appropriate gains from it.
India’s BoP India presently has a deficit in its current account of BoP, which has increased substantially after reforms in 1991. In 1991-92, current account deficit was $1,178 million, which rose to $17,403 million in 2007-08, and accounted for $36,469 million for the last three quarters of 2008. After the reforms in 1991, India’s position of
Capital and current account balances for India were quite stable between 1991 and 2001. After 2001, primarily because of increased exports of IT services and transfers, current account balance went into surplus. But due to increasing imports and an increasing oil bill, it started deteriorating after 2004 and went into deficit. Sound fundamentals and a large untapped market coupled with a deregulated regime allowed foreign investors to invest in India, thereby increasing capital inflows after 2000. However, the global meltdown has led to an outflow of capital, which has led to a sudden fall in the capital account balance after 2007. Reserves were built up over the years mainly because of capital inflows. But a recent deficit in current account and capital outflow led to a fall in 2008-09.
merchandise trade (exports and imports of goods) kept on deteriorating, but its position on invisibles (services, current transfers etc) improved during the period. However, one of the major factors for increasing current account deficit in the last few years has been a rising oil import bill. Some countries like Japan and Germany have current account surpluses, while the USA and UK have deficits. India has done fairly well on the capital account side. In 2007-08 it had a capital account surplus of $108,031 million. In the same year it increased its foreign exchange reserves by $92,164 million, which provided stability to the economy. Foreign investments have increased manifold since 1991, peaking in 2007-08 to $44,806 million. India’s overall current account and capital account deficit is $20,380 million for April–December 2008, which is expected to rise to a figure between $25 and 30 billion by the year ending March 31, 2009. There has been dip in reserves from $309,723 million in March 2008 to $253,000 million in March 2009. Reasons for this are portfolio flows from foreign institutional investors and the appreciation of the US dollar. But this may not pose a significant threat to the Indian economy and businesses because of large pool of reserves that are still providing enough cushion. However, some businesses like those related to equities and realty are hit when outflows from these sectors occur. Not only is there fall in asset prices and erosion of investment value, but economic activity also gets reduced in these sectors. However, recent profitability/ growth numbers have indicated signs of a revival. Also political change and expected stability might bring in foreign exchange and may improve India’s capital account position and reserves. This may lead to the appreciation of the Indian rupee and may affect exporters and importers accordingly. At the same time, reserves infuse stability into the system, which in turn has positive effects on busiDAR E nesses and investments. JULY 2009 53
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/going global
Doing Business in Israel The country’s rich talent pool and technological know-how makes Israel a lucrative place to do business /Vimarsh Bajpai
I
f security fears due to Israel’s position on the world map is keeping Indian companies away from investing in the country, then they are most certainly losing out on a host of benefits that it has to offer. Some of the world’s top multinational giants have already invested in Israel and many others are queuing up to set up base there. IT major Microsoft’s R&D center in Israel is one of the company’s three international strategic regional development centers. Others MNCs that operate from Israel include Intel, HP and Motorola. While Indian investment in the country is miniscule, the bilateral trade between the two has grown in a big way since full diplomatic relations were established between the 56
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two countries in 1992. It has grown 20 times to touch $4 billion at the end of 2008. India exports textiles, chemicals, rubber and plastic products, machinery, base metals, prepared foodstuffs and transport equipment to Israel. Major items exported by Israel include diamonds, machinery, telecom equipment, software products and services and chemical products.
Why Israel? Israel’s workforce is highly educated, thanks to the world-class educational institutes that dot the country. The Technion Israel Institute of Technology has over 12,000 students enrolled in its various programs. The R&D facilities are of global standards, as the
country is estimated to invest 4.5% of its GDP on research and development facilities. Israel has always been a hotbed of entrepreneurship, backed by the booming venture capital industry. According to the Invest in Israel Agency, 483 Israeli hi-tech firms raised over $2.1 billion in 2008, the highest amount in the last seven years. This was up $1.8 billion over the 2007 and 28% over the 2006 figures. There are a number of sectors where Indian investors can benefit from Israel’s expertise. Take the case of water technologies. Israel has worked wonders for itself despite the scarcity of this resource. With a 75% water recycling rate, Israel has the world’s largest desalination plant. The renewable energy sector is also lucrative.
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/going global
India-Israel Trade
Note: All figures in US$ Million Source: Ministry of Commerce, Government of India
JULY 2009 57
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Mouneer Agbariya Economic Counsellor, Embassy of Israel in India How have trade relations between India and Israel grown since full diplomatic relations were established between the two countries in 1992? Since establishing full diplomatic relations between the two countries, the volume of trade between the countries has been around $200 million. Within the last 17 years, it increased 20-fold. We have ended the year 2008 with bilateral trade of nearly $4 billion. The growth in Israelâ&#x20AC;&#x2122;s exports to India that varied between 7 and 12% per year; in the last three to four years it has been increasing at 18 to 25%. We donâ&#x20AC;&#x2122;t have similar figures with any other country worldwide. Both Indian and Israeli markets have different capabilities. What India produces and exports to Israel is X, what Israel produces and exports to India is Y â&#x20AC;&#x201D; which means both are exporting different things. So there is no competition between the two countries. In most cases, Israeli companies are not competing with local companies. This has helped trade to increase in big volumes. The same goes for Israel. If you look at the composition of exports from Israel to India, it would be mainly chemicals, equipment for the telecom sector, machinery etc. while India exports textiles and agriculture products etc. What is it that makes Israel an attractive destination for foreign investors? In most of the sectors you will find that cutting-edge technology comes from Israel. The government is actively involved in giving incentives for foreign investors to come and invest in Israel. These incentives help foreign companies in the initial stage to minimize risk and the expenditure. We have a unique program that encourages foreign investors to invest. The program states that the government will subsidize nearly 80% of the labor cost during the first year. During the next three years, the subsidy will reduce, but during the first few years there would be some share of the Government of Israel in the labor cost.
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/going global This is because the cost of labor in Israel is relatively high. So, in order to make the cost affordable for investors, the government shares the cost to make it affordable. In addition to this, there are other incentives in taxes etc. which prospective investors could consider. How are the business-to-business relations between the two countries growing? The main fields in which we see increased activity by Israeli companies in India is the telecom sector and in homeland security after the unfortunate events of 26/11 in Mumbai, There are an increasing number of Israeli companies that are tying up with local companies. The agriculture sector is another. There is a big potential for Israeli companies in water technologies. We have excellent technologies available in water management and desalination etc. We have started to see more and more Israeli companies coming to India in this area. How do you allay fears on security of investments of foreign investors? The answer to this question is very simple. Most of the multinational companies have invested in Israel. Take, for instance, in Motorola and Microsoft. Intel has a huge manufacturing facility in Israel with 400 to 500 workers. Cisco is there, besides Alcatel. Most of the international names are already there in Israel. Israel is one of the biggest arms supplier to India. Due to the offset clause in defense sector, are the Indian companies benefiting from this? During my talks with companies that are in the military equipment space, this issue comes up for discussion. Usually, I try to bring about some kind of tie-up with local companies such as Tech Mahindra and Tata. This is the only involvement from my side. The matter of offset is relatively new. This obligation of offset was not there in the past. From the Indian side, they did not know how to make companies fulfill their commitment for offset requirements. Now things are gaining shape and are becoming clearer. The companies that are committed to offset now know more on how to fulfill them. There are enough companies in India that are suitable and can help Israeli companies fulfill their commitments under the offset clause.
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/going global Which are some of the sectors that you think are lucrative? Besides water technologies, biotechnology and IT are very promising. In the IT sector, Israeli companies have very advanced technologies and Indian companies have very good capabilities. Combining the two would bring in a lot of benefits. Another area which is very new is renewable energy is in the shape of solar energy. There is also a special program from the government to encourage the use of solar power. Are there talks on FTA between the two countries? There is a proposal from our side for negotiations. The proposal was sent to the Ministry of Commerce in 2007, but till date we have not got any official response from the Indian side. We get to know that things are being considered positively, but no official response has been received so far. What is the scope of joint venture agreements between Israeli and Indian companies? I think the volume of JVs between Indian and Israeli companies is not up to the level it should be. This is because Israeli companies are concerned about the patents regime and protection of intellectual property in India. Most of the Israeli companies are still not aware of what steps have been taken by India and are not so confident about the agreement. They worry that Indian companies may copy the technology after some time and would start to work on their own. This is a big reason as to why we do not see a lot of JVs between Israeli and Indian companies.
DARE/doing business Ease of
2009 Rank
2008 Rank
Change in Rank
India
Doing Business
30
30
0
122
Starting a Business
24
18
-6
121
Dealing in Construction Permits
120
111
-9
136
Employing Workers
92
92
0
89
Registering Property
160
158
-2
105
Getting Credit
5
5
0
28
Protecting Investors
5
5
0
38
Paying Taxes
77
74
-3
169
Trading Across Borders
9
8
-1
90
Enforcing Contracts
102
100
-2
180
Closing a Business
39
43
4
140
SOURCE: World Bank Doing Business 2009 Report
Sun Pharma is chewing a bitter pill in Taro acquisition It all started in May 2007 when Sun Pharma, one of India’s leading pharaceutical firms, penned a $454 million merger pact with Taro Pharma of Israel. But the Israeli firm soon withdrew from the agreement citing undervaluation. The two companies then moved the court even as the Indian firm made an open offer to grab all shares of Taro Pharma. The issue of the open offer that was launched at $7.75 a share last year was dragged to court again by Taro. The court stopped Sun Pharma from closing the offer till the verdict comes out. The two are still awaiting the judgement of Israel’s Supreme Court on the issue.
DARE/key sectors n
Pharmaceuticals
n
Tyre manufacturing
n
Agro industry
n
Biotechnology
n
Telecommunications
n
Water technologies
n
Information technology
n
Renewable energy
Israel has devised plans that promote the use of solar power for household consumption. Israel’s pharmaceuticals and life sciences industry is also one of the world’s most advanced. There are over 900 life sciences companies, with around 50 to 60 formed every year, according to the Invest in Israel Agency. Starting a business in Israel is relatively easy vis-à-vis other economies in the region. The World Bank’s Doing Business Report states that it requires five procedures, takes 34 days, and costs 4.40% GNI per capita to start a business in that country. Israel ranks quite high on the parameters of credit availability to investors and inDAR E vestor protection. JULY 2009 59
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/INSEAD
Evolving the entrepreneurial spirit at Bharti Enterprises /Irawati Gowariker and Philip Anderson
O
ne of India’s great modern entrepreneurial success stories is the Bharti group, started by self-made entrepreneur Sunil Mittal with an initial capitalization of 20,000 rupees. In 14 years, the growth engine of the group, Airtel, has become one of the world’s fastest growing telecommunication companies and has joined the small set of iconic Indian companies that are well-known globally in management circles. Today, even as Airtel continues to grow apace, other ventures within the group are building new businesses in areas such as retailing, financial services, and food processing. Because of this spectacular growth, Bharti faces a fundamental challenge: how to preserve the entrepreneurial spirit that built the enterprise when the company’s very success makes it a large, complex organization? Simply saying “Let’s stay entrepreneurial 60
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and run things just as we did in the old days” won’t do, but if creeping bureaucracy isn’t fought at every turn, it’s impossible to retain either the spirit or the people who made an enterprise great. How can we evolve an entrepreneurial culture as a fast-moving startup develops into an economic giant? At Bharti, the answer is “We want neither professionals nor entrepreneurs to lead this enterprise—we want professional entrepreneurs.” When those within Bharti Airtel speak about a “PE ratio”, they aren’t discussing the price-to-earnings ratio. Their own definition of the PE ratio is a barometer of their sense of ownership and a can-do legacy, a professional-entrepreneurial (PE) culture that starts at the top with Mittal. Sanjay Kapoor, Deputy CEO of Bharti Airtel, Asia’s leading integrated telecom services provider asserts “The PE culture has indeed been Sunil Mit-
tal’s conviction. Mittal realized that he couldn’t scale up past a point unless other stakeholders imbibed an entrepreneurial spirit. Entrepreneurship has been a linchpin behind every success of Airtel and the PE culture resonates not only within the company, but outside too, to our strategic partners”. Eleven years with Bharti, Kapoor recounts the evolution of the PE culture. “When we started, entrepreneurs were managing the company and so we had an Entrepreneur-Entrepreneur culture. EE was apt through our early days but not sustainable. When we started to scale up, we changed it to EP (Entrepreneurial-Professional) with entrepreneurs taking the lead and professionals following them. This was important, because we had to build a large company. Now, we are at the PE stage, where professionals are doubling up as entrepreneurs to build the future”.
