NOVEMBER 2010
How K Chittilappilly builtV-GUARD THE WAY I WORK
THE SULTAN OF SAMBHAR
G BALASUBRAMANIAM The Magazine for Growing Companies
*
GREY CAPS PAGE 64
THE
SULTANOF SAMBHAR AT 13, HE WASHED DISHES IN AN INDUSTRIAL CANTEEN
The MAGAZINE for GROWING COMPANIES
Forty years later, Jayaram Banan runs the Sagar Ratna chain of restaurants. Here’s how he put together his perfect business thali. PAGE 30
November 2010 | 150 | Volume 01 | Issue 09 A 9.9 Media Publication
PLUS
Why
GIRISH BATRA
seeks Wal-Mart’s scale for NetAmbit PAGE 38
What you can learn from
NIGHTMARE
BOSSES PAGE 62
November 2010
CONTENTS
The Hard Way In the early days, K Chittilappilly would carry his stabilisers on a two-wheeler to dealers in Kochi.
50 How I Did It Kochouseph Chittilappilly He built V-Guard into a household name in Kerala. Then, against all advice, he started two amusement parks that turned out to be a hit. No wonder K Chittilappilly thinks his entrepreneurial journey has been a total joyride. as told to jacob cherian
30 The Dosa King
Jayaram Banan introduced butter-chicken-loving Delhi to south Indian fare through his chain of Sagar Ratna and Swagath restaurants. Now, he’s eyeing the rest of the world to expand his 70-crore empire.
38 Seeking the Right Numbers
NetAmbit founder Girish Batra is dreaming big. He wants his distribution company to become the Wal-Mart of financial services products in India. by pooja kothari
by shreyasi singh
26 Case Study A Return to Hospitality
THIS PAGE PHOTOGRAPH: SANTHOSH
Employees were bailing out. And customers were constantly complaining. Could the heir apparent resurrect Golden Waters resort to its earlier glory? by pooja kothari
THIS EDITION OF INC. MAGAZINE is published under license from Mansueto Ventures LLC, New York, New York. Editorial items appearing on pages 11, 16-17, 23, 42-49, 57-58, 62-63 were all originally published in the United States edition of Inc. magazine and are the copyright property of Mansueto Ventures, LLC, which reserves all rights. Copyright © 2009 and 2010 Mansueto Ventures, LLC. The following are trademarks of Mansueto Ventures, LLC: Inc., Inc. 500.
42 The Explorer
His aerospace business has contracts worth billions. His electric-car company just went public. But Elon Musk’s real journey is just beginning. by max chafkin
54 Start-up Diaries
A website that lets you spy on people; and an update on how Mumbai firm Mirakle Couriers has fared over the past five months. by shreyasi singh
on the cover
Jayaram Banan, founder of Sagar Ratna Hotels. Photographed by Vijay Kutty in Delhi. Cover design by Binesh Sreedharan
NOVEMBER 2010
|
INC.
|
1
CONTENTS
November 2010
16
14 22 64
04 Mail 05 Editor’s Letter
06 Behind the Scenes Why gourmet shoppers love Le Marche supermarket.
09 Launch
Where will you look for your successor—inside or outside the company? A healthier alternative to cooking oil The Ticker Horse Race: Food guides on the web A Skimmer’s Guide to Islands of Profit in a Sea of Red Ink: Why 40% of your Business is Unprofitable and How to Fix It
12 Earn Your Spurs
By Jessie Paul Build your company’s market share before pursuing profits. That is sure to propel you into the top league.
14 Passions
Taekwondo spells fitness for Chris George.
16 Balancing Acts
By Meg Cadoux Hirshberg The dreaded relationship between the entrepreneur and his girl—the BlackBerry.
18 Innovation
A robotic tool that makes it easier to conduct biopsies.
21 The Goods
Speaker phones for your conference room Upgrades from the Mac stable A download on Gmail’s Priority Inbox feature The Wink e-reader tablet Renting a swanky ride Beyond the stars: Samsung Galaxy Things that Rohit Raj cannot live without
Guidebook
How to protect patents against infringement. Find the Guidebook following page 24
|
INC. | NOVEMBER 2010
RK Somany The founder of Hindustan Sanitaryware & Industries shares lessons learnt while running a global business.
STRATEGY 57 SALES & MARKETING Some CEOs swear by them. Others call them snake oil salesmen. Should you hire a sales consultant? 59 SALES & MARKETING Toys that are fun, and yet, educational. Mama’s Little Donut seeks inputs from four entrepreneurs on how to appeal to more parents. 60 ELEVATOR PITCH IndiaKhelo aspires to make children fitter through sports. Will investors be game for 1 crore? 62 MANAGING What you can learn from nightmare bosses
64 The Way I Work
He travels 180 days in nine months. He’s completely jobless for the rest three. And, he usually works through the weekend. Yet, Giri Balasubramaniam, the CEO of Grey Caps, loves what he does. as told to shreyasi singh
2
68 I Wish I Knew Then...
A great start
I was extremely impressed by your magazine, which I have seen for the first time in my life. I am so touched by the contents and presentation. I happened to see it in the reception of one of our customers, which prompted me to subscribe for the same. Please accept my congratulations. —RK VASAN, Chief operating officer, Spiral Tools.
Good survey The survey made for an interesting read. In future, I shall try and procure the copy from the bookstore as early as possible. gaurav sekhri
Vice president, IndiaVenture Advisors
A winner I think you have a winner on your hands. It is a truly classy product, with interesting content-led differentiators. Best! jai saxena
Associate director, Transaction Advisory Services Ernst & Young
MANAGING DIRECTOR: DR PRAMATH RAJ SINHA PRINTER & PUBLISHER: ANURADHA DAS MATHUR EDITORIAL MANAGING EDITOR: POOJA KOTHARI ASSISTANT FEATURES EDITOR: ROHINI BANERJEE CONSULTANT FEATURES EDITOR: PAYEL MUKHERJEE FEATURE WRITER: SUNAINA SEHGAL CO-ORDINATOR: AKHIL BERY DESIGN SR CREATIVE DIRECTOR: JAYAN K NARAYANAN ART DIRECTOR: BINESH SREEDHARAN ASSOCIATE ART DIRECTOR: ANIL VK MANAGER DESIGN: CHANDER SHEKHAR SR VISUALISERS: PC ANOOP, SANTOSH KUSHWAHA SR DESIGNERS: PRASANTH TR, ANIL T, SURESH KUMAR ANOOP VERMA & JOFFY JOSE DESIGNER: SRISTI MAURYA CHIEF PHOTOGRAPHER: SUBHOJIT PAUL PHOTOGRAPHER: JITEN GANDHI COMMUNITY TEAM PRODUCT MANAGER: MAHESH RAVI SENIOR MANAGER: SHREYA PILANI ASSOCIATE: DEEPIKA SHARMA
4
|
INC. | NOVEMBER 2010
CORRECTIONS Our annual ranking on Best-Performing Mid-sized Companies in India was done in partnership with the India Brand Equity Foundation. The omission of credit from the September issue is regretted.
SALES & MARKETING VICE PRESIDENT: NAVEEN CHAND SINGH NATIONAL MANAGER (ONLINE SALES): NITIN WALIA NATIONAL MANAGER (EVENTS AND SPECIAL PROJECTS): MAHANTESH GODI REGIONAL MANAGER (SOUTH) VINODH K (+ 91 97407 14817) REGIONAL MANAGER (NORTH) PRANAV SARAN (+ 91 93126 85289) REGIONAL MANAGER (WEST) SACHIN MHASHILKAR (+91 99203 48755) MANAGER (KOLKATA) JAYANTA BHATTACHARYA (+91 93318 29284) PRODUCTION & LOGISTICS SR GENERAL MANAGER (OPERATIONS) SHIVSHANKAR M HIREMATH PRODUCTION EXECUTIVE VILAS MHATRE LOGISTICS MP SINGH, MOHD. ANSARI, SHASHI SHEKHAR SINGH
In the same issue, we had incorrectly published that Ipca Laboratories is “engaged in import and marketing of pharmaceutical formulations and active pharma ingredients.” Ipca manufactures in India and markets to more than 110 countries worldwide. We regret the inadvertent error. –Editor
To submit a letter, or alert us to an error, write to us at inc.india@9dot9.in Letters may be edited for space and style. Submission constitutes permission to use.
OFFICE ADDRESS 9.9 MEDIAWORX PVT LTD A-262, DEFENCE COLONY, NEW DELHI–110 024 FOR ANY QUERIES, PLEASE CONTACT US AT HELP@9DOT9.IN PUBLISHED, PRINTED AND OWNED BY NINE DOT NINE MEDIAWORX PRIVATE LIMITED. PUBLISHED AND PRINTED ON THEIR BEHALF BY ANURADHA DAS MATHUR. PUBLISHED AT A-262, DEFENCE COLONY, NEW DELHI–110 024 EDITOR: ANURADHA DAS MATHUR PRINTED AT SILVER POINT PRESS PVT LTD, PLOT NO. D-107, TTC INDUSTRIAL AREA, SHIRVANE, NERUL, NAVI MUMBAI – 400706
EDITOR’S LETTER
Some Reflections Since my last note, I have turned a year older—and hopefully, wiser; though my boss might not entirely agree with me on that.
As is customary for that time of the year, I too reflected on the year gone by. I realised that I have definitely become more grateful in life—not least for the affection you, our dear readers, have sent our way in the past few weeks. Thanks to our friends at the Mint, who enthusiastically supported our annual rankings by publishing them on September 22 and September 24, we received calls from all over the country. Most simply wanted a copy of the magazine, but many also congratulated us on our work—and better still, some wanted to know why they didn’t figure in the list. That truly was worth all the effort spent on chasing companies for interviews since July.
The Winning Streak Jayaram Banan (L) and K Chittilappilly are both entrepreneurial successes from south India.
I guess that’s how Jayaram Banan must feel every time someone eats at one of his many Sagar Ratna restaurants—and appreciates the sumptuous product line-up. That really must make it worth his while to spend every waking moment at work, as he has done for the past three decades. In fact, he still visits his first outlet in Defence Colony every evening for the puja and spends his Sundays driving around the national capital region to visit all his 27 outlets here. Phew! Just thinking about it makes me feel exhausted, but then, such is the junoon of entrepreneurship. It’s purely a co-incidence, but this issue has become a tribute to entrepreneurial talent from south India. We’re featuring another stalwart born there—K Chittilappilly of V-Guard, whose stabilisers have been used in households for years now. He shares his story on Page 50. We’ve also got Giri Balasubramaniam of Grey Caps on Page 64. There’s an interesting interview with Robert Sutton that we’ve picked up from our US edition. It’s about ‘nightmare’ bosses. Some of those insights might prove useful as you build your organisations and hire more people. Hope you enjoy the issue.
Pooja Kothari pooja.kothari@9dot9.in
NOVEMBER 2010
|
INC.
|
5
BEHIND THE SCENES
Companies at the Heart of Everyday Life
Store Interiors One of Delhi’s premier supermarkets, Le Marche’s ambience takes customer delight to another level. Helped by Pooja Agarwal’s Architect (PAA), a Delhibased firm that has designed the Vasant Kunj and Saket branches of Le Marche, the retailer has used indirect lighting and hand-painted walls to create the surroundings for ‘indulgent shopping’. From what kind of racks to use, and where to place them inside the store, PAA has planned it all. Started in 2008, the firm employs three people, and undertakes interior designing projects for homes and hotels.
Software and Hardware It’s tough to keep track of what’s moving off the shelves. The store and inventory management software provided by Ascension Technocrats helps keep tab. Set-up in 2004, the firm provides software and hardware, such as printers and scanners. Owned by Quraish Bharmal, this Delhi-based company also caters to brands such as Modern Bazaar and Gitanjali, to name a few. The 1-crore firm employs nine people, and services clients from retail to salons.