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/INSEAD What does PE (professional-entrepreneurship) mean to senior professionals within Bharti? Ajai Puri, heading Airtel’s DTH (Direct to Home) business, comments, “It is all about empowerment and as a part of the PE culture at Airtel, every leader tries to get the best out of people by exciting, empowering and challenging them. It is a very structured way of passionately consuming everyone”. CIO of Airtel’s mobile business, Amrita Gangotra agrees that, “Entrepreneurship is in the very DNA of Bharti Airtel and it encourages professionals like us to think fresh”. According to Sanjay Kapoor, who heads the Mobile, Telemedia and DTH businesses of Airtel, “The spirit of entrepreneurship is about being passionate about what you do and your drive to do something unique.” The PE culture lends speed particularly when the stakes get bigger”, he adds. And on entrepreneurial traits, he shares that, “The body language and out-of-thebox thinking are two obvious traits that I look out for. Through a conversation, if the person shows little fear for failure and a willingness to take chances, then the person is entrepreneurial by nature and can be trained to fit better into our PE ethos”. Taking entrepreneurship to
Simply saying “Let’s stay entrepreneurial and run things just as we did in the old days” won’t do, but if creeping bureaucracy isn’t fought at every turn, it’s impossible to retain either the spirit or the people who made an enterprise great. How can we evolve an entrepreneurial culture as a fast-moving startup develops into an economic giant? another level, Kapoor reveals, “In our training and appraisal process, the entrepreneurial spark is a dimension that is measured. Bharti Airtel hires from FMCGs, cola companies and the banking sector, and they join because they are motivated to be a part of this entrepreneurial drive at Airtel”.
At the management of Bharti Enterprises, where Airtel is the flagship brand, Akhil Gupta equates entrepreneurship with innovation. Gupta, who is associated with a range of strategic, financial, mergers and acquisitions of the Bharti group notes, “Innovation is the responsibility of our management, the directors who direct Bharti on the board. They have to lead it as they have the insight into the company’s needs. The value proposition and the benefits and risks of an entrepreneurial innovation are put forward in simple terms for the board’s support.” He continues, “The board will help mitigate risks, and they support innovation regardless of the environment they work in”.
The PE plus factor: In a survey conducted by the Wall Street Journal, Airtel was nominated as India’s most innovative company. The PE culture at Airtel has made the organisation change-agile, a prerequisite to implementing innovative ideas. Executive Director N. Arjun, who drove the launch of Airtel’s recent DTH business observes, “Airtel is large, but we have the soul of a young company. Across businesses, including emerging ones like DTH, people are given a free hand so that they don’t get bogged
When we started, entrepreneurs were managing the company and so we had an Entrepreneur-Entrepreneur culture. EE was apt through our early days but not sustainable. When we started to scale up, we changed it to EP (Entrepreneurial-Professional) with entrepreneurs taking the lead and professionals following them. This was important, because we had to build a large company. Now, we are at the PE (Professional-Entrepreneurship) stage, where professionals are doubling up as entrepreneurs to build the future.
— Sanjay Kapoor Deputy CEO, Bharti Airtel
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/INSEAD
The PE ratio was introduced to keep alive the essence of entrepreneurship. However this ratio varies at different levels of operations and the maturity of the business. So it tilts more towards entrepreneurship for emerging businesses like DTH where the slate is clean and we have to cast our own stones. But in a more mature business like mobile services, the stakes are high, and we have to be more process oriented.
— Ajai Puri Head, Airtel DTH
down by processes. Bureaucratic delays haven’t crept into the system.” Ajai Puri, who took over the DTH reins from Arjun two months back, agrees: “Two documents, the annual operating plan and our COC (Code of Conduct and Values), serve as boundary guidelines. We don’t cross these two.” He elaborates, “The PE ratio was introduced to keep alive the essence of entrepreneurship. However this ratio varies at different levels of operations and the maturity of the business. So it tilts more towards entrepreneurship for emerging businesses like DTH where the slate is clean and we have to cast our own stones. We have to take a call on how we want to conduct our business and build the business model. While building from scratch, it demands greater ownership but we can afford to take more risk. Speed and our ability to action our decisions are of essence. Constant experimentation, happens more frequently, challenging the status quo. But in a more mature business like mobile services, the stakes are high, and we have to be more process oriented”. Kapoor points out that an empowering ecosystem is developed around the PE culture. “Each of our telecom 62
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circles across geographies is headed by a CEO. Decision making for each circle is done entirely at their level”. This encourages effective problem-solving too, Puri says:, “As decision making goes down the chain, the problems get appropriately addressed closest to where they arise. Sometimes in large organizations if the problem is at level 10, it gets sorted at level 1, by which time it changes colour and texture and
In a survey conducted by the Wall Street Journal, Airtel was nominated as India’s most innovative company. The PE culture at Airtel has made the organisation changeagile, a prerequisite to implementing innovative ideas.
the solution is bound to be less effective. We operationalised the decisionmaking process. I often tell my team, ‘Come to me with a problem and a solution, not just the problem.’” But while functioning in a large workforce, how do these professional entrepreneurs avoid a wasteful readyfire-aim approach? Arjun explains how they steer clear of it: “Once the brief is given, operating teams are allowed to run with it until they are reviewed. When DTH started in March ’07, clear objectives were laid down. We wanted to be market leaders through product superiority. A SWAT analysis was done and we tried to benchmark ourselves against the best in the world. We tried to pick good practices from other players in the industry. For example, our customer installation manuals, training modules and processes were picked up from others and tweaked to our business requirements. We meticulously listened to the voice of customers to understand the underlying pain points. And these reviews gave us a clear idea of where we stand and where we skip. For example, when DTH is installed at new customers’ homes, we conduct audits, sometimes unannounced audits, which then serve
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/INSEAD as group learnings. Since the launch of DTH, our customer surveys have consistently scored in the top-box”. Managing her role as Chief- IT Operations and Governance at Airtel, Amrita has a similar observation to make. “We aim for flawless execution by being process-oriented. And by institutionalizing our standard operating procedures we run our business professionally, not in an ad hoc manner. So this balance is the key to our success”, she says. The PE culture tends to view disruptions as opportunities. Amrita Gangotra recalls, “Products such as Easycharge and HelloTunes increased market shares and bottom lines. We tried to stay focussed on raising aspirations of our customers and not on providing a ‘me-too’ response to competition”. With respect to innovating to stay on top of the curve, she adds “Innovative ideas are not necessarily about starting from scratch or about having to re-invent the wheel. We have introduced new products into India after tweaking them to the needs of the Indian customer. From being a mobile company we became an integrated telecom services provider after we brought in long distance operations to India for the first time”.
Not weighed down by the side effects of change, Bharti has come up with new solutions to old problems, newer versions to existing solutions, new solutions to new problems and paradigm shifts. Consequently, the PE ratio across this leading integrated telecom services provider has seen the genesis of effective change management, empowerment and innovation, giving Airtel the competitive edge in the industry. At the forefront of the telecom revolution, Airtel has an aggregate of 100 million customers.
Airtel ‘expresses itself’ through PE: Not weighed down by the side effects of change, Bharti has come up
with new solutions to old problems, newer versions to existing solutions, new solutions to new problems and paradigm shifts. It has been the first telecom player to outsource functions such as IT, network, call centres, distribution and, more recently, tower companies. It boldly re-invented its business model. Akhil Gupta, Deputy Group CEO & Managing Director of Bharti Enterprises and a Director of Bharti Airtel Limited has been the architect of Bharti’s pioneering outsourcing deals. He speaks candidly about all the free thinking that went behind their IT outsourcing: “Outsourcing is not a fashion statement. We had to articulate clearly what activities we could do ourselves and what we would have to outsource. The question we were asking ourselves was whether we needed to do all activities ourselves. Traditional wisdom was about outsourcing non-core activities. We looked deeply and thought that was complete rubbish. Outsourcing has nothing to do with core or noncore. The questions were: First, who had deeper domain knowledge? Was it in-house or was it with someone else? Second, who had better economies of EVOLVING THE ENTREPRENEURIAL SPIRIT AT BHARTI ENTERPRISES CONTD. ON PG 86 ç
Innovation is the responsibility of our management, the directors who direct Bharti on the board. They have to lead it as they have the insight into the company’s needs. The value proposition and the benefits and risks of an entrepreneurial innovation are put forward in simple terms for the board’s support. The board will help mitigate risks, and they support innovation regardless of the environment they work in.
— Akhil Gupta Deputy Group CEO & MD, Bharti Enterprises and Director, Bharti Airtel
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/blog
Creating a “Why Not?” Culture
/Rupin Jayal
I
n industry after industry, organisations and executives that were once dismissed as upstarts, as outliers, as wildcards, have achieved positions of financial prosperity and market leadership. There’s a reason the young billionaires behind the most celebrated entrepreneurial success in recent memory began their initial public offering (IPO) of shares with a declaration of independence from business as usual. (‘A Manifesto for Mavericks’, William C. Taylor and Polly Labarre, Market Leader, Issue 38, Autumn, 2007). At the start of a business venture and then right through its lifetime, there is a danger of contracting “business sclerosis”. The symptoms of this disease are rules that most cannot fathom the reason for, or those that were formulated for a specific reason, have outlived their utility, but are still being slavishly followed. These are not just rules that are “company policy,” but even informal rules governing everyday work. Typically, they are identified by such statements as: “Oh, but we don’t do it like this over here” or “But that wouldn’t work” or “But doing this/saying this/ changing this would imply...” These are arbitrary rules either backed up by “conventional wisdom” that has degenerated from the conventional to the obsolete or by institutionalized prejudices and resistance to change.
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But before we take up this issue — why “why not” and not just “why”? "Why not" implies a desire to question something and that implies that something already exists. It also implies an alternative path, a different solution, and a desire to innovate. “Why not?” implies innovation; “why?” often implies seeking information. The danger of just “why” is that it is open-ended and could mutate into questioning everything without a specific purpose. A powerful antidote to business sclerosis is creating a “why not?” culture. Many entrepreneurial ventures start as either an answer to an unmet or poorly addressed need, a dramatic innovation or an answer to products or services that are suboptimal in some way. This implies the need to introduce something different and there is often a missionary or even revolutionary zeal. But running the business is much more than just the startup and the inauguration. It is about fuelling the zeal everyday and across a huge variety of interactions. Very critically, it is about identifying the right people to carry the torch as the business expands and more people join it. When you look back and remember the aspirations and values with which you started and see a bunch of busy executives working hard at running the business, do you wonder whether they feel the same way, do they share your vision and most importantly if they share your initial evolutionary/revolutionary zeal? Creating a “why not?” culture does not only seek to prevent business sclerosis, but also, like a power business health supplement, to help develop the company’s “innovation muscle.” Innovation in today’s fast-evolving world, with its fast-evolving mindsets, cannot any longer be an event. It has to become a culture. It has to be sustained in an environment that continually seeks change. “Google is not a
conventional company,” says its Letter from the Founders. “We do not intend to become one.” Building a “why not?” culture focuses on the second part of that promise. So there are two clear facets to creating such a culture. The first is to question and create the environment where questioning is received as a stimulus rather than a threat. A climate where, when a question is asked, both the “asker” and the “askee” figure out whether things can be done differently for the better. If they do, they should be recognized and their collaborative improvement celebrated. At Hero Honda, when an idea is given for improvement, the reward is shared by both the originator as well as the implementer of the idea. Indeed, no reward is given until the idea is actually implemented. Thus, a “why not?” culture must be purposive and not adversarial. The question must be based on an alternate way of doing things and not just a pointless semantical argument. The second facet of a strong “why not?” culture is innovation. This should lie at the heart of any corporation. Innovation does find a fertile ground in India. Apart from a robust culture of argument, a faith that is possibly one of the most adaptable, assimilative and, therefore, democratic in the world and a capitalist entrepreneurial spirit that can be traced back to thousands of years, we also have a demographic dividend with a productive population that is one of the youngest in the world. It is a population that has embraced technology enthusiastically (for example, mobile phones), created tectonic shifts in entrenched categories (for example, from a predominantly scooter market to a market dominated by motorcycles) and supports a minirevolution every four years through a well-run electoral system. India has all the right ingredients to be the world’s leading “why not?” country!