6
|
INC. | NOVEMBER 2010
Le Marche Supermarket, Delhi
08.10.10 6:00 PM
Shopping Baskets Shoppers can carry their items of choice in red baskets to the check-out counter. Made by Nilkamal, these baskets can hold 10 kilograms of weight. Founded in 1991, Nilkamal is a known name in the plastic furniture industry, manufacturing everything from plastic crates to chairs. It has seven manufacturing plants across India, 45 regional offices and 33 warehouses. It has an annual turnover of more than 1,000 crore.
Signage and Branding Designing a good logo is one thing; using it effectively to build the brand is another. SK Uniprint has lent a helping hand to Le Marche. Established in 1952 by three entrepreneurs, Satish Kumar, Sunny Nayyar and Mohit Nayyar, this Delhi-based digital printing company has been working with Le Marche since its early days, when it was known as Sugar and Spice. It manages all kinds of signages, hoardings, posters and more. With 18 employees, this 7-crore firm boasts of Hero Honda and Amul among its clients.
PHOTOGRAPH BY SUBHOJIT PAUL
REPORTED BY SUNAINA SEHGAL
News, Ideas & Trends in Brief
LAUNCH
PHOTOS.COM
And Your Successor is... From inside the firm, or outside?
It’s a wonder the bookies haven’t started accepting bets on who will succeed Ratan Tata as chairman of the multi-billion-dollar Tata Group. As the 73-year-old approaches his retirement next year, the debate around his successor has been growing louder— with even the Parsi community, to which Tata belongs, throwing its views into the ring. So, who will it be—a Parsi, an Indian or an expatriate? International consulting firm, Deloitte, added its own take when it reported that hiring a successor from outside the organisation could be perceived as a failure to develop leaders. We decided to take the argument to the Inc. India 500 club—our newly-anointed kings of mid-sized businesses in the country. A snap poll showed a clear preference for developing a leader internally. (Given the small size of the sample, this is quoted here only for anecdotal purposes.) “The process of succession will be smoother and faster (with an internal candidate). Expertise, not available in the organisation, can always be hired,” argued
GM Singhvi of Century Enka in favour of an internal successor. “An insider would know issues—strategic or cultural—that need to be dealt with and, more importantly, how to go about realising (the goals) with complete support from the team,” added Ashok Atluri, managing director, Zen Technologies. However, as experience shows, there are as many successful examples of outsiders, who have made a success of their new assignments, as there are of them having done a less-than-competent job. For every Lou Gerstner who brought about a spectacular turnaround at IBM, there’s a Carly Fiorina whose stint at HP can best be viewed as controversial. Closer home, hiring an outsider and getting him to report to a family-member is a common strategy—and one that has worked well in most cases. The most obvious example of this has been the turnaround at the Aditya Birla Group. When the young Kumar Mangalam Birla took over the reins after his father’s death, he continued on the next page
EDIBLE OIL
Looking for some slick profits
Getting fit is tough business, especially considering the yummy fried food on offer everywhere. There’s hope now for those who cannot resist the sight of hot samosas, or dripping jalebis. Ludhiana-based Tara Health Foods has come up with a substitute to the “oh-sounhealthy” refined edible oil. Called Zaitoon Tara, this innovative blend of rice bran oil (70 per cent) and olive oil (30 per cent) can make your dinner healthier. It has negligible percentages of trans fatty acids, and is rich in vitamins E, A, D and K. It scores over most vegetable oils, since it is rich in antioxidants, usually found lacking in veggie oils. Launched in Punjab in 2008, Zaitoon is yet to make its presence felt outside the home state. At 160 per litre, it might seem tad pricey; however, given that olive oil is even costlier, this blend could be a rather palatable compromise. The oil adds 2 crore every month to Tara’s coffers. That’s more than 40 per cent of the top line. Known for its cholesterolreducing properties, rice bran oil has been touted as a healthier option for Indian cooking. India being one of the top producers of crude rice bran oil in the world, it’s a smart strategy to build an offering around an abundant ingredient. —Sunaina Sehgal
NOVEMBER 2010
|
INC.
|
9
LAUNCH
The Ticker
And Your Successor Is... continued
showed the door to the veterans who lorded over almost every group company. He recruited talented young professionals from companies such as Hindustan Unilever, who came from different cultures and brought different mind-sets. The rest, as they say, is history. Says PA Nair, CEO, Shree Digvijay Cement, which was at number 342 in the Inc. India 500 ranking: “While there is a structured approach to succession planning that gives internal candidates a chance to grow, Mr Birla is always on the lookout for talent from outside and inducts it quite regularly into the group.” There really isn’t a set formula for succession planning. “The intent of a business, its present position and its aims— all three influence such decisions of succession,” says Yashovardhan Saboo, chairman, Kamla Dials. Sourcing a successor from outside is usually led by compelling reasons. If a business wants to change course, or seeks a break from continuity, or wants to restructure its workings—or, in Saboo’s words, is looking for a clear break from the past—it should look outside for a leader. Another reason could be the need to fill a skill gap. When Delhi-based Dr Lal Path Labs acquired national ambitions, it was compelled to look outside. Run by Dr Arvind Lal, a pathologist whose family owned the company, it needed a manager to put an organisational structure in place and grow the business. “I was good at pathology, but not at doing the business of pathology,” says 10
|
INC. | NOVEMBER 2010
Dr Lal, pragmatically. The issue of succession acquires a different hue for smaller companies that have taken on external funding. To safeguard their investment, investors show a preference for internal candidates. “A founder-turned-CEO knows his firm better—in terms of its weaknesses and strengths. Also, he has more skin in the game, since his equity is higher,” explains Sandeep Singhal, partner, Sequoia Capital India, who has funded companies such as AppLabs, JustDial and Shaadi.com—each run by its founder. Sometimes, it’s also a matter of the industry one operates in. Companies in the information technology, media, and pharma sectors, or those primarily exporting goods and services, could hire an outsider with global exposure for better connectivity with clients. That may well be why Infosys is keeping its options open, having widened its search for NR Narayana Murthy’s successor to include expatriates. With a majority of its target audience overseas, an international face could give Infy a global makeover. There are no clear answers to this debate. What works for one company may not work for another. Even for a company, it’s about what works at that point in time. However, we do have a suggestion for the Tata Group— albeit from our poll. “Ratan Tata should convince Sunil Bharti Mittal to succeed him,” says Karan Chanana of Amira Foods (India). Now that’s an idea, Sir ji! —Sunaina Sehgal
The wonder that is India(n IT)! Ashok Soota-led MindTree (an Inc. India 500 honouree) will soon be launching its 3G smartphone based on Google’s Android platform in soota the US this year. Clearly, Bengaluru-based MindTree is all set to boldly go where no Indian IT services firm has gone before. Could this be a Nokia in the making?... Private equity exits crossed $3.5 billion in the first nine months of this (calendar) year—this could end up being the best year yet for the industry… ICICI Venture is once again laughing all the way to the bank, thanks to Rajiv Mittal and his management team who engineered a rare Indian management buyout (Indian subsidiary acquired the Austrian parent!) of water treatment another windfall company VA Tech Wabag that recently listed at a valuation of 1,610 crore. It makes Mittal worth about 320 crore, while his three partners are worth about 80 crore each, and ICICI Venture takes home another windfall RoI… Possibly inspired by the latter, PE major ChrysCapital is investing 50 crore in Ajit and Usha Kulkarni-led Pratibha Industries, an infrastructure solutions provider in the water management and urban infrastructure space… Kishore Biyani who backed up his belief in mythology by appointing Devdutt Patnaik as the chief belief officer of Future Group is rumoured to biyani be keeping his faith by acquiring a stake in Chennai-based Amar Chitra Katha Katha. It is owned by Shripal Morakhia (of Share Khan fame)and Samir Patil. How exciting that we live in times when an Indian entrepreneur can dream of creating both a WalMart and Walt Disney at the same time! —Inc. India
horse race
Foodies’ delight
Tired of trying to find the best restaurant for that special night out? Or,
of waiting in long queues just to get a glimpse of the menu? So were these foodies-cum-entrepreneurs, who have started online food and restaurant guides. Their websites offer a plethora of information: some solve the question of what to eat, others of how much to shell out, while still others even book a table for you. We have chosen four such sites. Here’s our eternal query, sure they are good; but can they make money? —Sunaina Sehgal
Foodiebay: Deepinder Goyal wasn’t willing to stand in queue just to read a menu. So, he found an easier way out—he scanned menus and uploaded them on his computer. In 2008, Goyal’s idea travelled from his office cubicle to the World Wide Web. His website, Foodiebay, reviews restaurants in five cities, allows viewers to search restaurants by locality, name, or cuisine; and even offers discount coupons. It tracks the number of times a restaurant has been viewed by a visitor and provides a breakup of visitors— thereby spicing up its offering to advertisers. It plans to make money through advertising—both premium listings and banner advertising. users: 200,000
HungryZone: Established in 2006, HungryZone claims to be India’s first online food guide. Its USP is that it allows users to order food online. Along with reading restaurants reviews and viewing menu cards, visitors can place an order for customised dishes. Thereafter, they receive an SMS with the status of their order and the delivery boy’s contact number. The website also offers information on the minimum size of an order for free delivery, time taken to deliver, and the modes of payment accepted by a restaurant. Its revenue model is based on advertisements, as well as delivery of food. The company offers consultancy services for aspiring restaurateurs. users: 85,000
KhaaoPiyo: Founded in 2009 by a team of three, KhaaoPiyo has a big appetite for success. The online food guide allows customers to write reviews, access maps and directions to a restaurant, view pictures and menus without prices; and get information on events. Operating from Indore, it has found a unique way to make money through a crossmarketing programme between 60 restaurants and 15 companies. Customers who spend money at any of the participating outlets get discount coupons for others in the programme. The website hopes to make money by offering services, such as virtual tours of restaurants, party packages and auto search. users: 3,000
IndiaFoodGuide: An early entrant into the world of online food guides, IndiaFoodGuide was started in 2007 by Rajesh Mittal. It’s the only website that offers detailed videos of restaurants, including kitchens and parking space. Users can book parties, reserve tables, write reviews and do much more. Only those who have eaten at a listed restaurant can write reviews—the website uses a system of bill codes to enable this. Its alternate sources of revenue are its security product eToken and advertising on its sister site vCricket. Future income streams depend on applications such as location APIs, online food ordering and shopping. users: 3,000
Spend five minutes on each of these websites and it becomes clear that Foodiebay is clearly ahead in the game—both in terms of number of users, and the quality of user experience. Given that restaurants allegedly pay more to advertise on Foodiebay than on any other website, it might also win the revenue game, though it’s early days yet. HungryZone seems to have kept its options open, with revenue coming from delivery service and consulting. KhaaoPiyo’s cross-marketing programme is good thinking, but too limited in its current avatar. And, IndiaFoodGuide hasn’t done much with its early-mover advantage.
the line:
A skimmer’s guide to the latest business books
The book: Islands of Profit in a Sea of Red Ink: Why 40% of Your Business Is Unprofitable, and How to Fix It, by Jonathan LS Byrnes; Portfolio; October 2010. The big idea: Most companies sit atop rich veins of untapped profits that can be made to pay off handsomely with a little imagination and reinvention. The backstory: Byrnes, a consultant and lecturer at MIT, is the Prophet of Profits. His column, The Bottom Line, which appeared in a Harvard Business School online newsletter, was for years a must-read. Don’t mail that tuition check: Islands delivers an executive-ed programme’s worth of insight. Most CEOs know that some kinds of revenue are more profitable than others. Byrnes explains in great detail how to turn that knowledge into action. If you read nothing else: The sample profit map in Chapter Six reveals neglected opportunities. Chapter 15, “Is Your Organization Reptile or Mammal?,” memorably compares Dell to a platypus. Pass-along value: Islands assigns new roles to everyone in the company. Salespeople should clamber over procurement officers to reach decision makers, operations folks should hang out with customers, and CFOs should ensure potential profits are realised. Rigour rating: 8 (1=Who Moved My Cheese?; 10=Good to Great). Byrnes is familiar with the inner workings of many companies, large and small, but it’s too bad he wasn’t able to name more of his case-study subjects. —Leigh Buchanan NOVEMBER 2010
|
INC.
|
11
EARN YOUR SPURS BY JESSIE PAUL
Is your firm a corporate dwarf? It certainly won’t become one if you pursue market share before profit. “profit versus market share” at a Nasscom event. The niggling question remained even after the event: should a business focus on building market share (regardless of profitability), or should it become profitable ASAP? Sure, the two are close cousins, but there’s always that question of timing. If you ask me—you should focus on market share first, and monetise that as soon as you have a credible share of the available market. Why, you ask. If a firm is creating a new category, then it has a small window of opportunity to lock out copycats. Given customer inertia, once market share has been acquired, it won’t be too difficult to maintain it. If a firm is taking on Goliath-type incumbents, then there are two options; either carve out a niche and be profitable and small—with the threat of acquisition, or worse, hanging over its head—or, do whatever it takes to break into the band of top three and be in a stronger position. (To know more about the advantages of being one of the top three players in an industry, you might want to read Dr Jagdish Sheth’s Rule of Three.) I discussed the issue with several firms at the conference. There was a consensus: market share-before-profit—in theory, at least. However, most of them felt they could not practice this theory because of a lack of capital. They didn’t have the luxury of building market share, and had to desperately strive to make profits. The easiest thing to pinch is longer-term investments, such as marketing and research and development. That set me thinking—is this why India is full of innovative companies that are profitable, but small? Is this why we don’t have blockbuster start-ups like Facebook, Twitter or Salesforce.com? Maybe the problem is broader. What about companies stuck at 100 crore?
12
|
INC. | NOVEMBER 2010
Or, even $100 million? Some of the firms I’ve spoken to are in this range of turnover, and fall in the small business category, given the industries they operate in. They say— surprisingly—that they can’t afford to invest even
PHOTOS.COM
A few days ago, I was moderating a panel discussion on
EARN YOUR SPURS
1 crore into marketing. The reasons may be varied, but it boils down to “if it ain’t broke, why fix it?” The sad truth is that many of these firms are on a declining trajectory—they are losing market share and will soon be overtaken by other, more nimble firms that will first take their clients, then their profits. I call these firms corporate dwarfs. They are small and profitable, but will never grow to their full potential. They will end up as niche players scrambling for business in the whitespaces left by the larger firms. Granted, lack of capital is a big issue— and it crops up at most forums attended by entrepreneurs. There’s no doubt that there is lesser access to capital in India than in countries like the US. And the country also doesn’t offer a “safety net” for entrepreneurs. But, it would possibly be more constructive than VC bashing—though less fun—to look at ways in which firms have organically funded their marketing efforts. Here are three ways to look at profits: 1. Zero Profits: Invest like crazy in market share, and postpone profits to the future (i.e. at least three to five years). A good Indian example of this is MakeMyTrip, which just completed its successful IPO in the US. It reported a net income of $1.3 million in the past quarter, reversing a loss from the year earlier, after increasing sales by 49 per cent. In the three previous fiscals, it lost a combined $32.5 million. About 48 per cent of the $1 billion in online travel reservations made in India in 2009 was booked through the company. (Source: http://news.businessweek.com) That’s an impressive share of the market. MakeMyTrip’s SG&A for the previous year stands at 20 per cent, despite losses—a clear evidence of its commitment to sales and marketing to fuel growth. This model is only possible with funding, and is therefore mostly relevant only to those in “hot” industries. 2. Somewhat profitable:
Reinvest in the business even at the risk of being less profitable than your peers. Sacrifice current profits for market share gains that will result in a stable business, if not a huge jump
in profits. This is suitable for new entrants in industries with entrenched players. An example of this is Cognizant. Founded in 1994, it is at least 10 years younger than the current top three players. When it entered the IT services space, competitors such as Wipro, Infosys, TCS and others were already entrenched. Therefore, Cognizant had no choice but to be different to smash in to the club of top three. It adopted a market-entry strategy that focused on a limited number of verticals, service lines and geographies—and, ensured its success.
An example of an Indian firm following this approach is Zoho. A part of 14-year-old AdventNet that has no venture funding, Zoho provides subscription-based access to business tools for CRM, project management, e-mail and so on, and is quite popular among the small- and medium-sized business community. It is the most glamorous— and the only B2C—offering from AdventNet’s stable. And it is funded by its other, low-margin B2B offerings. Zoho has successfully withstood the onslaught of Google Apps and Microsoft Office. It is now a profitable $50-million firm
The top three firms in most industries are disproportionately profitable. Cognizant also made a way-beyond-average investment in sales and marketing. It has always been less profitable than it could have been, consciously sacrificing around 4 per cent margin vis-a-vis the incumbent larger players, to reinvest in growth. Its SG&A of 22 per cent to 24 per cent is much higher than the industry norm, and shows its commitment to sales and marketing as a means of driving growth. The growth strategy has now paid off with Cognizant slated to become the thirdlargest IT services provider from India—up from No. 4. It may seem little, but, this jump into the top three is important in any industry since it gives players more control over the environment. 3. Slow-cooked profits:
This model is probably the most popular in India, as it does not require capital or marketing in the initial stages. In this model, the firm creates an initial revenue stream. Then, it uses that to fund a second line of business that requires up-front investment to gain market share, but can deliver a big profit payoff.
with 3 million users. Unlike Cognizant or MakeMyTrip, it has no ambitions—at least, stated—to be a category killer. But then, neither did Infosys, and it happened anyway. The Zoho story is not yet completely unfolded, but I’m looking forward to a happy ending. Stand tall
I love this quote attributed to Steve Ballmer, the chief executive of Microsoft: “We don’t have a monopoly, we have market share. There’s a difference.” The top three firms in most industries are disproportionately profitable. They also tend to be more resilient to changes in the environment. Every business should aspire to get there. I’d recommend you invest in your firm, so that it can grow to its full potential. India needs to become the land of giants again.
Jessie Paul is the CEO of Paul Writer, a firm that also hosts India’s largest community of B2B marketers at paulwriter.com. She is the author of No Money Marketing . NOVEMBER 2010
|
INC.
|
13
PASSIONS
Life Outside the Office
Chris George likes to kick butt: Taekwondo style! Though a movie buff, it wasn’t the moves that he saw in martial arts flicks that inspired him to take up the sport. The founder and CEO of EBS Worldwide, a 10-year-old marketing firm, just wanted to achieve top form. There was one problem—gyms and lifting weights did not excite him. “I wanted to be fit, but I didn’t want to become a beef-cake,” says the 34-year-old winner of the Bo Dan belt. His quest for the perfect form of exercise took him to the Taekwondo Federation of India four years ago. Now, he spends about one and a half hours five days a week in practice. In January next year, he hopes to earn his first Black Belt. He sure is kicked about that! Killer move Tack-gueg No. 6: A sixfoot kick in the air Dressed to fight The Dobok consists of wide pyjamas and a V-necked jacket. The belt denotes the rank or grade of the wearer
14
|
INC. | NOVEMBER 2010
A long road to a Black Belt George has won White, Yellow, Purple, Orange, Green, Senior Green, Blue, Senior Blue, Brown, Senior Brown, Red, Senior Red and Bo Dan belts
Essentials Head guard Chest guard Groin guard Fore arm and shin pads Mouth guard
Chris George
Taekwondo
“It is about mental and physical fitness; about calming the mind and strengthening the core.” PHOTOGRAPH BY JITEN GANDHI
REPORTED BY SUNAINA SEHGAL
BALANCING ACTS BY MEG CADOUX HIRSHBERG
Living with a BlackBerry Addict
How to deal with the third wheel in your relationship—the BlackBerry that never leaves the entrepreneur-husband’s side.
Her name is Bond Girl.
My husband, Gary, refers to her simply as his BlackBerry, but I know better. Bond Girl has become the awkward third wheel in our relationship. She sleeps on Gary’s bedside table and wakes us up each morning. When he reaches to silence her, he can’t resist scrolling down her sleek silver body to check for last night’s e-mails. Bond Girl joins us when we dine and sits on the sidelines at our kids’ soccer games, purring randomly. She knows all Gary’s secrets and contains all his memories. She alone knows where he’ll be today, tomorrow, and ever after. My normally calm husband turned quietly frantic when he misplaced Bond Girl a few months ago. She turned up after a 15-minute search, and I joked that it would be interesting to see just how long he could live without her. Not missing a beat, Gary replied, “I think you just did.” 16
|
INC. | NOVEMBER 2010
Over the 25 years that Gary has been in business, we’ve marvelled at each new technology. I remember my amazement at our first PC in 1985 and first fax machine in 1987. Then cell phones came along. But none of those affected the texture of our relationship the way Bond Girl has. Though the barrier between work and the rest of life has been eroding steadily, it’s taken the BlackBerry to shatter it altogether. Her incessant buzzing—Check me! Check me! It just might be important!—slices into our family cocoon. The way some mourn the loss of wilderness, I grieve the loss of quiet space, free of electronic intrusion and interruption. Bond Girl gives ILLUSTRATION BY SURESH KUMAR
BALANCING ACTS
Gary constant access to the world. But more disturbingly, she gives the world constant access to him. Entrepreneurial businesses are colicky babies that never stop screaming for their owners’ time, energy, and imagination. Their families are in a constant battle for attention. For the entrepreneur, maintaining workfamily balance involves managing guilt on both sides. Enter the BlackBerry. It beguiles both the entrepreneur and the family by creating the alluring illusion of freedom. The entrepreneur can be surrounded by family, untethered from the office—but always accessible to work. Nowhere is this truer than on our vacations, which Gary believes Bond Girl makes guilt free. But I would argue that his laptop freed him more effectively than Bond Girl has. This is not hair splitting. Before the BlackBerry, Gary would work on his computer each morning to lighten his load before we left to play for the day. Because the laptop is comparatively bulky and doesn’t mix well with sand, sea, and Piña Coladas, he would leave it behind in the afternoon. But Bond Girl goes everywhere with us: She’s in the restaurant and at the tennis court, on the boat and at the beach. On the surface, these family times “count” as leisure time spent together. But in my mind, Gary’s not truly in nature if his BlackBerry hitches a ride up the mountain on his hip. If his BlackBerry’s at the dinner table with us, then he’s not. Most of us lack strategies for dealing with the seductive power of these new technologies. Bond Girl is an irresistible superwoman: She brings e-mail and internet; she is an alarm clock, phone, camera, and calendar keeper. The problem with this concentration of power is that she has become too big to fire. In the old days, if Gary needed to wait for a call while we were on the beach, he’d bring his cell phone. But because Bond Girl is also his phone, while he waits for the call, it becomes all but irresistible for him to check his e-mail, too. Though Bond Girl distracts Gary, he’d also be distracted without her—wondering when and whether to check in with coworkers and business associates. She does help Gary dispense with important items
quickly and ignore the rest. Recently, he took our daughter Danielle college shopping and afterwards told me that without his BlackBerry, he’d have spent hours on the phone with work during that precious daddydaughter time. Because of Bond Girl, interruptions were minimal. What confounds me is that the device that allowed Gary to leave work for this trip is the same one that ensures he’s always working. I decided Gary and I needed some advice concerning Bond Girl. So I called an expert on the relationship between humans and machines: Sherry Turkle, an author and a professor at the Massachusetts Institute of Technology. Turkle agreed that BlackBerrys, and similar devices, exact a psychic toll: Most of us now feel anxious when we disconnect from the world. She said we’re losing the knack for solitude and the desire to “be here now”. If we stay in the present, doing just one thing at a time, we feel like we’re falling behind.
life, the attention they deserve, and your work will benefit also. Friedman asks his students to try a series of experiments related to this concept. Many students, not surprisingly, start by placing some controls on their BlackBerrys. I spoke with one of Friedman’s former students, Sam Allen, founder and CEO of ScanCafe, an online photo scanning company. Sam told me that his experiment was to turn off his BlackBerry and ignore work for two hours when he got home to his wife and young son. “At first, I thought this would stress me out even more,” he said. “But it helped me focus, and I was rejuvenated from the two-hour break. And, my wife was happier.” Sam has maintained this discipline while building the company to 625 employees. Gary and I have decided to try some experiments of our own. He doesn’t bring Bond Girl to soccer games anymore. She has been banished from the dinner table as well.