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/blog To meet burgeoning aspirations and desires restricted by shallow wallets, Indian companies have created innovations that have received world attention. However, innovation must be part of the company’s DNA rather than merely event-based, where a major part of the company’s attention gets captured by a relatively few big-ticket and radical inventions. 3M did not just celebrate its major inventions. Its culture of innovation was even able to discover new ways to use products that were thought to have failed. A weak adhesive created the ubiquitous Post It. People too find novel ways to use existing products — Milkmaid condensed milk, a dairy whitener product, became a great base ingredient for desserts and gathered greater success in that role. In Punjab, single-tub semiautomatic washing machines are used to make lassi. The Maruta is run by an agricultural diesel-run motor that was meant to pump water. The mobile phone is more an entrepreneurial implement than just a communicating device as more and more micro-scale entrepreneurs run their businesses through it. A very critical part of creating and nurturing an enduring “why not?” culture is the way senior management deals with failure of innovation. To understand why fiascos matter, I need to explain my theory of the borderline, which divides the areas of “possible” and “not possible.” The area of the possible is represented by those new projects that final customers will be ready to understand, to wish for, to love, maybe to buy. The area of the not possible is represented by new projects people are not able to understand. I admire some marketers and designers whom consumers find extremely difficult to understand. Sometimes they create things that could be used 10 or 20 years later. Well-organized, mass production companies try to work as far as possible from the borderline. They cannot afford to take too many risks. But by all producing the same car, the same television set and the same fridge year after year, those companies are mak-
ing products more and more boring and anonymous. The destiny of a company like Alessi is to live as close as possible to the borderline, where you are able to really explore a completely unknown area of products. (Alberto Alessi on design innovation in the Mckinsey Quarterly, February 2009). While many pay lip-service to encouraging failure as a “learning process,” few actually follow that in action. Few companies keep record of their failures in terms of understanding what led to the failure and innovations that could create more robust conditions for success in the future. However, rather than treat it as another sclerosisinducing rule book, it could be used as a stimulus for employees to figure out the “why nots” and thus stimulate innovation rather than avoid failure. A major “why not?” is the way massproduced products and economy products look mass produced. The role of innovative design in adding
not constantly reminded that you are traveling by a low-fare carrier. In fact, anecdotally, many senior management dethroned from the front of the cabin by the recent economic crisis prefer to travel by Indigo as it reduces the impact of the compromise. Quite a difference from the first budget carrier in the Indian skies that ensured you felt that you traveling “low cost.” Whether product or service, a critical “why not?” is the use that can be made with existing resources to provide people with a better experience. A simple example is music. While the “product,”that is, CDs are produced in thousands and even millions, the musical content is special for the person who buys it. Mass produced does not have to mean “mass” designed, and is one place where a robust “why not?” culture would help in a major way. Innovation in a “why not?” culture can be at differing levels. A simple matrix to define varying levels of innovativeness is as follows:
value is a powerful one. Thus, when people looked at the Tata Nano they were pleasantly surprised by the fact that its interiors didn’t scream “cheap.” When you fly by Indigo its smart and clean interiors, comfortable seat pitch and efficient staff ensure that you’re
Business sclerosis destroys many formerly flourishing businesses, so creating a robust “why not?” culture is the best antidote and power supplement for yours. Take one everyday for a healthy long-term business. D A R E The author is Director-Strategic Planning at M&C Saatchi.
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Photo: Quantum Power systems
opportunity/electronic printers
Opportunity in POS and Mobile Printers With vast areas of utility, new-age mobile electronic printers offer a promising opportunity /Amit Panday
W
e are heading to an age where data mining and recording is becoming a priority. As more and more points of sale (POS) get mobile or connected to backend systems like ERPs, there is a need for billing machines and mobile printers that can be attached to these billing devices. Be it any POS of a retail outlet, a government-owned transport corporation, a warehouse managing inventory, a bank, or even an organized parking lot, data is generated in the form of codes. Thus, these mobile billing machines with integrated printers are beginning to occupy the center stage. A big reason for this is data mining. Information generated can be used in churning out patterns, like customersâ&#x20AC;&#x2122; habits, using the same to leverage resources to better use. Simply put, mobile billing machines are basically handheld computers with embedded applications. The printers integrated within the machine are primarily of two typesâ&#x20AC;&#x201D;thermal or dot matrix. Both have their own usages. For example, a thermal printer is used for generating tickets and receipts in transport services because thermal printing is faster as compared to dot matrix printing. Moreover, these print-
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ers do not require ink ribbons and use thermal paper. On the other hand, mobile dot matrix printers are used at various POS applications. These printers are affordable because they are function-specific and embedded only with the required application. This also makes mobile printers risk-free and crash-proof. We talked to some vendors who are in this business already, and found out that these printers are roughly priced between Rs 5,000 to Rs 10,000 in the market with annual maintenance costs of around Rs 1,000 to Rs 1,500. These machines need servicing on the lines of placing fresh ink ribbons (for machines with integrated dot matrix printers), continuous supply of paper rolls, replacing batteries, etc.
Who are the users? Mobile electronic printers come into use across various POSâ&#x20AC;&#x201D;a government transport bus, private radio cabs, retail stores, banks, electricity boards, parking systems, toll gates on express highways, and so on. For example, with modernized banks making efforts to reduce the customer servicing waiting time, there are many branches that have deployed electronic printers to generate service coupons. More examples are: a billing
machine kept at a Crossword store, buying tickets to watch a movie at any PVR Cinema, etc. Needless to say, with the constant increase in POS along the length and breadth of the country, handheld electronic printers hold a huge demand.
Who are the providers? In India we have providers mostly in the form of importers and manufacturers. The number of importers of such machines, who further market such products, is much more than manufacturers. Furthermore, these handful manufacturers are heavily dependent on China for hardware requirements. However, there is another segment in this line of business, which is of developing embedded applications for these devices. We spoke to some existing players to get inputs and insights on the subject. Among them are Softland India (Trivandrum) who claim to be a manufacturer of handheld electronic computers (used for billing purposes) as well as ticketing machines; Quantum Power Systems (Bangalore) who also manufacture such machines; and Krishna Electronics (Delhi) who are in the business of importing and selling electronic printers from Shanghai.
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opportunity/electronic printers As mentioned earlier, a POS can be a payment counter in a retail outlet while also a payment counter within a multiplex for buying movie tickets. There is a huge market in catering to the needs of such points. Why? Electronic printers promote accountability and transparency as it keeps a record of all transactions. Besides, these printers also help POS such as retail outlets in data mining. With organized retail catching up in a big way, data mining is gradually gaining importance. Such new-age printers can be particularly useful in determining information of customers’ buying habits, repeat purchases, usage of discount schemes, frequency of purchases and more such information. These devices are further useful for various retail stores in examining the performance of their retail schemes, improving their customer relationship management (CRM) systems etc. Some of these devices are also used as an inventory management terminal between outlets and warehouses. For example, at Coffee Day Express, the manager feeds in opening and closing stock, which helps the head office to track stock of sold, unsold, damaged, returned products and much more. The second best bet in this line of business is handheld machines for electronically generating tickets and receipts. Such machines are better known as electronic ticketing machines (ETMs). They are primarily used in government-owned state or city transport services. For example, the Delhi Transport Corporation has deployed such ticketing machines in some of its city buses. Then there are inter-city, inter-state buses or tourists buses that are also using such machines for issuing tickets to travelers. Another section within the transport services would be private radio cabs. Each of these cabs has an internally deployed thermal printer for printing receipt against the payments made for the services. This is a form of spot billing. For such similar spot billing purposes, various electricity boards have also started using handheld electronic
BASIC UTILITY Electronic bus ticketing Spot billing-cum-cash collection solutions for electricity board, cable TV operators Banks coupons for services system Vehicle parking receipts, petrol pumps Toll gates on express highways Inventory management at warehouses and stores (stock in and out readings) POS terminals • Coffee shops like Cafe Coffee Day, Barista, Costa Coffee etc. • Multiplexes like PVR Cinemas, Wave Cinemas etc.
Photo: Atlanta Systems
Big demand
• Retail outlets like Crossword, Shoppers Stop, Pantaloons etc. printers. Such machines are fed with the old and new meter readings of the respective household and calculate the number of units and the electricity bill accordingly. Many electricity board officials prefer this mode of receiving payments as it encourages a quick and transparent way of billing. Even cable operators of small towns like Kanpur and Allahabad are opting for such handheld printers for spot billing purposes. Electronic printers also come in handy in banks. For example, we notice a small though bulky looking printer hanging alongside the wall near the entrances in ICICI Bank branches. They are used in generating service receipts for customers. Customers operate these printers on their own as they are easy to use and self-explanatory. The specific service request is entered by pressing the keys, while the printer generates a paper coupon that mentions the service(s) desired along with time, date
PRODUCT-RELATED OFFSHOOT REQUIREMENTS Ink ribbons for machines with integrated dot matrix printers Thermal/regular paper rolls Battery (lithium) Regular servicing requirements Other machine spare parts
and a token code. This information can be used in compiling valuable data like what kind of services people prefer the most or if there are location-specific banking habits of customers. Other areas where these printers are also deployed currently include organized parking lots, petrol pumps and toll gates on express highways and bridges across the country. Electronically fed information in these cases too can help derive out important conclusions like which days of the week witness maximum parking at a respective place, what time major traffic passes through a respective toll gate and so on.
Improving current deployment The current deployment can improve by creating an awareness of the benefits that these printers provide such as reducing manual workload and time consumption, as well as saving on costs in the long term. Apart from the organized retail outlets, retailers in the unorganized sector are also waking up and deploying such printers for electronic receipt generation. Hence, retail POS are likely to boost a dual-phased growth in the usage of mobile electronic printers. The local ‘kirana’ shop owners could realize a basic advantage of transparent and correct records in their daily transactions; while the big organized retail outlets are now looking forward JULY 2009 67
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Current market potential In a report by KPMG called “Indian Retail: Time to Change Lanes” (2009), B.S. Nagesh, MD, Shopper’s Stop mentions, “We have found that 50 to 55% of a customer’s experience revolves around two components: the availability of merchandise and the ease and speed of a billing process.” The KPMG report estimates that the current penetration of organized retail in India is around 6% and is going to grow to 10.4% by 2012. The figures are calculated after considering the prevalent global slowdown in the retail sector. The report does not state the number of organized retail outlets currently in India, but pegs the current size to be around US$ 25 billion. According to our estimates, only within the franchisee space as POS, there were around 68
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Photo: Analogic Technomatics
to data mining for improving their CRM standards and figuring out new retail schemes. Government-owned transport authorities are also opening up to the deployment of such printers. More buses are expected to issue electronicallygenerated tickets across states. Lalit Singhal, Krishna Electronics, says, “More than 90% tickets of the low-floor DTC buses are generated electronically.” He further adds, “Around 8 million tickets are generated on a monthly basis in DTC buses with an average price of Rs 5 to Rs 8 per ticket. With the usage of ETMs, there has been an increase of 25 to 30% in the revenues of DTC.” This highlights the round figure of at least 40 million recorded revenues generated by the state-owned transport corporation through this mode. With modernizing banks, especially public sector banks, the deployment of such printers is likely to rise in huge numbers. Similarly, even other entities like state electricity boards, cable operators, petrol pumps and parking areas will look at optimizing this option. Awareness, such as mentioned earlier, will certainly go a long way in improving the current deployment and also create new markets.
opportunity/electronic printers
ADVANTAGES OF HANDHELD PRINTING MACHINES Convenience of handling and logging in information Risk free from internal damages like viruses; crash-proof Less dependence on manpower; no skill required to operate Avoidance of data skipping; increases accountability and transparency Information recorded can be accessed without fail Optimization of recorded information 40,000 franchisees across sectors in India in 2008 (Refer: “The Power of Franchising”, DARE, June 2008). Switching on to the larger share of the pie, there would be around 12 million individual retail outlets in the unorganized retail sector (Refer: “Why Big Retail is in a Mess”, DARE, April 2009). On the public transport front, Softland India has provided 5,000 ETMs to the Kerala State Road Transport Corporation (KSRTC). For the current year, they have a contract of providing around 1,500 ETMs to Rajasthan State Road Transport Corporation (RSRTC). The lot will be provided at a cost of around Rs 5,500 per machine, which includes service charges for the first two years of the warranty period. In another example, Krishna Electronics have a contract for providing 1,000 ETMs to the DTC since May 2008. The contract covers providing DTC with such mobile printers and its operation management and servicing too.
For a brief outlook of this space, we can look at the sizes of public transport of some major states of India. The Maharashtra State Road Transport Corporation (MSRTC), for instance, has an existing fleet of over 16,000 buses. Similarly, the Gujarat State Road Transport Corporation (GSRTC) has more than 4,000 buses under operation, Uttar Pradesh State Road Transport Corporation an existing fleet of around 7,000, RSRTC around 4,500, Karnataka State Road Transport Corporation around 8000, and KSRTC more than 5,000. Another segment within this space would be the radio cab business, which is growing at an extraordinary rate in the big cities. DARE estimated the number of private cabs to go up to 20,000 in Delhi alone by 2010 (Refer: “Radio Cabs – A Business of Rs 7210 Crore”, DARE, October 2007). If we extrapolate this number to other metros too, we have a figure of 100,000 cabs. This translates to a requirement of the same number of electronic thermal printers.
Starting a business of mobile electronic printers As mentioned in the beginning, manufacturing as well as importing-selling are two already existing forms of business that can be explored. While manufacturing will call for investment in a few million rupees, importing these devices and selling them domestically would not require much investment. The area of manufacturing itself could be either in the form of contractual hardware manufacturing (in which the parts/applications are imported from China) or complete manufacturing of the devices here in India itself (which would also include application development). Besides manufacturing and selling these devices, there exists a good potential of business in manufacturing ink ribbons for dot matrix machines, thermal and regular paper rolls, batteries (lithium) and other spare parts. Also, the fact that these devices will require regular servicing creates an offshoot opportunity for service centers DAR E for these devices.