Bond Girl gives Gary constant access to the world. But more disturbingly, she gives the world constant access to him. Turkle doesn’t pass judgment on our new technology. “It’s not good or bad—it’s here,” she told me. “That ship has sailed. But it does pose a question: What are our human values? Is it important to give full attention to who so ever you’re with, or to whatever you’re doing, no matter how seductive the technology? I’m not saying to stop using these devices. But, we need to be more reflective about their use.” Recently, I sat in on an executive MBA class at the Wharton School, taught by Stewart Friedman. Friedman’s course was about the relationship between “work/life integration” and leadership. He preaches about the importance of being fully present no matter what you are doing—example, when you’re with your kids, be with your kids. Give your family, your community, and your personal
Now that I’ve reclaimed the kitchen, I’m optimistic about the bedroom. As for my experiment, I’m trying to mentally recast Bond Girl as Miss Moneypenny—an indispensable sidekick, but not one to make me jealous. In case that fails, I’ve started searching the globe for vacation spots with sun, sand, and Piña Coladas— where satellites don’t reach.
Meg Cadoux Hirshberg is married to Gary Hirshberg, president and CEO of Stonyfield Yogurt. She writes a regular column about the impact of entrepreneurial businesses on families. She can be reached at mhirshberg@inc.com NOVEMBER 2010
|
INC.
|
17
18
|
INC. | NOVEMBER 2010
The trajectory Since its launch in June 2009, Perfint has sold 50 units of PIGA to leading hospitals, such as AIIMS and Lilavati. It even exported a few units of the UN certified-product to Singapore, Europe and the Middle East.
Dock cable
In-built computer
Its components Automated arm
Comes with a oneyear warranty
Goes up to 18 lakh, with training for doctors and staff
The fine print Costs 16 lakh, without training
Perfint Healthcare has come up with an innovation that makes it a lot easier for clinicians to conduct CT-scan guided minimallyinvasive procedures. Its robotic assistance solution, PIGA—short for Precise Intelligent Guide Arm—helps plan and execute procedures, such as biopsies on difficult-to-reach tumours, delivery of pain management drugs and drainage of fluid collections. It converts an image into a robotic arm movement—allowing the doctor to place a needle on the target with greater ease and accuracy than if he were to do this freehand. Building on the success of its first product, Perfint is now working on similar assistance solutions in the therapy space.
A supporting arm
INNOVATION Companies on the Cutting Edge
—S Nandakumar, CEO, Perfint Healthcare
“We want to achieve global leadership in interventional oncology.”
PIGA
PHOTOGRAPH BY NITISH SHARMA
Perfint Healthcare
REPORTED BY SUNAINA SEHGAL
Your Business Toolbox
THE GOODS CALLING UP
Another Take
Can you hear me now? The best buys in the industry Today, speaker phones combine great sound with even better functionality. Some have in-
built recorders, while others can slow down a fast talker. In case you need one for your conference room, here are the best buys in the market. —Sunaina Sehgal
For those who are still bootstrapping their way to business success, there’s an alternative to conference rooms, and expensive speaker phones, to conduct conference calls. Thanks to the internet, it is possible to register on websites and set up conference calls across the country. Here are two options that will lead you to another fruitful conversation! SABSEBOLO
POLYCOM
SOUNDSTATION IP 7000
PANASONIC
SOUNDSTATION IP 6000
Ideal for large conference rooms, its acoustic technology reduces slightest of echoes and disturbances. Users can add handsets to enable multiple interfaces. The microphones adjust to the direction of the person talking. It can be linked with mobile phones and computers. It supports video integration and Bluetooth.
Though it shares some features of the IP 7000, such as high-definition voice technology, it is not as advanced. It cannot be connected to a mobile phone or computer, nor can it support multi-unit connectivity. It resists interludes from mobile phones or wireless devices. This phone is ideal for a small to medium-sized conference room.
price:
price:
53,300
warranty:
One Year
35,600
warranty:
One Year
KX-NT 700
This sleek model supports three-way internet conferencing. Its high-definition voice quality software delivers clear sound. One can even slow down words. It has a SD card that can record all conversations and play them on a computer. The 2GB card can record up to 67 hours of conference time. It also reduce noises made by projector fans, ceiling music or nearby traffic. price: 35,500 warranty: One Year
KX-TS730BXS
Its microphone system facilitates sharp hearing. It is backed by various functions, such as pause, record and playback. It can record calls as long as two hours. It supports duplex conferencing. The voice at the other end of the line is absolutely clear, thanks to its Hi-Fi noise reduction feature. The alpha numeric LCD displays the caller’s name and number. price:
22,000
warranty:
One Year
A pioneer of free telephone conferencing in India, SabseBolo allows up to 10 participants on a call. Once registered, users can get a conference dialin number, ID and a pin number. This information can then be distributed to the participants. The service provides dial-in numbers for six cities; and, users can choose one to get into the call. It also allows users to send reminders through e-mail. Other features, such as call recording, attract charges. EAGLE CONFERENCING
Eagle Conferencing follows a similar registration process, but offers a more limited experience. Only three people at a time can participate in a call. It provides dial-in numbers for Mumbai and Bengaluru only. Packages to dial in and out of India can be availed. Extra features, such as call recording and play back, are available on pay-to-access basis. —SS NOVEMBER 2010
|
INC.
|
21
THE GOODS
Products + Services
Updates from the Apple stable A much better notebook and server
While the world is still excited about the iPad, with people displaying their new acquisi acquisi-
A download on Google’s latest offering We’ve all seen a new tab on our Gmail accounts. It’s called the Priority Inbox. It’s a boon for those who receive a large volume of incoming mail. The new feature promises to segregate e-mails into important and notso-important, so that you don’t have to waste unnecessary time. The Priority Inbox works off algorithms that keep track of user choices and decipher a pattern in terms of importance in all incoming e-mail. The important mails are tagged and occupy the uppermost segment of the mailbox. Mail gets segregated into Important and Unread, Starred and Everything Else. One can customise sections as well. Google employees report that it saved about 13 per cent of their time. To function efficiently, Priority Inbox has to learn your preferences—and does so by initially asking you to mark your mail either as important or not important. This is carried out by the two buttons. The Priority Inbox has a certain degree of flexibility. After enabling the Priority Inbox, an additional tab appears in the Google settings panel. The user is given the option to: select Priority Mailbox as the default mailbox, disable it completely, or include all mails under a single label.
22
|
INC. | NOVEMBER 2010
MAC MINI SERVER
MACBOOK PRO 15-INCH
Apple had introduced the server in a Mac mini form factor in 2009. This iteration is an upgrade from the original and has quite a few additions. It’s slimmer and wider than the original. It also has an in-built power unit within the aluminium cast—doing away with the power brick that was in the original version. Although the optical drive is missing in this edition, the two 500GB hard drives make up for that. With no keyboard or mouse, it is ideal for small offices that want a dedicated web server, e-mail server, or file sharing among many users. It scores over the Windows Server in that it allows multiple users to access services without any extra licensing fee. It’s a decent buy for small businesses. specifications: processor: Intel Core 2 Duo 2.66 GHz ram: 4 GB DDR3 RAM hard disk: 2 x 500GB price: 64,900
Excellence aside, dishing out more than a lakh of rupees for a notebook is no joke. However, the MacBook Pro 15-inch is not just any notebook. It offers the right mix of portability, performance and size. It uses Intel’s latest Core i series of laptop processors and has two graphics processors. But Apple’s intelligent feature allows the system to choose between the two. Another new feature is the inertial scrolling. What hasn’t changed is the aluminium casing and its sharp edges. With a beast of a configuration it will serve for anything, but hardcore gaming. That it can survive being used as a weapon is a fringe benefit! specifications: processor: Intel Core i5 2.4 GHz ram: 4GB DDR3 hard disk: 320 GB operating system: Mac OS X 10.6.3 screen: 15.4 inches price: 1,09,900
test review
test review
overall:
7/10 features: 7.0 performance: 6.5 build quality: 8.0 value for money: 7.5
overall: 7/10 features: 7.0 performance:
build quality: 8.0 value for money:
5.5
7.5
WINK E-READER
A second from India Made by Bengaluru-based EC Media International, the Wink e-reader tablet is the second such tablet from India. Starting at 11,490 for the Wi-Fi only device (Wink XTS), the e-reader is likely to get a running start with more than 200,000 titles from publishing houses, such as Harper Collins, Penguin, Roli and so on. The Wink 3G costs 14,990 and supports up to 15 Indian languages, has a 6-inch 16-level grayscale e-ink display at 800x600 resolution, 400MHz ARM9 processor, 2 GB onboard memory (expandable up to 16 GB), WiFi, USB 2.0, audio/video playback support, and a 10-hour battery life (10,000 pages and 10 hours music).
Powered by:
E-MAIL MANAGEMENT
tions rather proudly, Apple has introduced some upgrades to its existing products that are equally exciting. The MacBook Pro 15-inch notebook and the Mac Mini Server, though both using earlier design specs, have quite a few additions—and for the better, too. Here is our take on the two just in case you decide to splurge this holiday season.
Work + Play
Rent a car, but not a driver Fancy set of wheels to drive yourself
THE GOODS
FIRST PERSON
Self-driving a rented car is not popular in India. However, in case you decide to get behind the steering wheel on your next trip, or decide to drive into the mountains for a long break, here are a few car rental services that might be of help.—SS
How TimeSvr service helps me with the small stuff
MATT HEINZ PRINCIPAL HEINZ MARKETING WASHINGTON
AVIS INDIA
how it works: Rent a car on a
daily, weekly, or monthly basis; or even for six-toseven months. Just show your driving licence and credit card before driving off with your choice of wheels. fleet: 1,200 cars in 18 cities. cost: Hiring a Wagon R will cost 3,000 per day. Premium options, such as Mercedes, may be rented for about 30,000 per day. services: Cars are equipped with a mini fridge, road maps, GPS service (for an additional 300), etc. The minimum age to hire a car is 18 years. One can use the services of a driver during peak hours and personally drive back during leisure hours.
EUROPCAR INDIA
how it works: The car has to be
collected from a company depot, and returned to the same location. Rent is charged on time- and kilometre-basis. There’s no extra charge for overnight rentals. fleet: 600 cars in 8 cities. cost: Renting an Indica for a day will cost 3,700. A Toyota Corolla, a top-end option, costs about 5,000. If the usage exceeds 150 kilometres, charges at the rate of 10 to 25 per km kick in, depending on the city and the make. services: The cars have a firstaid box, laptop charger, mobile charger etc. The minimum age to sign a self-drive rental agreement is 25 years.