DARE.CO.IN DELHI 2009
Smart Entrepreneurship in Challenging Times
/bio
Hotel Taj Palace, New Delhi, September - 18th & 19th, 2009
www.tiecon-delhi.org Dear Entrepreneurs, Smart entrepreneurs look for opportunities in challenging times. The current economic situation may or may not have reached its lowest point – and we may or may not be into the recovery stage by the time TiEcon comes around - but one thing is for sure and that is the opportunities thrown up by the downturn will outlast the recovery period. TiE Delhi takes great pleasure in announcing its signature event – TiEcon Delhi 2009 – “Smart Entrepreneurship in Challenging Times” scheduled on September 18th & 19th 2009 at Hotel Taj Palace New Delhi. Along with a dedicated TiEcon Committee and a large team of volunteers, we are working to continue to build upon the TiEcon standard of excellence that you are accustomed to and remain current by adjusting the events and sessions to match the prevailing conditions. KEY HIGHLIGHTS n Panel sessions with panelists who are the best in the business, whether opinion leaders, policy makers, investors, industry leaders who will present and debate recommendations on regulatory issues & matters that we believe materially impact entrepreneurship in India. n Panel sessions designed to focus on the opportunities & challenges thrown up by the recent economic situation. How does one preserve costs & cash? What are some of these new opportunities and their entry barriers? n Recent and relevant entrepreneurial stories & experiences across sectors/regions interspersed in the various sessions, with emphasis on the things they did right. And, of course, the guru sessions as usual. n TiE – Lumis Partners Smart Entrepreneur Awards will recognize early stage entrepreneurs who have started – and achieved some degree of success – with very exciting business ideas. An expert panel will choose and give awards to the best along with an opportunity to present to the TiEcon audience. n Mentoring Clinic for one on one mentoring. n Multiple networking sessions where you will be given adequate time to meet, mingle and share a cup of tea and some “gyan” with panelists, charter members, Indian Angel Network members & VCs, government officials, etc. We will also try and link you up with your peers in sectors like HR, Marketing, Education, IT/ BPO, etc. This is a new initiative for us but we are determined to overcome the technology and time challenges required to make this a unique networking experience for you. n Last but not least, our Gala Dinner that will include an exciting entertainment programme. Since the networking “tea” sessions will be run in parallel over the two days, it would be important for you to register early so as to have the best shot at getting the networking sessions of your choice. While, of course, we will try and accommodate all as best we can, it will be the “early bird” who will get the best portion! We plan to send out registration forms by about early July that will capture your networking choices and needs and we will revert with a tailored networking plan (appropriately coined “MyTiEcon!”), that will include names, timings, room nos, etc. No need for you to miss any panel session because you wanted to network more. Along with us, TiEcon is bringing together the vision and passion of the Steering Committee comprising of Ajai Chowdhry, CEO, HCL Infosystems, Deepak Puri, Chairman & MD, Moser Baer, Sanjeev Bikhchandani, Founder & CEO, Naukri.com, Vasant Subramanyan, President, TiE Kolkata, Anil Gupta, President, TiE UP, Dilip Kamdar, President, TiE Nagpur, Mahavir Pratap Sharma, President, TiE Rajasthan, Prabhat K Sinha, President, TiE Patna, Puneet Vatsayan, President, TiE Chandigarh, and an Organizing Committee of over 25 seasoned and successful charter members. This year we celebrate the 10th Anniversary of TiE in Delhi and we invite all of you to celebrate with us. Please do block your diaries. And plan on attending this exciting event. TiEcon this year will truly be exceptional. We look forward to seeing you at TiEcon Delhi 2009 on 18th & 19th September at Hotel Taj Palace, New Delhi. For more details, please log on to the TiEcon website www.tiecon-delhi.org or contact Nitin/Manish on 9818477719/9971766455. Write to us at info@tienewdelhi.org. Warm Regards,
Pramod Bhasin Chair, TiEcon Steering Committee
Saurabh Srivastava Chairman Emeritus, TiE Delhi
Mohit Goyal Chair, TiEcon Organizing Committee
Ashish Gupta Co Chair, TiEcon Organizing Committee
Pradeep Gupta President, TiE Delhi
TiE Delhi C-25 Second Floor, Sector 8, Noida Tel: 0120-4066500, Fax: 0120-4066523 www.tienewdelhi.org 69
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s it true that investors back services startups and not product companies? Fund managers tend to invest in service-oriented businesses because there is lower risk and particularly in today’s environment where capital is less, they become even more risk averse. The other thing is that those bold ideas addressing big market needs in a smart way—we are not seeing those. “I can do this product or this service 10% smarter or more efficiently than the other guy,” that doesn’t move any needle for us. We need to see changes where you talk of a magnitude of 50%. Or is it a totally new need. That kind of thinking we don’t see. Where we do see it, it is totally unrealistic. How important is the role of intermediaries in reaching investors? If you look at our portfolio, I think less than 5% of companies have come through intermediaries. Intermediaries, I think, provide a great service, but tend to look at deals that are $10 million plus. Now may be they are saying, “I’ll see $5 to 10 million also.” I think intermediaries certainly provide value to entrepreneurs. They make them ready for meeting investors. When an entrepreneur is approaching you, what should he write in the introductory e-mail? It should talk of the business proposition, as to why they think it is special and what stage they are today. And the
funding/strategy The second theme is that of semi-urban and rural areas. We say that our focus is on the needs of the rural, the semi-urban markets and the needs of the SMEs, as opposed to the needs of urban areas and needs of large corporates. That has been the theme on the healthcare side too. Our last fund, while it was called the Biotech Fund, we backed the diagnostic chain, whose model was to move primarily from one hub to all the semi-rural, semi-urban and rural areas. From our sector perspective, healthcare, particularly the Life Fund sectors, seem to be very appropriate. Healthcare related, even agri-processing etc. One of the things that has happened in the downturn, while the sectors didn’t change, we have certainly become less receptive to pre-revenue companies. There is no doubt about that. It makes sense to salvage existing value as opposed to trying to create a new one. That has certainly affected us in our thinking. We continue to be venture-style investors, but we would be extremely cautious on pre-revenue investments. In our seed-stage fund, however, by definition we have a small program that is called the Blue Sky. It is going to be a very cautious approach, but we do have some allocation left there. That is one change in our approach. Another thing has helped us in the market, why we can get not only pre-revenue, but pre-profit businesses is because valuations have dropped, cost of doing business has dropped, salaries have dropped, rents have dropped, cost of material has dropped. Promotors are more reluctant to
investor of the month third point is who they are and why they are better suited to address this proposition. What is your investment strategy? A common theme of a venture capital investor is that they invest in multiple rounds and not one large chunk of money, which is what most PE investors would do. On an average, we would invest two to three rounds of investment in a company. That is a trademark of ours. So that is why we are calling it a venture style of investment. We would invest $5 million in the first round, invest in multiple rounds going up to $10 to 15 million. In a seed-stage fund, we would start in a different manner. How has your investment strategy changed in the last six months? From a sectoral viewpoint, we pretty much seem to be on the same track as before. We have a few broad investment themes. These themes run across our funds. One of the primary themes has been that we look at the needs of the Indian market. So that theme continues to resonate even more now. 70
JULY 2009
take on too much investment now because their valuation is low. All this combined together, you can get huge amount of opportunities now. Earlier promoters were looking for $10 to 15 million checks, now they say they will take $5 million. It is healthy because they can prove the milestone and then look for more funds. We are quite happy to give them higher valuation in the next round. That helps both the promoters as well as us. That’s the beauty of venturestyle investing. What is the minimum ticket size of your investment? As far as our regular funds are concerned, it is sub-$5 million. It is an 80/20 rule. At the end of the day, as fund managers, we are also opportunistic. First round will be sub-$5 million and going forward we can put in $10 to 15 million. In the case of seed-stage fund, the first round would be sub-0.5 and we would invest up to 1 million or 1.5 million. Have you recapitalized your portfolio companies because of the slowdown? We haven’t yet done any recapitalization because of the slowdown. There are a couple of ways to look at this. There
funding/strategy
DARE.CO.IN
Sarath Naru
Managing Partner, Ventureast Ventureast has close to $300 million under management. Sarath Naru, founder of the company, has the lead role as the managing partner across its funds since its inception ten years ago. He has invested directly or has overseen investments in over 50 deals in growth to early stage and in sectors ranging from technology, biotech and healthcare, and consumer goods to infrastructure services. His academic qualifications include a B. Tech. from IIT Madras and an MBA (finance) from University of Chicago. JULY 2009 71
DARE.CO.IN are businesses that build intellectual property (IP) and there are businesses that are growth-oriented. We haven’t fortunately gone into a situation where there are growthoriented businesses that overextended or had expected certain revenues and income from the expansion and now its not coming. How many companies have you exited so far? We have exited only from our first fund. We are into what I would call a third generation of funds. The first generation is invested and exited, which had 18 companies. We have two significant returns still left. We made multiples on the fund side itself on the return already. The secondgeneration fund is fully invested. We don’t draw money in one shot as a fund manager. We have four to five years to draw the money. Because of the way we approach our business, we do a multiple round of investments and not one round of investment in the first investment round itself, which is what most PE managers would do. PE fund managers would draw down their entire money in the first two years. We would take a full four to five years. So a fund that started in 2004, the weighted average age of my portfolio is still only two years as of March 2009. So the second-generation fund is fully invested and we are yet to divest anything. Now we are investing from our third-generation fund — Ventureast Tenet Fund and the Proactive Fund. We are raising the third generation of the Life Fund. What is your exit strategy? Is it mostly IPO? We have multiple exit routes. Our first fund had two IPOs in the 18 companies. Roughly about 10 to 15% would end up going to IPO. In case of about a third of the companies, we would see a strategic investor buying. Another third of the companies would see another fund coming in. The rest get written off. What kind of returns do you look at? At least one-third of our investments have to go into companies that make double-digit multiples. How do you get to that stage? Let’s take, for example, what happens to venture capital in the US. Out of an average portfolio, the top 10% makes huge returns — 10x plus or even 20x, 30x, 40x. And they write off, I believe, about 50 to 60%. About 40% make decent returns. The 10% is what is known as the stars. In India we should be able to do at least 15 to 20%. This is because we are not going after such cutting-edge technologies. But at the same time, the market is huge. The point is that we expect to put at least one-third of our money in companies that give us double-digit multiples on investments. The time-frame could be anywhere from three to seven years. Typically, we found in the first fund, which had 18 companies, that the top three companies returned in excess of 10 multiples on their investments. Most of our investments also went into the top companies. In the better per72
JULY 2009
funding/strategy forming ones you tend to put in more money. You do that in stages. How closely are you are involved with your investee companies? By the definition of the style of investing, we don’t have a choice but to be invested closely. We do multiple rounds of investments, we monitor milestones, most of the times our returns are based on performance-based milestones or the valuation we give the company. With some companies we contact them every week. Then it varies. If you talk to companies where we have exited, you will find that there is a very cordial relationship between us still, irrespective of whether we had a great exit or a poor one. And I think that is the hallmark of the kind of relationship and value addition we brought to the game. How do you allay fears of entrepreneurs regarding the alleged interference of investors in day-to-day decision making? The important thing to realize is it where we can add value and where we cannot add value. At the end of the day, we are not putting money in the company because my team and I are some really smart guys who know the business better than the entrepreneur. We have co-created business with the entrepreneurs. There are give-and-takes, but there are a few of them only. Typically, where we can add value is from the point of view of how you can structure and position the company for better value from the investor's perspective (where next round of investors are going to come in), how do you spend money so that the RoI on every rupee that is spent is visible for the next round of investments. The second thing we have done is, we are very active in cash flow management. We help our investee companies with working capital. We also have been able to build facilities into our own fund where we can draw down money to give loans. We have given loans from our own fund management companies as opposed to a fund. The third thing we bring to the game is attract good talent. Unless we get involved it becomes difficult for small and medium-sized companies to attract great talent. They get to tap into our network where we are able to bring in senior management by virtue of our credentials. What are some of the challenges that you face as an investor? When it comes to IP-driven businesses, more so on the life sciences side, it gets very difficult to find co-investors in India. So we have had to always create these cross-border companies so that we can track US investors. Without a cross-border presence it becomes difficult to attract them. In case of innovative technologies, we haven’t found these ideas too convincing. They are only marginal improvements over existing technologies. Our style of investing is well suited to investing in those kind of companies, but we DAR E find few people who can take advantage of that.
DARE.CO.IN
strategy/legal
Basics of Registering a Company A step-by-step guide to help you understand how to register a company in India /Ambrish Jha
R
egistering a company in India can take anything from 15 days to as many as 35 days, though instances of getting the certificate of incorporation in a day to a week are also there. Before you start the process, you have to decide on what kind of company you plan to set upâ&#x20AC;&#x201D;a private limited company, a public limited company, a producer company or a branch of a foreign company in India. If you are planning to start a business and looking forward to registering your company, here is a step-by-step guide to help you in your pursuit.