ORIX INDIA
how it works: The self-drive
facility is available only through corporate tie-ups. A firm has to pay a security of 50,000 to become a member. Its employees can then rent cars by showing their company ID, driving licence and a credit card. The car has to be rented for a month. fleet: 2,500 cars in 7 cities. cost: The minimum charge for renting a car is 700 for upto 40 kilometres. Higher-end models, such as Ford Fiesta, could cost up to 1,500. After that, charges are levied at 12 per kilometre. services: MIS helps track a car, especially during breakdowns. It’s available to those above 18 years of age.
SAMSUNG GALAXY S
PHOTOGRAPHS COURTESY COMPANY
For some sweet talking The first thing that you notice is the beautiful 4-inch screen. The second is how thin and light this phone is. It comes with a powerful graphic processor, but doesn’t offer a dedicated keyboard. The 1 GHz processor, RAM and the screen, all make for a fast responsive unit. The phone is powered by Google’s Android 2.1 operating system. However, it makes a few odd missteps—for example, it doesn’t let you assign specific ringtones to your Google Contacts; it also has trouble integrating contact information from Google, Facebook, and Twitter. Its software integration seems a bit unfinished. If you are fine with that, it will please you for the most part.
About a year ago, I realised I needed help with administrative tasks. Instead of hiring a full-time assistant or pulling any of my five employees away from billable work, I started using a virtual assistant service called TimeSvr. The service, which charges $69 per month for an assistant that I share with other users, takes a lot of tactical work off my plate. When I meet new client prospects at networking events, for example, I e-mail their contact information to my assistant, who adds them to my contact list, CRM system, and newsletter list; friends them on Facebook; and begins following them on Twitter. My assistant also handles some personal tasks, such as adding movies to my Netflix queue and making dinner reservations. I can contact my assistant via text or Skype IM, but I prefer e-mail, because I can just send a request and forget about it. I can also monitor my assistant’s progress using an online dashboard, which comes in handy during large projects that need to be broken into sections. My business has really taken off over the past year. TimeSvr has contributed to that success by helping me keep my contact database current and giving me more time to focus on the big picture. —As told to JJ McCorvey NOVEMBER 2010
|
INC.
|
23
THE GOODS
Beyond Business
Things I Cannot Live Without... Spectacles Four steps away from complete blindness, I cannot do without my specs. I picked these quirky babu moshai frames from the streets of Mumbai. iPhone 3GS I may forget to take the soap to the loo, but not my iPhone.
Toys From miniature Batman to Shrek, I have a huge collection of toys in my office. Jughead has his hamburgers, I have these!
CO-FOUNDER, THE GLITCH
Rohit Raj
24
|
INC. | NOVEMBER 2010
...and What I Covet A sea-facing apartment with a BMW waiting in the parking lot.
PHOTOGRAPHS COURTESY COMPANY
Sketch book It’s always with me to make sure that any idea that pops in my head finds itself on the notepad.
The advertising trade may be largely using “shock and awe” to grab eyeballs—but not Rohit Raj. This co-founder of the Mumbai-based creative consultancy is happier letting the ads and brand campaigns do the talking. His simple theory; human attention span is only five seconds. It’s another matter altogether that a mug of chilled beer can hold this 26-year-old’s attention for an entire evening. Raj’s concept of augmented reality, a fun web marketing strategy, has hooked many television biggies, such as UTV, Channel[v], MTV and B4U. Though he started his entrepreneurial journey recently, he wishes to retire by the time he cuts his 35th birthday cake. Now, it’s your turn to be awed, isn’t it?—Sunaina Sehgal
09
Everything you need to know to run your business in today’s economy
: : : : : : : : : : : A MONTHLY GUIDE TO POLICIES, PROCEDURES AND PRACTICES
REMOVE BOOKLET ALONG DOTTED LINE
PROTECT YOUR PATENTS It takes millions of dollars in research for companies to come up with breakthrough research, or develop a new product. Given the monies involved, it becomes all the more important to prevent the innovation from getting copied. That’s why companies file patents on new products and technologies. That, however, is not enough. Patents spell big bucks only as long as a company can closely guard them. And that isn’t an easy task . Ask global pharma major Pfizer, which has been warding off numerous challenges to its patented cholesterol-lowering drug Lipitor. The best-selling drug has notched up sales of about $12 billion for each of the past three years. And, the only way Pfizer can keep up these blockbuster sales, is to make sure no one infringes its patent. Closer home, in 2007, Bajaj Auto pressed charges against TVS Motor Company to protect its patented DTS-i engine technology. Bajaj claimed that TVS’ Flame twowheelers incorporating CC-VTi technology infringed on its Indian patent. The outcome of the ensuing long-drawn court battle was an order forbidding TVS to receive any further bookings for Flame two-wheelers incorporating the disputed engine technology patent. As Pfizer, Bajaj, and countless other companies across the globe know, patenting an invention is just the first stop. It marks the start of the patentees’ responsibility to protect its coveted product, or process. Enforcing patents calls for constant vigilance to ensure that competitors are not selling products, or using processes that resemble your own, and thereby siphoning away your sales, cutting into your revenues, and grabbing your market share. Read on to learn more about what it takes to protect your patents.—By Charu Bahri VOL. 01 NO. 09 | INC. GUIDEBOOK
09
PROTECTS YOUR PATENTS : : : : : : : : : : : : :
AVOID PATENT INFRINGEMENT 1
The starting point
Defining infringement: A patent grants its holder, or, the patentee, the exclusive right to make, use, distribute, mortgage, or sell, the covered invention in India. Infringement takes place when the product is made, used, offered for sale, or actually sold by another, without authorisation. If the patent covers a process, the unauthorised use of the method amounts to infringement. “Literal infringement happens when the product or process is exactly copied. But infringement takes place even if the imitation varies slightly,” says Kaviraj Singh, patent attorney and managing partner, Trustman & Co. Detecting infringement: “Keeping a close watch on products released in the market and on patent applications being filed helps detect infringement,” says Atul Dixit, patent associate, IPpro, an intellectual property services firm. That involves closely studying every new product to determine if it has any features that strongly resemble your own. You should also go through the product packaging, advertisements, pamphlets, brochures and user manuals describing it to figure this out. You can also review patent applications filed by known and potential competitors. That will help you get a sense of their products in the pipeline, which may infringe upon your patents. “Patent-watches can nip competitors’ moves in the bud. Companies can even try to invalidate or oppose the patent/ patent publication before it actually happens, thus sparing themselves considerable loss,” adds Dixit. INC. GUIDEBOOK | VOL. 01 NO. 09
If you hold many patents, it may help to appoint someone, who provides patent analysis services, to monitor markets on your behalf.
Review patent applications filed by known and potential competitors. Prepare your case: The success of a patent infringement suit depends on getting the facts right. “A detailed check determines if the infringer has copied the core of the patented product or process, as covered in the claims of the patent,” explains Nitin Nair, manager (patents), Brain League IP Services. This is done with the help of a “claims chart” that should be prepared once you’re sure that your patent has been infringed. This chart will highlight the features of the competitors’ product or process that fall within the scope of your patents’ claims. A typical move on the part of the defendant would be to invalidate the patent—that is, to show that the patent does not cover a substantially new or innovative product or process, or was wrongfully obtained, or does not sufficiently disclose material information relating to the invention. When a patent is invalidated, the litigation suit is compulsorily withdrawn. Therefore, it might be a good idea to get an invalidation search done as well—this would throw up information about patents existing prior to your own that the infringer may use to partially or com-
pletely invalidate your patent. It would also help evaluate the strength of your patent before you resort to legal recourse. Also, says Abhay Porwal, head of operations, IPpro: “You’ll need the claims chart when you press charges, or even if you decide to send a legal notice to the infringer, pointing out the infringement.” 2
Press your case
Estimate your damages: You may have some idea about the losses that you have incurred, but will the court uphold your estimate? “While calculating the compensation due to the plaintiff, courts consider the actual economic losses,” says Porwal. This will most likely equal the sum of profits gained by the infringer from selling the patented product or using the patented process, and the opportunity losses incurred by the patentee, such as, the loss of royalties earned from licensing the patent. The claims chart comes in handy when estimating damages. As Deepak Syal, director, GreyB Consultancy Services, points out: “The comparative analysis should clearly show the features and claims of the patented technology that have been replicated in the imitation product. That makes the plaintiff’s case stronger.” The claims chart is one of several factors used to estimate damages. Since patents typically consist of multiple claims, usually the more the number of overlapping features highlighted in the chart, the higher are the damages. If the infringer knowingly
infringed the rights of the patent holder, the court may additionally grant punitive damages. It is also customary for the successful party to be granted the cost of litigation on the completion of the case. Negotiate with the infringing company: Pressing charges is the ultimate recourse. However, you may decide to send the infringer a legal notice before doing that. “The notice serves as a warning to the infringer,” says Nair. Or, as is more common in India, you may hold discussions with the infringer to negotiate an out-of-court settlement. The negotiations may cover future use of the patent, royalties, licence fees, damages, and other aspects.
File a suit: In keeping with the Indian Patents Act of 1970, suits must be filed in a district court within three years from the date of infringement. A high court comes into the picture only when the defendant files a counter-claim against the revocation of the patent. All appeals thereafter are transferred to the Intellectual Property Appellate Board, a specialised forum that holds sittings at Mumbai, Delhi, Kolkata, Chennai and Ahmedabad. It has exclusive jurisdiction on matters related to revocation of patent and rectification of the patents register. “If the court determines that infringement has taken place, the patentee may be relieved by temporary or permanent injunction and/or damages,” adds Singh.
3
Overseas protection
Patents are jurisdictional rights— restricted to the country granting the patent. So, explains Syal, a patent needs to be filed individually in each country. You can either file a patent application through the World Intellectual Property Organisation and subsequently file the patent in each country of interest. Or, you can directly file a patent application in each country of interest. According to Syal, the first option gives companies time up to “30 months (from the first day of filing)” to file the patent in each country, as against 12 months for filing in each country in the second option. Undoubtedly, there is a lot to know when it comes to patents.
09
PROTECT YOUR PATENTS : : : : : : : : : : : : :
PROTECTING TRADEMARKS
AUTOMATED PATENT WATCH
A trademark may be a single word or phrase, symbol, logo, or a combination of these using certain colours and design features, which has been registered as the legally owned property of its holder.
It is common to conduct patent searches on the internet in countries, such as USA and the European Union, where detailed patent databases are available online. In India, however, despite the online availability of the bibliographic data of patents applied for and granted after 2005, searching this information is a fairly tedious job. While you could allocate this task to an employee, it would save time and resources to use an online solution to do this search. Based on the key words fed in to describe the patent, it would search for patents or applications that infringe upon your own. Ramaswami Natarajan, a patents and trademarks attorney based in Chennai, suggests using a service that tracks key words suggested by you, and automatically generates and sends updates on a weekly basis on e-mail to you.
It is equally important to save your trademarks from infringement. Here are a few facts you must know about them.
The owner of a trademarks has the right to prevent competitors from using identical or deceptively similar marks to sell competing goods or services. However, the applicable rule is “priority in adoption prevails over priority in registration”. Therefore, the registration of a trademark does not upstage a prior consistent user of trademark. Law grants the owner the right to use the trademark for different kinds of goods or services. Amul, India’s leading dairy brand, could restrict two shop owners, Amul Chasmaghar and Amul Cut Piece Stores, from using its trademark for a different class of goods through legal recourse. Legal cases involving infringement may be granted relief by means of an injunction, monetary compensation for damages from loss of business, and/or confiscation or destruction of infringing labels and tags. In the Amul case, the district court passed an order restraining the offenders from using the Amul trademark.