Rules for a private limited company 1. There can be maximum of 50 shareholders. 2. Minimum paid-up capital required is Rs 100,000. 3. A minimum of two directors and two shareholders are required. 4. No limit on maximum number of directors. Articles of Association of a particular company can fix a maximum number for itself. 5. There can be no invitation to the public for subscription of shares or debentures. 6. There can be no acceptance of deposits from public. However, deposits can be accepted from members, directors and their relatives. 7. Transfer of shares is restricted as per the Articles of Association. 8. Compliance requirements are lower in number.
Rules for a public limited company 1. Minimum number of shareholders is seven. No restriction on maximum number of shareholders. 74
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2. Minimum paid up capital requirement is Rs 500,000. 3. Minimum number of directors is three. Company with paid-up capital and reserves of Rs 5 crore or more or turnover of Rs 50 crore or more should have a minimum of seven directors. 4. No limit on the maximum number of directors, the limit of which can be fixed by the Articles of Association of the company, though in order to have more than 12 directors permission of the central government is required. 5. No restriction on transfer of shares. 6. No restriction on acceptance of public deposits. 7. Invitation to the public for subscription of shares or debentures is allowed. 8. Compliance requirements are far higher.
Registering a private limited company Registration of all sorts of companies
in India is overseen by the Registrars of Companies (ROC), appointed under Section 609 of the Companies Act 1956. Every state has a regional office of the ROC to oversee the registration process. The ROC is vested with the power to register companies in India and also ensure they comply with all statutory requirements under the Act. The very first step in the process of registration begins with the prospective directors of the company obtaining a directorsâ&#x20AC;&#x2122; identification number (DIN) and digital signature certificates. Both these can be obtained online. The next step involves approval of the name of the company by the ROC. One has to submit a list of six names (cannot be less than four) in order of preference to the concerned ROC in Form 1A (of the General Rules and Forms) along with a fee of Rs 500. The names should not resemble the name of any other company already registered and also should not violate the provisions of Emblems and Names (Prevention
Private Company vs. Public Company Description
Private
Public
Shareholders
Minimum 2, maximum 50
Minimum 7, no limit on maximum
Director
Minimum 2
Minimum 3
Paid-up capital
Minimum Rs 100,000
Minimum Rs 500,000
Public deposits
Restriction on public deposits No restriction
Transfer of shares
Restricted as per Articles of Association
No restriction
Compliance requirements
Lesser in number
More in number
Commencement of business
Possible on obtaining certificate of incorporation
Possible only after getting commencement of business certificate within six months of getting certificate of incorporation
DARE.CO.IN
strategy/legal Registration process Procedure
Time to complete
Cost to complete (Rs.)
1
Obtain director identification number (DIN) online
1 day
100
2
Obtain digital signature certificate online
1-6 days
400-2,650
3
Reserve the company name with the Registrar of Companies (ROC) online
2-3 days
500
4
Memorandum and Articles of Association vetted and printed
Has to be done within six months of name approval
Nil
5
Stamp the company documents either at the superintendentâ&#x20AC;&#x2122;s or an authorized bank
1 day
Charges vary from state to state
6
Get the Memorandum and Articles signed by at least two subscribers
1 day
Nil
7
Get the certificate of incorporation
3-7 days
4,000 for a company with authorized capital of Rs 1 lakh (Fee keep on reducing successively in slabs after this)
8
Make a seal
1 day
350
9
Obtain a Permanent Account Number (PAN) from UTI or NSDL
15 days
66 for fee and 5 for application form (if not downloaded)
10
Obtain a tax account number (TAN) for income taxes deducted at source from the Assessing Office
15 days, simultaneously with procedure 9
11
Register for VAT with the sales tax officer
12 days simultaneously with procedure 10
5,000 (registration) + 100 (stamp duty)
12
Register with Employeesâ&#x20AC;&#x2122; Provident Fund Organization
2 days, simultaneous with procedure 11
Nil
13
Register with ESIC (medical insurance)
1 day, simultaneously with procedure 11
Nil
14
Filing for government approval before RBI/FIPB for foreigners and NRIs
15 days
Nil
of Improper Use) Act 1950. The ROC is supposed to respond to the application within six days, but it normally takes anywhere between two to three days. Nowadays this procedure is done online. The approved name is reflected on the Website of the Ministry of Company Affairs (MCA). Following the approval of the name of the company, one has to get the Memorandum of Association (MoA) and Articles of Association (AoA) drafted. The MoA, according to Wikipedia, often simply called the memorandum, is the document that governs the relationship between the company and the outside world. The MoA clearly lays down the name of the company, the type of company the objectives of the company, and the authorized capital. It also mentions any other business company might like to venture into some time in the future. The AoA of a
company, according to Wikipedia, are the regulations governing the relationships between the shareholders and directors of the company. Thus, the AoA typically cover issues of shares, voting rights, dividends, provision for transfer of shares, board meetings and similar matters pertaining to internal functioning of the company. AoAs can be amended by shareholders having the requisite majority. The Articles once altered in accordance with the Act become the Articles of Association of the company binding on all the members. Once the MoA and AoA are drafted, these are printed and sent to the ROC concerned for vetting and pointing out objections. After all objections, if any, are addressed, these are sent for stamping with the appropriate stamp duty, which varies from state to state. Request for stamping the documents should be accompanied by unsigned
55
copies of the MoA and AoA and the payment receipt. The company must ensure that copies submitted for stamping are unsigned and have nothing written on them by hand. Once these are signed, at least two subscribers of the company should sign them, providing in own handwriting the name and detailed activities of the company, along with their respective addresses, occupations and number of shares subscribed. These should be signed in presence of at least one witness. Finally, all the documents are sent to the ROC along with other details like particulars of appointment of the managing director, directors, manager and secretary. This is followed by paying a registration fee, which depends on the companyâ&#x20AC;&#x2122;s authorized capital. Once this procedure is completed, the company is registered as a private limited company under the Companies JULY 2009 75
DARE.CO.IN Act 1956. The ROC issues a certificate of incorporation to the company concerned, which can begin its operations right after getting this certificate. The whole process, thus, consumes anywhere between 15 to 20 days. There are a few more necessities that a company needs to fulfill, but it can do this simultaneously with starting operations. These necessities include getting a permanent account number (PAN), a company seal and registering for VAT obtaining tax identification number (TIN). The company also has to register for professional tax, with the Employees’ Provident Fund Organization and medical insurance. These procedures can be taken along with the procedure to register for obtaining TIN.
Registering a public limited company The procedure for registering a public limited company is more or less same, with a few additional steps needed to be taken. These are: 1. Consent of directors to act as such in Form No 29. 2. Arrange for payment of application and allotment money by directors on shares taken or agreed to be taken. 3. File the Statement in Lieu of Prospectus with the ROC in Scheduleiv of the Companies Act. 4. File a declaration in Form-20 duly signed by one of the directors stating that every director has paid to the company for shares taken or contracted to be taken for cash in same proportion as is payable on application. 5. Obtain the Certificate of Commencement of Business. Unlike a private limited company, a public company is not authorized to start business upon the grant of the Certificate of Incorporation. It has to obtain a Certificate of Commencement of Business separately. The ROC issues this once the company fulfills all the previous formalities and submits a statutory report to it after holding a statutory general body meeting (within six months of receiving the certificate of incorporation). Registering unlimited com76
JULY 2009
strategy/legal Documents Required for Registration Memorandum of Association of the proposed company, duly stamped Articles of Association of the proposed company, duly stamped Form no. 1 (Declaration of Compliance) as per the Companies General Rules & Forms 1956 Form no. 18 (notice of situation of registered office) as per the Companies General Rules Forms 1956 Form no. 29 (for consent to act as director of a company) as per the Companies General Rules Forms 1956 Form no.32 (particulars of directors, manager, or secretary) (in duplicate) as per the Companies General Rules Forms 1956 Copy of the name availability letter issued by the ROC earlier Power of Attorney on a stamp paper of the representative who appears for correction/ alteration of any document Other documents as ROC may require to be furnished panies is not so common in India as they are more or less like partnership firms where partners are responsible for all the actions of the companies. Their liabilities are not limited to just their shares like it is in case of limited companies.
Registering a foreign company in India Foreign investors willing to incorporate a company in India need to seek government approval for doing so. Some approvals come through the automatic route and some need special approvals. For sectors in which investment is allowed under the automatic route, an application is required to be submitted to the Reserve Bank of India (RBI). Investors are required to notify the concerned regional office of the RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of issue of shares to foreign investors. For sectors where prior approval is required, proposals for investment by foreign investors are routed through theForeign Investment Promotion Board (FIPB).
The rest of the procedure is the same as that of registering a public or a private company, depending on what type of entity the foreign investors plan to put in place. A foreign company can form a joint venture with an Indian partner or establish its own subsidiaries. A company once incorporated in India even with 100% foreign ownership is treated like any other Indian company. Practically, there can be lots of problems for a foreigner in establishing a company in India. “If you are not planning to set up your company in Delhi or Mumbai, problem is more acute. Make sure you have an efficient advisor who has prior experience of getting foreign companies registered in India,” says Christopher Rudd, a New Zealand resident who had to go through lots of procedural delays while establishing an export–import firm in India. He adds, “Probably RBI officials in regional offices are also not aware of all procedures as applications for foreign investment approvals at these centers are very few.” However, a foreign investing company is entitled to acquire shares of an Indian company without obtaining any prior permission of the FIPB subject to certain prescribed guidelines. But in case such an acquisition results in the acquisition of a company listed on the stock exchange, it would require approval from the Security Exchange Board of India (SEBI). A foreign company is also free to set up its operations in India through a liaison office, project office or branch office. Companies have to register themselves with the ROC within 30 days of setting up a place of business in India. These offices are set up in the country only with the approval of the RBI and are bound to carry on permitted activities only.
Producer company With the number of cooperative societies with huge business set up rising, the government opted for an amendment allowing a cooperative to turn into a ‘producer company’. This became possible with the Companies (Amendment) Act 2002, (1 of 2003),
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DARE.CO.IN which added Part IXA to the Companies Act. According to the new provision, persons engaged in primary produce can participate in the ownership of a producer company, which can better be understood as a hybrid between a private limited company and a cooperative society. Under the Act, ten or more individuals involved in agriculture, handloom, handicraft or in cottage and ancillary industries can together incorporate a producer company. On registration, the producer company shall function as if it is a private limited company. Members of the company will have limited liability similar to a private limited company. However, a producer company is exempted from maintaining a minimum paid-up capital of Rs 1 lakh. Provision of maximum 50 shareholders is also not applicable. Equity of the members cannot be publicly traded, though it can be transferred. Every producer company is to have at least five and not more than 15 directors. Usually, like a public limited company, the number of directors is kept at 12. The board also appoints a full-time chief executive, who can be entrusted with substantial powers of management as the board may determine. A producer company is also exempted from the obligation of keeping a full-time secretary. Only a company having an average annual turnover exceeding Rs 5 crore in three consecutive years need to have a full-time secretary. This is quite in contrast to both private and public limited companies, as they have to keep one if their paidup capital is above Rs 2 crore.
Section 25 company Companies Act 1956 provides for registration of a not-for-profit company under Section 25. Under this provision a company can be formed to promote commerce, art, science, religion, charity or any other useful object. Any profit or other income accruing of these companies have to be used for promoting the very objectives of the company only. The company formed under Section 25 is barred from paying any dividend. The company is also exempted 78
JULY 2009
strategy/legal Keywords in company name and minimum authorized capital Sl. Keywords No.
Required minimum authorized capital (Rs)
1
Corporation
5 crore
2
International, Globe, Universal, Continental, Inter-Continental, Asiatic, or Asia being the first word of the name
1 crore
3
If any of the words in option 2 above is used within the name (with or without brackets)
50 lakh
4
Hindustan, India, or Bharat, being the first word of the name
50 lakh
5
If any of the words of option 4 above is used within the name (with or without brackets)
5 lakh
6
Industries/Udyog
1 crore
7
Enterprises, Products, Business, or Manufacturing
10 lakh
SOURCE: Ministry of Corporate Affairs.
from having a minimum paid up or authorized capital. Other rules for registering a Section 25 company is same as for any other private company. However, a company formed under Section25 needs a minimum of three trustees, with no upper limit on the number. The board of management is in the form of a board of directors or managing committee. No stamp duty is required to get AoA or MoA stamped by the ROC.
Other business entities Other forms of business entities include sole proprietorship and partnership firms. Sole proprietorship is the most common and simple type of business entity, where legal formalities are few. There is no obligation to file financial information to the ROC, to keep records and get them audited. There is no legal distinction between the proprietor and the company, and hence liability is unlimited. Partnership is something where two or more proprietors come together to form a bigger pool of capital, skills and resources. Partnerships are governed by the Partnership Act 1932. The Act restricts the maximum number of partners to ten if the firm thus formed is a banking business. For businesses of other types, the maximum number of partners allowed are 20. Normally, partners get profits divided in the proportion of their investment, but things are governed according to the “partnership deed” or “agreement” formed at the be-
ginning. The agreement, which can be prepared by a lawyer, should contain all information about the partnership — the amount of initial capital contributed by each partner, profit or loss sharing ratio for each partner, salary or commission payable to the partners, if any, duration of business, if any, name and address of the partners and the firm, duties and powers of each partner, nature and place of business and any other term and conditions the partners want to include. Liability of partners in a partnership firm in also unlimited. Unlike companies, partnership firms have no separate legal existence from its owners. No partner can sell or transfer his/her share to any one else without the consent of other partners.
Limited Liability Partnership Act 2008 This is a new law that has been enacted recently to bridge the gap between the existing partnership laws and the provisions under the Companies Act 1956. The law limits the liability of a partner to his or her own stakes only in the company. No partner is liable on account of independent or unauthorized acts of other partners. At the same time, all partners are also held jointly liable for all acts of the firm, irrespective of the stake of a person in the company. The Act allows the partners to organize their internal management on the basis of a mutually-arrived agreement, as is the case in any DAR E partnership firm in India.
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case/INSEAD
ç INGRID SRINATH AT CRY
Srinath’s predecessor as CEO worked with her during a three month transition period positioning the change of leadership to the management and trustees. They visited every office, met every employee, and discussed what the change would mean. Once this phase was completed, Srinath spent two years emphasizing the importance of institution building, to bring everyone together. CRY’s employees had been meeting twice a year to discuss non-business issues, and this was integrated with the business planning process. “We communicated that numbers and values were interconnected and everybody does both. Both strategy and culture were designated as KRA’s (Key Result Areas): everyone from the jeep driver to the CEO was reviewed quar-
In April, 2006, CRY formally changed its name from Child Relief and You to Child Rights and you.
terly on how s/he furthered strategy and culture.” Collaboration was identified as a cultural theme and people negotiated collaboration objectives together at the levels of individual, team and function. Srinath recounts, “It hardwired collaboration into the system in a way you could measure and review. We created a series of cross-functional forums, and senior people from each function in each region formed a leadership group solving problems collectively and sharing information. We created a regional committee and
Photo: www.cry.org
We decided to become the voice of authority for children in India, to be a builder of models for what works on the ground, and to build a cross-sector movement for child rights.
Photo: www.cry.org
CONTD. FROM PG 27
80
JULY 2009
devolved grant making authority to the regional head collaborating with this group of people. They decide what projects to fund in region and what fund raising strategies to use. We moved decision-making down and made it cross-functional.” A cross-functional strategy group identified the three key areas CRY would focus on. Srinath summarizes, “We decided to become the voice of authority for children in India, to be a builder of models for what works on the ground, and to build a cross-sector movement for child rights.” She continues: We did a national tour where every employee shared the strategy template and debated strategy, answering all questions until all were on board with the strategic direction. There was a lot of anxiety about how donors would react to the rights and advocacy themes—people wondered whether corporations would give us money if we become more activist in
DARE.CO.IN
case/INSEAD
We did a national tour where every employee shared the strategy template and debated strategy, answering all questions until all were on board with the strategic direction. There was a lot of anxiety about how donors would react to the rights and advocacy themes—people wondered whether corporations would give us money if we become more activist in our orientation. So we did a couple of trial runs to see how people would react to new CRY our orientation. So we did a couple of trial runs to see how people would react to new CRY. For example, we did India’s first telethon, which reached 8 million people. We found that few people deserted us. In April, 2006, CRY formally changed its name from Child Relief and You to Child Rights and you. All 171 employees met for only the second time in CRY’s history. Says Srinath, “They knew
the name was changing we told them how it would pan out, then answered questions. Then we took to NGO’s, and finally to the external world. By that time, the external world was comfortable with it. In parallel, we opened branches abroad designed to get nonresident Indians (NRI’s) on board.” In 2008, Srinath retired as CEO of CRY to become Secretary General of CIVICUS: World Alliance for Citizen
Participation, an international alliance of civil society organizations. Management of CRY now resides with a leadership team comprising the five Regional and Strategic Heads, including Hukku. CRY continues to be one of India’s most visbile NGO’s, having sustained the passion of its founder across thirty years while managing the transition to a broader mandate that can be supported and extended over time. D A R E
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DARE.CO.IN
xxxxx /overview /xxxxxxx
Textile Industry Policies Across States: An Overview /Manu Gupta
T
he textile industry is one of the most important pillars of the Indian economy. It contributes about 4% to the GDP, and 17% to the countryâ&#x20AC;&#x2122;s export earnings. It provides direct employment to over 35 million people (Ministry of Textiles). The main subgroups within the textile sector are readymade garments and cotton textiles. At the central level, various kinds of incentives and concessions are given to the industry either directly or through various schemes. A number of schemes like the Technology Upgradation Fund Scheme (TUFS) and Scheme for Integrated Textiles Parks (SITP) have been implemented by the government to provide extra stimulus to the textile sector. At the same time, incentives are offered by states as well. These vary from state to state. The textile industry is scattered across the country. Some states and areas specialize in certain products of textile and some in others. The share in the sector is highly uneven among 82
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states. Some states like Maharashtra, Gujarat and Punjab have a relatively higher share, whereas states like Bihar and Madhya Pradesh do not have welldeveloped markets. In order to improve and increase their investment, states provide various incentives. Some states have specific policies for the textile sector as well. For example, Gujarat, Karnataka, Tamil Nadu, Punjab and Andhra Pradesh have specific state-level policies for their textile industry. Incentives under these policies and other factors like raw material supply and local markets make some states favorable for some sectors of textile and some for others. Karnataka has apt climate for investment in the textile industry. If well-developed urban markets are not required, then Karnataka provides substantial benefits as it gives large incentives for setting up industries or making investments in its backward areas. Karnataka under its Textile Policy of 2008-13 has planned to get investment
worth Rs 9000 crore. Forty percent of such investments are planned to be directed towards the garment industry. The Karnataka government will establish fashion hubs and assist in market development and brand building. Specific incentives are also provided, like entry tax reimbursement, stamp duty reimbursement, up to 25% waiver on land acquisition charges, subsidy on power and capacity building support. Special support on caseto-case basis will be provided to mega projects, that is, those investing more than Rs 100 crore and employing more than 500 people. Also, required human resource development and skill upgradation would be done to assist the industry. This will be done by upgrading and developing training and development centers.
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Gujaratâ&#x20AC;&#x2122;s textile policy provides incentives that are more favorable for large textile units. It provides 25% capital subsidy on purchase of machineries. Custom duty on textile machinery is only 5%. Also, various human resource development activities for the textile industry has been initiated by state government. Subsidy at 50% of R&D expenditure is provided to industries carrying out research. Interest subsidy at 3% is provided for capital equipment for five years. Assistance is also provided for infrastructural development, market promotion and environment protection. Gujarat is also the largest producer and exporter of cotton, the production of which has been increasing over time. So raw material is plentiful. It is the largest producer of denim. Surat is a strong base for synthetic fibers and provides a big market. For the wool industry, Punjab is the most suited. It has 40% share of the total wool industry. At the same
time, Rajasthan is the largest producer of wool, so wool procurement does not have substantial transportation costs, which processors or traders in other states might have. Under its Textile Policy, it has raised the capital ceiling limit to Rs 1 crore under TUFS. It sanctioned Rs 4,074 crore in 2006-07 under TUFS. Fifty to 100% electricity duty has been waived for textile units. No departmental charges are incurred on using canal water. Punjab also had the lowest closureâ&#x20AC;&#x201C;operating mill ratio, which signals towards a conducive climate. It has experienced high growth rate in cotton production over the years and so can be the potential destination for the cotton industry. Andhra Pradeshâ&#x20AC;&#x2122;s Textile and Apparel Promotion Policy 2005-10 provides for special incentives too. It is more suited for medium-sized entrepreneurs. Labor laws have been relaxed considerably and working hours been increased. Conversion fee for textiles units is waived in the state. Up
to 100% of reimbursement of stamp duty, transfer duty and registration fee is allowed. A special incentive of power tariff of up to Re 1 per unit is provided to textile units. Facilities like singlewindow clearance, captive power generation using natural gas and land for housing needs of workers are also being provided under its textile policy. Specific incentives are provided for mega projects. Factors other than concessions and incentives, like raw material availability, markets, transportation facilities and cost, affect investments and investment decisions. For example, the jute industry is mainly concentrated in West Bengal due to the raw material availability factor. States like Tamil Nadu and Maharashtra do have a large share in textiles, but do not give significant incentives to new investors. Thus, the textile industry is scattered all across the country even though certain areas and states are more conduDAR E cive for investments. JULY 2009 83
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/event
The Summer Startups Startups based on out-of-the-box ideas showcased their offering at the Headstart Summer Event
I
f you want to make some judicious stock picks, log on to Monevidya, an online stock picking community for Indian traders, investors and stock market enthusiasts. Or if you are a sports enthusiast and want to use your skills to trade stocks, you may log on to SPOXCHANGE , an entertainment portal. These were among the exciting startups that showcased their offerings at Headstart Summer 2009. The event was held on June 20 in Mumbai. Swan Suits — branded boutique service apartments, VeriCAR — used car inspection and verification company, Zopte — a one click website provider, Hellointern – an IIT
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Bombay student run internship portal and Informate – a unique mobile user behavior tracking system were others that were part of the event. SPOXCHANGE is “born out of the need for change in the online sports entertainment.” The firm states that “watching live scores and reading dumb commentary is a thing of past. No more will you be a selector at the start of a tournament and form a team of players with you being a mute spectator depending on their performance.” Informate was set up keeping in mind the way mobility has redefined the consumer world. “The mobile consumer
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/event
is always connected, always on the go. Hence, in order to stay ahead of the dynamic and rapidly transforming mobile market, organizations today require an equally dynamic and real-time understanding of the mobile user,” says the startup’s website. The guidance for entrepreneurs came from not less than well-known angel investors and venture capitalists such as Vishal Gondal (founder IndiaGames), Harsh Roongta (CEO
and Founder, Apnapaisa), Gopala Krishnan (Founder, Mobile2Win), Freeman Murray (Founder, Kendara Inc), Sasha Mirchandani (MD, Blue Run Ventures India), Alok Mittal (Canaan Partners), Krishna Mony (Sequel Ventures), Indus Khaitan (Partner, Morpheus Venture Partners), Pradeep Tagare (Director, Intel Captital), Gaurav Saraf (Director, Epiphany Ventures) and Pravin Gandhi, (Founder/Partner DAR E Hinditron, Seedfund, Infinity Ventures).
SMS: “DARE <your comments, questions or suggestions>” to 56677 Email: dare@cybermedia.co.in Website: www.dare.co.in Follow us at: http://twitter.com/daretostartup JULY 2009 85
DARE.CO.IN ç EVOLVING THE ENTREPRENEURIAL SPIRIT AT BHARTI ENTERPRISES CONTD. FROM PG 63
scale with that activity? Third, who will attract better human capital for that activity? When we went through this in depth, we had astonishing results. In IT the answer was simple: We could never have the same domain expertise as an IBM, Wipro, Infosys, etc. Top telecoms have finally agreed that we don’t have as much domain knowledge as they do. Economies of scale were also obvious. IBM makes their own high end servers and deals with same software vendors across the world. And it is common knowledge that talented professionals like to work for IT companies, not those that apply IT. So it became very clear that IT was a function better outsourced”. With its world-class services built on leading edge technologies, Airtel’s growth is attributed by Kapoor largely to its partnerships and collaborations. He says, “We encourage people with ideas and would like to work with them on a flexible basis either through revenue sharing or as investors”. Gupta, involved from the start in the growth of Bharti in the telecommunication services sector – both organically and by way of various acquisitions, speaks about what drove their thinking towards the creation of the largest tower company . “We didn’t do anything different with the towers”, avers Gupta. “When we looked at passive infrastructure, we realized domain
/INSEAD Every leader at Bharti wants to look in the mirror and say “I’m still an entrepreneur”— making entrepreneurship their profession, and spreading that sense of professionalism to others, is how the company keeps the feel of a venture while it grows knowledge could not be within telecom since by definition telecom is a marketing outfit, run by marketers. But there was no external agency that had this domain knowledge. So we decided to create a separate company that could acquire this knowledge. Economies of scale were clear since this would be their only job”. Explaining the win-win behind this shift from a CapEx to OpEx model, Gupta adds, “I am convinced the tower companies we have created is very entrepreneurial as we got three fierce competitors to join hands to cre-
ate great value. The business model is rare because in very few businesses, the company gains when the customer pays you less! Profits come from sharing infrastructure among many operators, so the customer gets to pay lesser than before, and yet the company makes a profit”. Bharti’s PE culture encourages solutions by turning a perceived problem on its head. Puri, only six weeks in his new role as the head of DTH speaks passionately about expanding the DTH market in the same way that mobile technology when introduced in India brought a rush of subscribers from rural India, which had been deprived of an access to fixed lines. “If we make a paradigm shift in the way we view our market, we would have three segments: TV cable market as mentioned earlier, cable-dark market (homes that have colour TVs but no wires/cables) which can be provided a satellite dish. And finally, there is a market also in that segment where there is no TV. This third category has a deprived consumer, not necessarily one who can’t afford it but has inadequate infrastructure. DTH is provided via satellite and so a person in the remotest village can become our customer if we offer them lower value packages or Top-Ups which we have just recently added to our offerings”. In Kapoor’s words, Bharti’s next big transformation will be yo move from its share of telecom wallet to share of overall wallet”. Puri expands, “For Bharti
We aim for flawless execution by being processoriented. And by institutionalizing our standard operating procedures we run our business professionally, not in an ad hoc manner. So this balance is the key to our success.