NOTES:
Resources
Access Ramaswami Natarajan’s patent search solution at http://www.
tmpsearchers.com/patdb
Read more about the Indian Patents Act at http://ipindia.nic.in/ipr/patent/ patact1970-3-99.html
Visit the patent offices’ website to find a registered patent agent or use the interactive guidance service, http://www.patentoffice.nic.in/ipr/ patent/patents.htm
Download the trademarks practice and procedure manual at http:// www.patentoffice.nic.in/tmr_new/ default.htm
INC. GUIDEBOOK | VOL. 01 NO. 09
The Success Gene SM Alex attributes the improved service standards at the family’s resort in Kerala to his son Rosh’s hard work.
CASE STUDY
A resort runs into labour issues. Can the heir-apparent give it a makeover?
S
BY POOJA KOTHARI PHOTOGRAPH BY S RADHAKRISHNA
M Alex came to Bengaluru in the early nineties from Mumbai. A chemical engineer by education, he hailed from a family of landowners in Kerala. After completing his masters, Alex chose to settle in the country’s financial capital, running a pharma manufacturing business. However, after a while, he sold it to his partners to migrate to the cooler climes of Bengaluru. The garden city seemed like a good bet. The weather was much cooler, and it was closer to his native place. The city’s excellent academic institutions were an added bonus. It also proved to be the right time to move, as Bengaluru was on the verge of a boom that went on for the next decade, or so. “It was a growing city with lots of development happening; so, I started buying land in the suburbs,” he says. For the next decade, Alex created land banks and sold them to real estate developers, building a 200-crore business in the process. In 2000, roots beckoned. Alex started a resort near his hometown in Kumarakom, now one of the most NOVEMBER 2010
|
INC.
|
27
CASE STUDY
The Experts Weigh In sought-after tourist destinations. Back then, the governTHE VALUE OF PROFESSIONAL MANAGEMENT An excellent example of someone taking the bull by the horns, and ment of Kerala was promoting tourism as an industry— making a difficult situation better through determination and hard remember being invited to “God’s Own Country”?—and work. I think Rosh has shown that his heart is in the hotel industry soliciting investment in the sector. Alex was attracted to (evidenced by him leaving a plum job at an IT major)—and that, to me, the opportunity, more so because it gave him a chance to is the key to success in this industry. Without passion, one cannot survive the many ups and downs that the industry is known to witdo something big in his hometown. ness. Another view is that one could have looked outside the family, to Luckily for him, Golden Waters, a four-star property a professional hotel management company, to bring its systems and spread across 13 islands covering 15 acres of unmatched processes, and relationships with key travel agents and tour operaterra firma, was received well. “It ran at an occupancy rate tors, who operate in Kerala. That could have jump-started the busiof 90 per cent to 95 per cent for the first three years,” says ness a lot sooner. Rosh and his family would still be involved in the business, but not in the day-to-day operations (which is not their core Rosh Alex, the heir-apparent. They even began farming strength). If that is unpalatable (and for many families, it is), then a fish and prawn inside the property. professional general manager, with experience in managing tough Soon afterwards, though, Lady Luck parted ways with labour situations and running resort properties could have been the Alexes. At the end of the third year, the business ran brought in. Finally, I’m glad they are monitoring their online reputainto labour problems. “Workers formed a union and made tion. It’s the key to success in the leisure market, especially when catering to foreign tourists! some unreasonable demands,” recalls the senior Alex. Keshav Baljee | PRESIDENT AND CO-PROMOTER | Royal Orchid Hotels, Bengaluru Things came to such an impasse that the resort had to be closed for nearly a year-and-a-half. A SIMPLE, YET EFFECTIVE, APPROACH “We took the matter to the Supreme Court. For the Staying focused, and spending quality time in the ‘battle field’ to confirst time, a labour union in Kerala was broken apart,” front the challenges—these are key qualities for entrepreneurs, especially during a crisis. The simplicity of Rosh’s approach in putting his recalls the 27-year-old son, who was then finishing his house in order is laudable. We surely need to look inward before we computer engineering course in Mumbai. embark on something big. Having turned the resort around, Rosh With much relief and excitement, the resort was should look outward and work towards building a brand. It’s good to reopened in 2005. The second innings, however, proved send customers 100 per cent satisfied; however, he needs to explore to be quite the battle. For two years, the father fought a the opportunity of repeat visits. I would even encourage them to seek external help to put the growth on a fast track. This case also highspate of complaints from guests. Occupancy rates in the lights the need for the younger generation in family-managed busi28-cottage property shot down to 35 per cent. The 40-odd nesses to get some exposure in the corporate world before joining employees became disillusioned with the brand, and conthe family business. It also highlights the importance of embracing a fidence levels ebbed. “Our problems were being magnisystem- and process-driven approach, in place of the traditional and fied by agents in the market and the operation was outdated methods. running at a loss.” S Ramu | CENTRE FOR FAMILY MANAGED BUSINESS | SP Jain Institute of Management & Research, Mumbai. By 2007, he had had enough. That’s when the son, who had been working in Chennai with a software firm, decided to take matters into his own hands. “My parents were apprehensive about it. They were not sure what future will I line at the back of one of the cottages had rusted because of have in a business that wasn’t picking up,” he recalls. non-usage. A guest complained. Rosh checked out all the cottages Adds his father: “He was a software engineer. And hospitality and got repairs done. was an absolutely different field. It required attention to details. I Next, he addressed the issue of high attrition. “I couldn’t underwas not sure if he could adjust.” However, his apprehensions didn’t stand why the staff was leaving so quickly. I took time to comprehend deter Rosh one bit. what their problems were.” He made the resort his home for the next year and started looking He also looked at external perception of the property—by talking at everything with a microscope. Though the manager was resistant to travel agents and asking them why they hesitated in recommendto this change, Rosh focused on learning things hands-on before ing it to their clients. “I especially sought out the problems they faced trying to direct the team. in working with us and took care of those,” he says. It wasn’t long before problems started coming to the fore. With It took him a while to put the house in order. His time at a big some help from his mother on the accounts front, Rosh gradually software firm had introduced him to the benefits of systems and started straightening things up despite the lack of any training or processes in managing projects. He used that to introduce some at understanding of the industry. Golden Waters as well. “I sat with each of the heads of departments “Guests pointed out things that I didn’t notice—things that and documented systems and processes, refined them and put them could only be experienced during the stay. So, I listed out problems in manuals that were given out to employees,” he explains. mentioned in the guest feedback and solved those first,” he says. Small changes, such as blacklisting those who didn’t pay up on For instance, the physical condition of the cottages had deterio- time and providing more facilities to those who did, helped in rated during the months that the resort was closed down. The pipe- getting the cash back into the coffers. On the front end, Rosh 28
|
INC. | NOVEMBER 2010
CASE STUDY
“Occupancy has improved. Trade has accepted that things are working well. And we’re making a profit.”
asked his managers to keep an eye on employees who were handling guests, keep a log of the interaction and give feedback. For instance, his team was not used to catering to Jains—the community of vegetarians who don’t eat onions or tomatoes. So, a procedure was laid out detailing how such special requests could be handled and put up on the notice board for guests to read. Just as Rosh thought things were looking up, he was hit by a spate of cancellations in the wake of the 2008 terrorist attacks.
The Decision It had taken Rosh seven-to-eight months to sort out the basic issues. He wasn’t willing to let his work go to waste. So, he focused on guests who were staying at the resort, instead of lamenting the lack of occupancy. “We decided that we will send the guests 100 per cent happy,” he says. So, in came the process of getting guest feedback over e-mail after checkout. During this time, he also set up a whole new team. Over the past year, a new manager was recruited and attrition was reduced sub-
stantially. “We’re still working on that, though,” he says. Says Alex, his father: “In the past year, Rosh has improved the place. He spends a lot of time in the property. Service standards have improved and there’s a good general manager in place. The graph is climbing up now.” Though the recession dried up the flow of the European clientèle, domestic tourists made up for the loss. Since the end of 2009, occupancy rates at the property have gone up. Now that the basic problems have been addressed, Rosh is concentrating on upgrading services. “We’re working on a new look now,” he says. The website has been revamped, some rooms have been renovated and feedback is a regular part of the experience. Rosh’s latest project is to improve the online reputation of his property. His father has the last word. “We are getting positive results. Occupancy has improved. Trade has accepted that things are working well. And, we’re making a profit.” In the end, the bottom line’s what matters.
Dos
GUTTER CREDIT HERE
THE
30
|
INC. | NOVEMBER 2010
PHOTOGRAPH BY VIJAY KUTTY
a King He conquered the palates of butterchicken eating Delhi with Sagar Ratna’s piping hot sambhar and soft idlis. Hungry for more, Jayaram Banan wants a bigger slice of the food market. BY SHREYASI SINGH
NOVEMBER 2010
|
INC.
|
31
“First, you finish eating, we can talk after that,” announces Jayaram Banan in a firm voice, as I fish out my notepad and voice recorder. The interview with the founder and chairman of Sagar Ratna and Swagath restaurants can wait. His piping hot food cannot. For, laid out on the table are some of the most popular south Indian dishes—the indomitable paper dosa, the aromatic filter coffee, and an idlivada combo with a platter of colourful chutneys—that have redefined the gastronomic preferences of the butterchicken-loving north Indian. And, in the process, enabled Banan to stage one of the most dazzling success stories in the restaurant world. As I ploughed through the dishes, washing them down with masala tea, coffee or even badam milk, always under the observant eye of my host, I made a mental note that an interview with Banan could almost be off-limits for those with weak appetites—or, on a diet. During the photo shoots that followed, he wouldn’t budge for an outfit change till he made sure our entire crew was stuffed to the gills. “He is an incredible host,” begins K Suresh, the affable chief financial officer of Sagar Ratna. “I visit many of our restaurants every week. But, going with him can be tough. He’ll pile food on to your plate; won’t heed a ‘no’.” That Banan finds such personal joy in feeding people is probably what got Delhi-ites coming in droves to eat simple, vegetar32
|
INC. | NOVEMBER 2010
ian south Indian food at his restaurants. “Our first day sales were 470. By our second month, people were queuing up to get in,” he says proudly of his first outlet in Defence Colony, then a quiet, leafy resres idential neighbourhood. That was in December 1986. Cut to now, the queue’s still there, only it’s longer, especially on weekweek ends and public holidays. In the years that have rolled by, the restaurestau rant has outgrown its humble 40-seat beginnings to become a 255-seater iconic landmark that it is today. It still isn’t unusual to see customers hanging outside the restaurant for a good 30 minutes to get a place inside the eatery. “When we started, I’d go to the Sai Baba temple on Lodhi Road every day. He’s given me everything I have. If I am in Delhi, you’d still find me there every day,” says the founder. The prayers have definitely worked. Sagar (the suffix ‘Ratna’ was PHOTOGRAPH BY NITISH SHARMA
THE DOSA KING
added later) revolutionised eating out in Delhi with quick table turnovers, clever pricing, impeccably neat, but basic interiors, and food that continues, till this day, to be delicious and surprisingly consistent. “Our sambhar is special. Everybody else makes it with moong dal. We use pure arhar,” explains the rather proud owner. The restaurant also achieved another rare feat—it appealed to both the uppity-class diners as well as the office-going middle class. Today, it feeds over 2,000 people a day, and has a daily turnover of 5 lakh. What Banan has pulled off is even more striking if you consider that Sagar Ratna does not share an umbilical cord with any major eatery brand from the southern region. Its roots lay firmly in Delhi, thanks to its owner’s intuitive understanding of the market and culinary arithmetic. “We have always concentrated on differentiating ourselves through personalised service. I have stood at the gate for years yelling out waiting numbers myself,” says Banan. His foghorn voice is a product of those days, he explains in his distinct conversational lingua, which is a mix of everyday Mumbaiya Hindi and learnt-onthe-go English, spiced with a definite Kannadiga accent. Banan has replicated the winning recipe at Defence Colony several times over, successfully putting south Indian dishes on the nation’s culinary map. There are now 55 Sagar Ratnas across India. There’s an outlet in Singapore, too. And a couple of weeks ago, they finalised a venue in Canada.
N
othing in his childhood, however, groomed him for such a success. The story of his early years seems to have come right off an Eighties Hindi film plot. The son of a driver in Karkala, a small town 35 kilometres from Udupi, he ran away to Mumbai in 1967 when he was just 13 years old. “I spent the money my father had given for my school fees. He was very, very strict. I knew he’d thrash me hard, so I ran. That was the end of my formal education.” A man he met on the bus ride to Mumbai got him a job as a washer in Hindustan Organic Chemical’s canteen in Panvel. Within three months, Banan moved up to become the tea trolley boy. Six months later, he was the supervisor. Over the next eight years in Mumbai, he worked several gut-busting shifts at canteens and even hawked shoes as a salesman for footwear brands like Bata and Corona. “But, I didn’t want to do ‘naukri’ all my life,” recalls Banan, although he is thankful for what his jobs taught him. “In the canteen in Bombay, I used to be hit by the owner with his chappal. Those beatings have really helped. They made me work harder.” He moved to Delhi in the early 1970s to join his elder brother. Together, they took up canteen contracts in Sahibabad, starting with Central Electronics. Luck soon shined upon them and big meal tickets like Tata and Dabur contracts flowed in. “We ran the Tata canteen for 18 years and Dabur’s Ghaziabad office canteen for 15.”
I, Me, Myself What’s your typical workday like? I leave home by around nine in the morning. With the way traffic is, the commute from Ghaziabad to my corporate office in Malviya Nagar now takes up to three hours at times. From then on, I don’t know how the day passes by. People might think I am a big man. But, business is about struggling every day. I reach home almost close to midnight. But I always have dinner with my wife. I never eat outside. What do you do outside of work? That’s one of my big regrets. I have never taken time off, hardly taken holidays with my wife. I couldn’t even attend my elder son’s convocation ceremony in Australia. He’s still upset about that. I don’t want my sons to work the way I do. I often tell Roshan, my elder one, to use his time wisely since it is not going to come back. I have told him he should be more organised. He should work 9-5, and after that, he should be out of the office. He should have time for his wife, once he gets married. What is your biggest extravagance? Clothes are my biggest extravagance. I must have more than a thousand shirts. I change my clothes three times a day, morning, afternoon, evening. Nadeem takes care of my wardrobe and toiletries. He’s been with me for 26 years and travels everywhere with me. What can’t you do without? I am fastidious about cleanliness at home, office and the restaurants. I can’t even tolerate a fly. What’s your favourite food? I love my rasam, rice and curd. That’s my standard meal. My wife is my favourite chef. I don’t eat out much, maybe sometimes at The Taj Hotel in Delhi. I don’t enjoy any other cuisine. It’s simple south Indian food for me. What’s your next personal milestone? I want to buy a nice house in Panchsheel or Defence Colony now. I never wanted to leave Ghaziabad. My brothers live there as well. We are a close knit family. But, my younger son, Rohan, is in his final year of medicine. He is going to do an internship at AIIMS. He doesn’t want to commute. So, we will all move. I hope I get a great house. Ten years ago, I could buy any nice house in Defence Colony. Now, it seems impossible. Bungalows cost from 30 crore to 60 crore. But, I don’t want to whine about it. One can never get more than one’s kismet or before one’s time. I also want to build a hospital for my younger son. I don’t want him to waste his time doing administrative things. He should work on being a great doctor. Who’s your favourite patron? I have been privileged to have so many great people enjoy our food. Atalji would come in. Advaniji still frequents the restaurant. Rahulji drops in at The Ashok hotel branch sometimes. The Gandhi family is my favourite. I cherish my relationship with Robert Vadra and Priyanka Gandhi. NOVEMBER 2010
|
INC.
|
33
THE DOSA KING
Not satisfied with the miniscule margins involved in canteen operations, Banan decided to take a wide-angle view of the business possibilities. He moved to Bengaluru in 1981 after his marriage and opened Gangotri, his first foray into the restaurant business. He used the profits from his catering business to start up. Within a couple of months, he realised there just wasn’t enough footfall to make the business click. “South Indian vegetarian is a crowded market that side.” And so, while fretting over it one night, he decided to down shutters. Another man might have been dismayed at this unfortunate turn of fate. But not Banan. He made his way back to Delhi and took up his first independent canteen contract at Danforce India, repeating his earlier run, this time by himself. His company continues to run three Moser Baer canteens in the national capital region even today. “The canteen business is easy to bounce back into. You don’t need a lot of capital, just provisions. Plus, I already had a good reputation in Ghaziabad,” says the restaurateur, who lives in a plush bungalow with his wife and their six dogs in a Ghaziabad neighbourhood even now. Opportunity soon knocked on his door. An herbal products store, located at Defence Colony, was downing its shutters. The
owner wanted to finalise a quick lease on the real estate. And Banan grabbed the deal. “We bagged it at a weekly rent of 3,250. And tables and chairs were part of the deal,” he recalls. Another 5,000 in investment, and his restaurant was up and running. The deal was a hit and so was the first Sagar outlet. Delhi-ites lapped up the south Indian fare served at the neat small eatery, which provided great service at reasonable prices. His second outlet at the well-known Lodhi Hotel took four years to come up. But, it upgraded Sagar’s positioning and heralded in a name change. “We couldn’t keep the same prices at a five-star hotel. That’s when we added the ‘Ratna’ to our name,” he explains. Initially, the Sagar Ratna outlets offered the same menu at 20 per cent higher prices. He continued to grow organically, opening subsequent outlets in Malviya Nagar, Preet Vihar and Noida in the national capital region. By 2000, he had 13 restaurants. Annoyed by the comments that he could only work the “canteen style” vegetarian food model, Banan took up the challenge to do something different. In 2001, he opened Swagath, a coastal, seafood fine dining restaurant in the same Defence Colony market, a few shops down from the original Sagar. Despite its slow start, Banan managed to deliver another hit, this time adding a layer of culinary art to the basic south Indian fare. Swagath’s prawn gassi, fish fry and neer dosas gradually became cult hits. To ensure families with diverse tastes didn’t get turned off, Swagath also loaded on to its In December 1986, Jayaram Banan opens his menu staple non-vegetarian first Sagar outlet in a rented building in Defence Delhi fare, Mughlai and Colony, a quiet residential neighbourhood in Delhi. Indian Chinese. The clever By 1990, Sagar is ready to be launched in its positioning was spot on. upmarket version as ‘Sagar Ratna’ at Lodhi Hotel, “Because of the non-vegecharging 20% higher prices. The name also tarian menu, it has much betofficially changes from ‘Sagar’ to ‘Sagar Ratna’. ter margins. Sagar has a turnover, not margin. People After resisting for many years, Banan gives in to growth compulsions and opens his first spend more time in Swagath. franchisee outlet in Ludhiana in 1999. Business has been good,” says Banan, who closed 2009-10 Sick of being taunted for ‘canteen style’ vegetarian with a turnover of 70 crore fare, Banan launches Swagath in Defence Colony for Sagar Ratna and Swagath. in 2001—this time, to give a taste of coastal seafood. Earlier this year, he opened Swagath’s ninth branch at Hungry for growth, Sagar Ratna crosses Hotel Janpath in Delhi. He geographical borders to open its first overseas claims it to be his most sundar branch in Singapore in 2009. restaurant and hopes the locaBanan’s not satiated with just feeding people. He tion will help him attract an decides to get into boarding facilities, and opens his entirely new kind of customer. first hotel in Mangalore, a three-star property Both brands have roucalled Ocean Pearl, in 2010. tinely romped home with awards that celebrate great
Milestones
THE DOSA KING
cuisine and innovative culinary thinking. And, year after year, they continue to be voted best in their category in popular food almanacs like The Times Food Guide and HT City Eating Out Guide. Banan, of course, credits his patrons for the exponential growth. “The customer is God for me. Even now, I stand at the door to welcome them. Most don’t even know that I am the owner. They often pass on a 10 or a 20-rupee note as tip.”
H
aving resisted the franchisee model for many years, he finally let go in 1999 with an outlet in Ludhiana. Now, more than 65 per cent of all his restaurants, Sagar Ratna and Swagath, are run as franchisee operations. “It’s faster growth. But there are problems. Maintaining quality is an issue. Our people have to be persuaded to go work in the franchisee branches,” he admits. Industry observers, however, feel Banan has done a remarkably good job. Manu Mohindra, former chef of Machaan, The Taj Palace Hotel’s popular coffee shop, and now a hotel consultant who has helped set up several well-known Delhi restaurants, calls Sagar the only “corpotarised, McDonalised” south Indian chain in the country. “There could be a couple of franchises where you might feel the sambhar is off, but more or less, he has managed his logistics,” he adds. Sagar Ratna’s CFO, K Suresh, thinks his boss’s intuitive ability to spot trouble has been the key. “He is prescient and can sniff a problem from far off.” Banan confesses to keeping a tight grip. “I call the Defence Colony branch at least 10 times a day. I know closing sales on an everyday basis for all our restaurants,” he says. When in Delhi, he usually visits at least 2-3 restaurants every day. On Sundays, he leaves home at 7am to undertake a record-breaking task of sorts—stopping by all his 27 restaurants in the NCR area. “There’s no traffic. I go ‘taktak-tak’. If I don’t do this, I feel my body is missing something vital.” The Defence Colony branch still remains the favourite. “It’s my life. I am there for the evening puja every day at 7pm.” He usually grabs his lunch there too, eating quickly in the kitchen. He’s back at the drawing board; this time, to take Sagar Ratna to 100 outlets across India and key overseas markets, such as North America, United Kingdom and South East Asia, over the next three years. It’s a model that is heavily dependent on the franchisee route. It won’t be easy. And Banan knows that. “Every day 100 restaurants open, 200 close,” he says. “But, I have told my senior management I want this. They need to figure out how.” “It can’t be done without him,” says KS Bhatt, director, Sagar Ratna and a trusted aide. “He’s invaluable for locations. We launched a few venues, like our outlet in Patiala, without him okaying them first. None of them have done very well,” adds Bhatt. Mohindra shrugs this off. “As you expand, it’s important to have the will to shut down non-performing outlets. Banan will need to display that conviction. Dominos Pizza came down from 100 to 72 outlets. It made them more profitable.”
Waiting in the wings His father might have a large, brightly-lit new cabin ready for him, upholstered in deep browns, but 26-year-old Roshan Banan is non-committal about a joining date. “Very soon” is all that the young man is willing to let out. With a Master’s degree in engineering from University of New South Wales, he works in a robotics company in Australia. But, over the last year and a half, he’s been keeping track of what goes on at Sagar.