— Amrita Gangotra CIO and Governance, Airtel
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/INSEAD
Once the brief is given, operating teams are allowed to run with it until they are reviewed. When DTH started in March ’07, clear objectives were laid down. We wanted to be market leaders through product superiority. A SWAT analysis was done and we tried to benchmark ourselves against the best in the world. We tried to pick good practices from other players in the industry. We meticulously listened to the voice of customers to understand the underlying pain points. And these reviews gave us a clear idea of where we stand and where we skip.
— N. Arjun Executive Director, Bharti Airtel
Airtel, the big transformation would be that mobiles will be much more than just a voice instrument. Business can be done through mobiles. Music, social networking, M-commerce (pay your bills, transfer money), M-Entertainment etc. will make sure that the mobile phone will be a life partner! And then there is the convergence of the 3 screens--Mobile, laptop and TV-which is expected to happen in the coming months. Internet connectivity can be provided to a TV set either thru GSM or broadband technology. So an Airtel customer could watch TV on a laptop and browse the net or send SMS on TV. If you were playing a game of chess on TV and had to leave it half way, you can continue it on your
way to office on your mobile and the cheque-mate at your office-break on your laptop!” Perhaps the least astonishing fact about Bharti Airtel is that one of its core values is ‘Making it Happen’. It’s impossible to make things happen in a huge enterprise using the same logic and processes that worked when the company was young. But the professional entrepreneur culture that pervades Airtel and its sister companies provides the compass that keeps the group on track. Every leader at Bharti wants to look in the mirror and say “I’m still an entrepreneur”—making entrepreneurship their profession, and spreading that sense of professionalism to others, is how the com-
pany keeps the feel of a venture while it grows. Each of the company’s businesses aspires to become the leader in its sector within India. The ultimate destiny of these enterprises will then be to grow abroad. Just over the horizon lies the next challenge for Bharti—instilling in a global enterprise the ethos of the professional entrepreneur, conDAR E ceived and forged in India. With her rich media background, Irawati Gowariker has led strategic communications for the IT arm of HSBC and ANZ in India. Irawati now ‘dares’ to go beyond large multinationals to tell the story of some Indian entrepreneurs. Philip Anderson is INSEAD Alumni Fund Professor of Entrepreneurship, Director, Rudolf and Valeria Maag International Centre for Entrepreneurship and Director of INSEAD’s Centre in Abu Dhabi.
SMS: “DARE <your comments, questions or suggestions>” to 56677 Email: dare@cybermedia.co.in Website: www.dare.co.in Follow us at: http://twitter.com/daretostartup JULY 2009 87
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blogs/opinion
Serial Entrepreneurship
/Anurag Batra
W
ould you sell your first baby? If you are a serial entrepreneur, that’s what you have to do. To be a serial entrepreneur, you have to create at least one successful venture and then go on to create more. You have to be the kind of person who loves living on the edge, and revels in emotions like terror, joy, and even greed. In his biography Confessions of a Serial Entrepreneur, Stuart Skorman talks about how he created and sold businesses, and then created some more. A former 1960s hippie-turneddot-com mogul, Skorman launched the online video store Reel.com in 1997 and sold it three years later for US$ 100 million. He went on to create several other companies, earning and losing millions of dollars in the process. Not everyone is a Skorman or a maverick like him. The thing about being a serial entrepreneur is that your previous success or even failures have no bearing on making the next one a success. According to Skorman, a serial entrepreneur should not be afraid of making mistakes – so long as the focus is on learning from those mistakes and moving ahead. Also, a serial entrepreneur should not tie his/ her ego with one decision; instead,
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he/she should always be willing to do what is right for the business. A first-time, first-generation entrepreneur is in love with his/her first venture. It’s like a first love, or a first child, and the thrill and feeling of engaging with this form of entrepreneurship is high and of a different class. Breaking this relationship can be tough; moving on can be tougher. But the moot point is, can an entrepreneur easily sell his/her first venture? If you ask me, as of today (from my personal experience and where I am coming from), the answer is a ‘no’, and it is definitely a difficult mental and emotional challenge. To let go anything that you value is tough, but to let go something that you created from scratch, and which becomes your identity, your soul, and also your calling card, is tougher. However, smart entrepreneurs know that only if you monetize what you have created can you pursue your hobbies and passions. What if the enterprise of an entrepreneur is a result of his or her pursuing a passion or hobby? It is an intriguing question, but I believe that I have an idea about the answer. While
Smart entrepreneurs know that only if you monetize what you have created can you pursue your hobbies and passions
entrepreneurs are passionate about their products, especially those born out of pursuing their interests and hobbies, they have a greater need to satisfy the urge to create something new and bigger, and create new pinnacles of success. This could be in the form of a new venture, free from the baggage and errors of the past ones. I believe that a person can either be a worker or an entrepreneur. Let me explain that: a person is inherently either a worker, which means that he/she finds comfort in working for a steady pay check, and does not have the desire of going off the beaten track and trying something new. Alternatively, a person is an entrepreneur or a pioneer who will try to create something new. If the first attempt fails, he/she will try again and again, until he/she succeeds, or is no longer able to take such risks (meaning thereby that is risk-taking appetite is full). Success is addictive – and once an entrepreneur tastes success, there is no going back, and one will want to taste it again and again. A serial entrepreneur understands that it is not the venture that one is passionate about – it is success. A successful enterprise sold by an entrepreneur is success; starting new ventures to build new enterprises is success. As Carl Zetie\ once said “He’s a serial entrepreneur. Somebody stop him before he makes a killing again.” It is a road less traveled, and not for the faint of heart, but for those who are addicted to it, the returns are worth the risk. DAR E 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 founder and editor-in-chief of exchange4media group which includes exchange4media.com.
Special booklet from UNION BANK for SME'S In the next issue of DARE
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Institutes With an Entrepreneurial Streak At NEN’s co-founding institutes entrepreneurship development is top priority
M
itesh Thakker grew his small media solutions startup NetPrice Services to become one of the Top 100 global startups listed in Red Herring in 2008—a privilege that was earlier awarded to companies like Google and Youtube. Major (Retd.) Devashish Chakravarty and his three classmates founded Quetzal Online and Quetzal HR in 2007, a day after they completed their MBA from IIM-Ahmedabad. Last year, despite the recession, the two companies doubled its revenue. Little did Prof Shevare of IIT-Bombay imagine that he would start a company someday. Zeus Numerix, a company that sells software for analysis of engineering systems, was started by him and his nine students four years ago. Today it has 45 employees and over 40 projects in India and abroad. Wondering what ties these diverse stories together? Mitesh, Major Chakravarty and Prof Sherwade are entrepreneurs who were made (or are being made) in the hallowed portals of some of India’s top institutes—SP Jain Institute of Management and Research (SPJIMR), IIM-Ahmedabad and IIT-Bombay. Not surprisingly, these institutes are among the five pioneers that co-founded National Entrepreneurship Network (NEN) in 2003 – the other two being Birla Institute of Technology and Science, Pilani; Institute of BioInformatics and Applied Biotechnology, Bangalore. Today, these institutes have emerged powerhouses in entrepreneurship, running unique entrepreneurship programs for students in campus, mentoring future entrepreneurs and directly supporting early and growth stage entrepreneurs through incubation and courses.
The SPJIMR story A closer look at SPJIMR reveals the dynamic entrepreneurship environ90
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Aspiring entrepreneurs at SPJIMR ment that the institute has built over the last five years. SPJIMR introduced an innovative, hands-on elective called Lock, Stock and Trade (LST) in 2004, which connected its MBA students with real companies run by the students of its Family Managed Business (FMB) Program. The MBA and FMB students worked together to create a value proposition for the family-run companies and presentations were made in a public event. Mock shares of these companies were traded at the end of the event. Last year, LST connected with the entrepreneurship community, with students of MBA and FMB students working with startups to experience entrepreneurship firsthand. SPJIMR also introduced a fourmonth program, Start Your Business (SYB) course, tailored for aspiring en-
trepreneurs who were keen to convert their idea into a scalable business, but did not have the skills to do so. The demand for the course is so high that the batch strength has been increased from 12 in 2006 to 22 now, with two batches being run each year. SPJIMR’s incubation center, which supports SYB students to start up, has incubated three companies till now. Incidentally, Mitesh founded their companies while doing the SYB program. “SYB for me was the right thing, at the right time and at the right place. It has given me much needed direction to grow my idea into a well recognized business,” says Thakker. “Entrepreneurship is in the DNA of SPJIMR. So when NEN gave us the opportunity to set up a Centre for Entrepreneurship, we responded with conviction. Influencing practice and value
DARE.CO.IN based growth are the twin tenets driving SPJIMR’s efforts, and we realized that entrepreneurship development will be key to achieving these goals,” shares Dr Shrikant, Honorary Dean of SPJIMR, who himself enjoyed a rich entrepreneurial career in the steel industry and spearheaded SPJIMR’s rapid growth in the last two decades. As there were no ready references available in India at that time, SPJIMR sent some of its faculty members to study and learn about entrepreneurship education abroad. Dr M Suresh Rao, Chairperson and Professor at the Center for Entrepreneurship, SPJIMR, participated in the Price Babson’s Symposium for Entrepreneurship Education Program in USA and Harvard Participant Centered Learning Program in Harvard University. Along with Dr Rao, faculty members Prof Atish Chattopadhyay (who joined Dr Rao in the Harvard University Program), Prof Indu Niranjan, Prof Parimal Merchant and Rushi Anandan drew upon their newly gained knowledge to create entrepreneurship courses for colleges in India. Their knowledge was significant in shaping NEN’s initial faculty development program. Not only did SPJIMR contribute, but it was also the first to host the program in its campus.
Incubation centers: Breeding ground for entrepreneurship Different models have emerged in different institutes; IIM-Ahmedabad and IIT-Bombay reached out to young entrepreneurs through their incubation centers. Prof Rakesh Basant, Chairman of the Centre for Innovation, Incubation and Entrepreneurship (CITE) at IIM-Ahmedabad, was part of a collaborative research group of entrepreneurship when IIM-A joined NEN as co-founder. Together they strengthened the CIIE, especially its incubation facilities for new entrepreneurs. Today, the number of incubating companies has increased from three in 2003 to over 20 active incubatees today. For those like Major Chakravarty, who wanted to start their companies right
Bidders checking results at Lock, Stock and Trade at SPJIMR after graduation, with not much money in the pocket, it offered office space, an address and lots of mentorship. “At a time when our company was bootstrapped, the support received from CIIE made a huge difference,” shares Major Chakravarty. Similarly, the incubation centre at the Society for Innovation and Entrepreneurship (SINE) at IIT-Bombay made researchers like Prof Shevare into entrepreneurs. “It was because of SINE’s support that I could convert my research knowledge of fifteen years into a value proposition,’ he says.
How it all began The role of the five co-founders, at the time of establishing NEN was remarkable. The act itself was entrepreneurial, considering that the concept of entrepreneurship education had not taken hold in India at that time. The number of entrepreneurship education courses and level of participation, was close to zero. But these five institutes understood the potential of entrepreneurship education, and passionately took the lead to bring world-class entrepreneurship education to their campuses and beyond. The five institutes worked with Wadhwani Foundation to give
shape to NEN, a program that supports entrepreneurship development in multiple campuses across India. It was due to their collective efforts that entrepreneurship education has grown so phenomenally in the country. This year, NEN is planning to run 43 different faculty development courses with more than 1,000 faculty members participating in them. Thanks to them, people interested in teaching entrepreneurship do not have to go abroad to study it; rich material is now available in India. According to Laura Parkin, Executive Director, NEN, it was the ‘entrepreneurial streak’ in NEN’s co-founding institutes that has made them achieve so much in so short a time. “Their success is largely because they were willing to experiment, quick to rework on things that were not working and open to taking risks. From the way they conduct their courses to how they run their incubation centers—they are constantly looking at how to take things to the next level. The biggest strength of these institutes is that they are driven from DAR E inside,” she says. More articles on www.nenonline.org. Content provided by NEN JULY 2009 91
Organizations DARE.CO.IN
covered in this issue, in alphabetic order; first appearance
3M.............................................................................. 65
HP India ..................................................................... 48
Plaxo.......................................................................... 36
Air India ..................................................................... 24
ICICI Bank ................................................................. 67
PricewaterhouseCoopers (PwC) ............................... 29
AirAsia ....................................................................... 38
IL&FS......................................................................... 18
Procter & Gamble ...................................................... 26
Airtel .......................................................................... 21
India Semiconductor Association (ISA) ..................... 29
PVR Cinemas ............................................................ 67
Airtelâ&#x20AC;&#x2122;s DTH ............................................................... 61
IndiaGames ............................................................... 85
Quantum Power Systems .......................................... 66
Alberto Alessi ............................................................ 65
Indian Institute of Entrepreneurship........................... 23
Rajasthan State Road Transport
Alcatel ........................................................................ 58
Indian Institute of Management in Kolkota................. 24
Corporation (RSRTC) ................................................ 68
Alessi ......................................................................... 65
Indian Renewable Energy Development
RBI............................................................................. 76
Allied Digital ............................................................... 47
Agency Limited (IREDA) ............................................ 28
Reel.com ................................................................... 88
Amazon ..................................................................... 40
Indus Khaitan............................................................. 85
Registrars of Companies .......................................... 74
Apnapaisa.................................................................. 85
Infinity Ventures ......................................................... 85
Reliance..................................................................... 18
Archies Gifts and Greetings....................................... 26
INSEAD ..................................................................... 21
Reynolds.................................................................... 46
Asbury Park Press ..................................................... 41
Intel ............................................................................ 56
Salesforce.com .......................................................... 38
Bank of India.............................................................. 23
Intel Captital............................................................... 85
Security Exchange Board of India ............................. 76
Barista ....................................................................... 67
interbrand .................................................................. 38
Sequel Ventures ........................................................ 85
Bharti Airtel................................................................ 60
International Desalination Association ...................... 17
Bharti Enterprises...................................................... 21
Israel Desalination Enterprises Technologies ............ 18
Bharti group ............................................................... 60
iSuppli Corp ............................................................... 30
Blackberry.................................................................. 20
IVRCL ........................................................................ 18
Blue Run Ventures India ............................................ 85
JetBlue....................................................................... 38
Cafe Coffee Day ........................................................ 67
Karnataka State Road Transport Corporation ........... 68
Canaan Partners ....................................................... 85
Kendara Inc ............................................................... 85
Chambers of Commerce ........................................... 41
Kerala State Road Transport Corporation (KSRTC) .. 68
Child Relief and You (CRY) ........................................ 24
Kohinoor Foods ......................................................... 32
Cisco.......................................................................... 58
KPMG ........................................................................ 68
Citicorp ...................................................................... 26
Krishna Electronics .................................................... 66
Clinton Foundation .................................................... 30
Lanco ......................................................................... 29
Comcast .................................................................... 38
Langton Cherubino Group, New York ........................ 39
Costa Coffee.............................................................. 67
LinkedIn ..................................................................... 36
Crossword.................................................................. 67
Maharashtra State Road Transport
DARE ......................................................................... 21
Corporation (MSRTC)................................................ 68
Delhi Transport Corporation....................................... 67
Mahindra.................................................................... 18
Dell ............................................................................ 38
Mckinsey .................................................................... 65
Earth Policy Institute .................................................. 30
Microsoft .................................................................... 56
Tatas .......................................................................... 18
Emcore Photovoltaics ................................................ 30
Ministry of New and Renewable Energy .................... 28
Tech Mahindra ........................................................... 58
Epiphany Ventures..................................................... 85
Mobile2Win ................................................................ 85
Titan........................................................................... 26
Exim Bank ................................................................. 22
Morgan Stanley Research ......................................... 30
Trulia .......................................................................... 41
Export Credit Guarantee Corporation of India ........... 23
Morpheus Venture Partners ....................................... 85
Twitter ........................................................................ 36
Facebook ................................................................... 36
Moser Baer ................................................................ 29
Twitterfeed ................................................................. 38
Flickr .......................................................................... 38
Motorola..................................................................... 56
Uttar Pradesh State Road Transport Corporation...... 68
Ford ........................................................................... 38
MySpace.................................................................... 36
Ventureast ................................................................. 71
Foreign Investment Promotion Board ........................ 76
National Small Industries Corporation ....................... 23
Virginia Polytechnic Institute and State University..... 17
GE ............................................................................. 18
National Solar Mission ............................................... 28
Wall Street Journal .................................................... 61
G.M. Pens International ............................................. 46
Netmagic ................................................................... 47
Wave Cinemas .......................................................... 67
Garage Technology Ventures..................................... 38
Netmagic Solutions.................................................... 47
Wikipedia ................................................................... 40
Global Water Intelligence........................................... 18
NYTimes .................................................................... 41
Wipro Infotech ........................................................... 46
Google ....................................................................... 38
Orkut .......................................................................... 36
World Alliance for Citizen Participation ...................... 80
Gujarat State Road Transport Corporation (GSRTC) .... 68
Overseas Infrastructure Alliance ............................... 47
Yahoo!........................................................................ 40
Help a Reporter ......................................................... 39
Pantaloons ................................................................. 67
Youtube...................................................................... 40
Hero Honda ............................................................... 64
Peninsula Realty Group ............................................. 41
Zappos....................................................................... 38
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Shoppers Stop ........................................................... 67 Sify............................................................................. 46 SimpliFlying.com ....................................................... 38 SlideShare ................................................................. 40 Small Industries Development Bank of India ............ 23 Softland India............................................................. 66 Spectrolab ................................................................ 30 Squidoo ..................................................................... 40 Starbucks ................................................................... 38 State Financial Corporations ..................................... 23 State Industrial Development Corporations ............... 23 Sun Pharma .............................................................. 59 Support Direct ........................................................... 26 SWS&GB Saline Water Specialists ........................... 16 Taro Pharma ............................................................. 59 Tata ............................................................................ 58 Tata BP Solar............................................................. 29 Tata Communications ................................................ 50 Tata Nano .................................................................. 65
People DARE.CO.IN
covered in this issue, in alphabetic order; first appearance
Ajai Puri ...........................................................................................61 Akhil Gupta ......................................................................................61 Alberto Alessi ..................................................................................65 Alok Mittal ........................................................................................85 Amrita Gangotra ..............................................................................61 B.S. Nagesh .....................................................................................68 Bill Gates .........................................................................................26 Carl Zetie .........................................................................................88 Christopher Rudd ............................................................................76 David Langton .................................................................................39 Freeman Murray ..............................................................................85 Gaurav Saraf ...................................................................................85 Gopala Krishnan ..............................................................................85 Gurnam Arora ..................................................................................32 Guy Kawasaki..................................................................................38
DARE is not an acronym. It represents the daring spirit of the entrepreneur.
H. Subramaniam ..............................................................................17 Harsh Roongta ................................................................................85 Ila Hukku..........................................................................................25 Ingrid Srinath ...................................................................................24 Jugal Arora ......................................................................................32 K. Ganapathy ...................................................................................46 Ketan Desai .....................................................................................50 Krishna Mony...................................................................................85 Lalit Singhal .....................................................................................68 M.P. Ramaswamy ............................................................................16 Mahesh Murty..................................................................................36 Mansukhbhai Raghavbhai Prajapati ................................................44
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.
N. Arjun ............................................................................................61 Nitin Hiranandani .............................................................................48 P. Allimuttu .......................................................................................96 Pradeep Tagare ...............................................................................85
The entrepreneur dares to do things. (S)he dares to do things differently
Pravin Gandhi ..................................................................................85 Rippan Kapur...................................................................................24 Sanjay Kapoor .................................................................................60 Sarath Naru .....................................................................................71 Sasha Mirchandani ..........................................................................85 Satnam Arora ..................................................................................32 Sharad Sanghi .................................................................................47 Shashank Nigam .............................................................................38 Shel Horowitz ..................................................................................40 Simon Robin ....................................................................................50 Stuart Skorman ...............................................................................88 Sunil Bhatt .......................................................................................47 Sunil Mittal .......................................................................................60 Tamim Younos..................................................................................17 Teerath Ram Arora ..........................................................................32 Vishal Gondal ..................................................................................85 William C. Taylor ..............................................................................64
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/society
The
Mango Farmer E
ver seen a mango tree laden with the golden-colored Alphonso on one branch, the reddish-tinged Sindura on another, the green-colored Langra on the third and so on? If you think this is impossible, then P. Allimuttu, a 60-year-old farmer from the Nammakal district of Tamil Nadu, begs to differ. He has grafted 28 varieties of mangoes on a single tree! Allimuttu is no botanist by profession—in fact he is educated only up to the sixth grade. However, his love for agriculture and experimentation has resulted in a hybrid mango tree that blooms different varieties of mangoes throughout the year. Some of the varieties on his mango tree are Alphonso, Selam, Mangloora, Imam Pasand, Banganapalli, Malgoa, Bangalora, Neelum, Sindhura, Sujata, Nadichella, Sind, Ratna, Mallika and Neelisa. Grafting is used extensively in agriculture wherein tissues of two plants are fused together for varied purposes such as creation of hybrid varieties. “Grafting is done on trees that are generally low-
Some varieties in Alimuttu’s mango tree
P. Allimuttu, a Tamil Nadu farmer, grows 28 varieties of mangoes on a single tree! He now teaches others in his village to improve quality /Aswathi Muralidharan 96
JULY 2009
Alphonso
Selam
Mangloora
Imam Pasand
Banganapalli
Malgoa
Bangalora
Neelum
Sindhura
Sujata
Nadichella
Sind
Ratna
Mallika
Neelisa
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/society yielding or do not produce good quality fruits,” says Sriram, Allimuthu’s son. He adds, “A few years back, under a local government scheme, several mango trees were distributed among farmers. However, poor quality of produce haunted farmers for years.” But things are changing slowly now, with more and more farmers taking to grafting to yield better varieties.
How is grafting done? “A mango tree that grows from the seed generally flowers after four to five years. It keeps on giving fruits for 15 years, after which a gap is generally given for a few years before it starts to bear fruits again. But in case of a grafted tree, it starts bearing good quality fruits from the next year onwards,” explains Sriram. For grafting, Alimuttu took a mango tree that was four years old and cut it off leaving a four feet stub. This is also called the root stock. When the new branches started coming out from that stub, it was grafted with other varieties (also called scion) of mangoes. Sriram says, “A ‘V’ is carved out on the surface of the root stock, to which the scion cut in the shape of the inverted ‘V’ is fixed. The joint is tightly wrapped with a plastic. After a few days, both the plants join together to form a single hybrid plant.” So do the fruits of such hybrid plants have different characteristics? Sriram says that this is generally not the case. “This is because the role of mother plant [the root stock] is just to take nutrients from the soil and pass it on to the other parts of the plant. However, the fruits from a grafted plant are better in quality than the ones grown from seeds.” The grafted tree grows like any other mango tree and does not require any special care. Sriram says, “As every variety of mango has a different blooming season, our mango tree produces fruits throughout the
year.” It starts from the Sindura that blooms during January to the Neelam that blooms the last till September. Besides mango, Alimuttu has also experimented with other plants like amla (Indian gooseberry). He says, “My father has grafted seven varieties on to an amla tree.”
Pricing As the fruits of the grafted tree are better in quality, they fetch a higher price. Sriram says, “The fruits from the hybrid plant can fetch anywhere between Rs 50 and Rs 90 per kg in the market. Whereas, the local variety will fetch only Rs 8 to Rs 10 depending on the quality of the mangoes. Moreover, during the off season, the prices double.” Most of his produce is sold in other states. He is also trying to enter the export market. Alimuttu also helps other farmers in grafting trees. In a year they graft almost 7,000 to 9,000 trees. Sriram says, “We also give training for grafting, cutting, pruning etc. The University of Coimbatore recommends farmers, students to us who come to us for training. We teach them free of cost.” Till date, almost 200 farmers have benefited from Allimuthu’s training. Allimuthu also sells seedlings of mango, amla, sapota, guava, jackfruit and jamun for Rs 50. He says, “We have the 20- to 21-year-old mother plant ready for grafting. We take scions from it and graft it into the rootstocks. We sell the sapling for Rs 50.” When asked when will these saplings start bearing fruits, he says, ”The mango tree, for instance, will start blooming from next year. It will produce three to four varieties of fruits.” Sriram adds, “We supply farmers with hybrid seedlings under a scheme of the Nation Horticulture Mission. We sell seedlings almost worth Rs 2 lakh per year to farmers under the scheme.” DAR E
Besides imparting free grafting training to farmers, Allimuthu also sells hybrid seedlings of mango, amla, sapota, guava, jackfruit and jamun for Rs 50 JULY 2009 97
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