“When he joins, I will have to keep my mouth shut and listen to him. He’s an educated boy.” “I was involved in a recent project for upgradation of the data management software,” says Roshan, his words chosen carefully. Even a short conversation on phone shows how different he is from his father. “We are alike, too,” he points out in his accented, public school English. “In that, we are both sticklers for quality. It’s my father’s strong point. Our restaurants personify that. I have inherited it.” Although Roshan is looking forward to facing the challenges of business, he confesses that filling his father’s shoes is going to be tough—if not impossible. “My focus will be on streamlining our operations, catching up with the next century.” A lot more technology needs to be brought in, he adds. There is considerable excitement at his induction. “Roshan is calm, collected, the perfect foil to his father. They complement each other beautifully,” says Suresh. An obviously proud father is also bracing ahead for the changes. “When he joins, I will have to keep my mouth shut and listen to him. He’s an educated boy,” laughs Banan. But, like any other father, he lays out tall expectations. “He should build really fast. I am giving him a ready-to-eat business.” NOVEMBER 2010
|
INC.
|
35
THE DOSA KING
And, while Mohindra admits Sagar Ratna has no “real” competition in India, he cautions that its incohesive brand identity could hurt its growth. “The soul of Sagar needs defining. They have to work hard at replicating the look and feel.” Banan agrees grudgingly. “I am learning from McDonald’s. It’s great how they have a constant look and feel. My restaurants are going to be renovated.” That isn’t the only challenge in front of Sagar Ratna, though. With inflation, the cost of ingredients has been going up. However, the chain’s ability to pass on the price rise to the customer is limited by the fact that a product like dosa has a threshold when it comes to pricing. Therefore, margins look likely to be squeezed in the future. Labour is another problem. Fancier options, such as “BPOs and call centres” have led the younger generation away. And, “More and more people are going abroad for jobs,” says Banan. It’s almost strange that people should be a pain point for Banan. His easy camaraderie with staff, office boys, drivers and a retinue of personal security officers, is hard to miss. He is, at once, an irreverent friend, an encouraging grandparent and a hard taskmaster. “Employees don’t leave him. Cleaner boys at the Defence Colony branch have become managers,” says Bhatt. “He grows his people.” Banan is also banking on his 1,100-strong staff to perfect his ambitious flourishes. He is buzzing with new verticals. The excitement pushes up the pitch in his voice, his words gushing forth. Plans are afoot to grow Sagar Express, his fastfood, self-service, takeaway kiosks. There is already an outlet at the Mangalore airport and another in Gurgaon. Plans are in place to take their packaged snacks the “Haldiram way”. Banan also wants to popularise other cuisines. He’s working on a Sagar Angandwadi restaurant, which will focus on Rajasthani and Gujarati food. A catering college in Noida is also in the works. “Students will work with us for five years after they finish. In turn, we’ll completely fund their education,” says he. In May, Banan inaugurated Ocean Pearl, a three-star hotel in Mangalore that marks his entry into the lodging industry. “My ultimate ambition is to open a five-star hotel in Delhi. I love this
“Every day 100 restaurants open, 200 close.
city, even more than my hometown,” says he. His ambitious plans would need an infusion of capital , but Sagar Ratna—still wholly-owned by Banan—is not actively looking for funds for its family dosa-sized appetite for expansion. Banan laughs off earlier news on sale negotiations. “We always deny them. But, they keep appearing now and then,” he says of the buzz last year that Anjan Chatterjee, who runs Mainland China and Oh Calcutta!, was keen to pick up a stake in Sagar Ratna. “We are not in any mood for equity dilution. That might change in five years. I can only speak of now,” he adds. This nonchalance notwithstanding, Mohindra says capital cannot but be on top of Banan’s mind. “No finance comes without cost. He’ll need to decide what cost he is willing to pay.” That might be so. But, Banan is quite likely to dish out the perfect recipe to suit the taste buds of financiers, just the way he served the average north Indian with the perfect dosa and sambhar.
But I have told my management I want 100 outlets. They need to figure out how.”
36
|
INC. | NOVEMBER 2010
PHOTOGRAPH BY VIJAY KUTTY
Seeking The
Right
Numbers Girish Batra has built NetAmbit into India’s largest distributor of financial services products. Now, he wants it to become like Wal-Mart—a supermarket bigger than every brand it sells. BY POOJA KOTHARI GIRISH BATRA is the classic dotcom kid, except that he didn’t batten down the hatches on his business. Instead, he let his entrepreneurial ingenuity kick in, and helped midwife the birth of a new model of selling—one that establised his company, NetAmbit, into the largest distributor of financial services products in India. No wonder Batra’s now dreaming big. He wants NetAmbit to become as big as a Wal-Mart—albeit in its own field. A one-stop shop that will meet every need that a household can have for a financial service product. “A Wal-Mart is much bigger than the brands it sells. We have the potential to be that in the financial services space,” says the 38-year-old founder. He’s convinced that “manufacturers” such as ICICI, HDFC and SBI, will have to depend on third-party distributors like him to acquire customers outside the Indian metros. And he’s betting his organisation’s future on that conviction. His plans might sound boastful, foolhardy even— 38
|
INC. | NOVEMBER 2010
since no one else has attempted this combination of retail and financial services before—but it would be a mistake to dismiss them completely, given the scale of Batra’s achievements. NetAmbit did 100 crore in revenue last year, and is hoping to close this year at 180 crore. Just three years ago, its revenue was 7 crore. What’s more, NetAmbit has managed to grow more than 100 per cent year-afteryear, even when the world struggled to deal with the economic turmoil of 2008-09. Today, it has a 4,000-strong team with a presence in 140 cities. “We hope to be 7,000 by March next year,” says Batra, clearly indicating an insatiable appetite for growth. The 20-somethings who crowd NetAmbit’s six call centres around the country and call up nearly 8 million people every month, have made it possible for the firm to acquire customers at the rate of “8,000 a month”.
GUTTER CREDIT HERE
Itching for Scale Girish Batra plans to add 3,000 employees by March next year.
PHOTOGRAPHS BY NITISH SHARMA
NOVEMBER 2010
|
INC.
|
39
SEEKING THE RIGHT NUMBERS
Batra’s new plans for the company are based on these relationships. “The idea is to sell other products to the same consumer, so that it brings down the cost of acquisition to zero, and improves profitability,” says Vishal Gupta, a managing director at Bessemer Venture Partners and a member of NetAmbit’s board. Bessemer invested in the company in 2007, and again earlier this year. In future, NetAmbit hopes to get a toehold into a household using one of its products, preferably life insurance, since that’s where its expertise lies. Once acquired, the customer will be handled by a more specialised product team, which will build on the relationship. This seems like a logical progression for the business. Life insurance gives the highest commissions of any financial service product (FSP), so it made sense to start there. Moreover, the direct marketing model that NetAmbit has built to acquire customers has proven rather cost-effective. Having acquired a certain size, it now makes sense to diversify into other products and channels. “Basically, give the customer the complete range of products, and several points of contact—call centre, website, or branch,” says Batra. To do that, the company has started operating branches, where customers can walk in. It is also exploring a franchisee model for the really small towns. And its website is being set up to ensure that those with access to the internet also come into its fold. Batra’s planning to cast his distribution net over 6,500 towns in India. That’s the number he heard in an interview with the CEO of Dish TV. “If a customer can afford to buy a Dish TV connection, he can definitely spare the cash to buy an insurance plan, or a mutual fund. So, that’s our benchmark,” he adds. This focus on becoming a platform for FSPs is a departure from what NetAmbit had been doing till recently. So far, its employees would ring up people, whose names and numbers were pro-
vided to them on a sheet of paper, and sell life insurance policies on behalf of their client brands. This “non-affinity” based model of selling—called so because sales are made to people with whom the company does not have an existing relationship—is Batra’s brainchild. His favourite anecdote would have you believe that “McKinsey has not seen this kind of model anywhere in Asia.” It was born out of necessity when Batra embarked on his entrepreneurial journey in 1999.
B
orn to a government servant,
Batra grew up surrounded by relatives who were running their own businesses. “They were richer than us. That sowed the seeds in my mind,” says he. Of course, to his young mind, business was the means to become as rich as the chachas and tayas around him. Post engineering, Batra joined Escorts. His experiences there led him to his next degree—an MBA from Indian Institute of Management, Ahmedabad. “I realised that one must do his MBA to be successful in life and then business,” he says.
Life Outside Office
40
|
INC. | NOVEMBER 2010
FRIENDS: I had lost my social network in the first seven-to-eight years of NetAmbit. So I am now reconnecting with old friends, batchmates and family friends. KIDS: My kids are very important. One day, my wife told me to wake up before my two daughters go away, which will happen sooner than later. MUSIC: I am very fond of music. I want to learn to play the guitar. TRAVEL: I love travelling. Besides the usual holiday destinations, I love going to small towns. That comes from all the places I visited during my days at Godrej. I love the countryside. I love eating at a roadside dhaba. Given an option, I would love to drive down a highway and spend a few days there.
That was the turning point. “My perspective about life and business changed totally,” recalls Batra. “I realised that doing business is not only about making money. Money is just a product.” In 1997, Batra joined the Godrej group as a management trainee and got his first taste of entrepreneurship. Within four months, he was handed the Real Good chicken division—a new business then. He moved to Bengaluru and set up that division from scratch. “I was handling sales, marketing, production, procurement, everything. So that taught me how to run things,” he says. That stint also fit in with his future plans. “I thought I’d work for six to seven years, and then start out on my own. And my wife will provide for the family,” says Batra. On his request, his parents even found him a bride, whose government job would provide a stable source of income. But, life wouldn’t be as interesting if things worked according to plan. Three months before the wedding, the couple realised that Batra’s fiancée would not get a transfer to Bengaluru. She would have to leave her job in Delhi and look for one in the new city. Batra was flummoxed—and almost convinced that his career as an entrepreneur had died, even before it started. However, some advice later, Batra was ready to trade in his secure job for an entrepreneurial fling. Twenty days before his wedding, Batra left Bengaluru and his safe job to start a new life as a husband and an entrepreneur. Fortunately for him, both his parents and bride were supportive of his move. “That was very unusual—as well as heartening. They said, ‘if you fail in business, after two years you can always go back to a job, thanks to your education’.’” The scepticism of relatives notwithstanding, Batra allowed fresh business ideas to wash over him. That was the time of the dotcom boom in India. “After wasting a few months chasing ideas around portals, I founded NetAmbit to provide offline services to online businesses,” he recalls. From a 200-square feet space in south Delhi, five employees, and an investment of 1 lakh, which his father withdrew from his provident fund account, Batra hawked offline sales and marketing services to por-
SEEKING THE RIGHT NUMBERS
tals, such as GoforI.com. It was a promising beginning. Within four months, his team expanded to 35 people, and his office moved into a larger space. And, then, suddenly, the dotcom bubble ran out of steam in 2001, leaving NetAmbit gasping for a while. “By then, we had fortunately gained some expertise in marketing to small- and medium-enterprises (SMEs), thanks to one of our clients,” he recalls. His younger brother too had joined forces with him. So, together, they decided to chart a new course for NetAmbit. Airtel then was a new player on the Indian business horizon, as well as in telecom. It was selling mobile connections mainly to large corporate players and retail customers. SMEs weren’t on its radar. So, Batra approached Airtel to sell its connections to SMEs for a success-based fee. Since resources were limited, he decided to set up a small team of call centre executives that would call up SMEs to get an appointment. Thereafter, his much smaller sales team would strive for conversion. Over time, the system revealed its advantages and laid the foundation for Batra’s future success with NetAmbit. For one, a salesperson approaching a client with an appointment could concentrate on selling— and do so with a lot more confidence since the client’s interest was already established. Moreover, once he knew the schedule, he was able to control the team’s field movement—that saved time and allowed for better allocation of the small team. “The model worked very well for Airtel; we did good volumes in a very short span of time. Within six months, we landed its landline business as well,” recalls Batra. Again, he used the same formula of keeping the costs of a sales team down and multiplying its efforts with those of a call centre. “It helped us make our teams more productive, which in turn made us a highly profitable organisation,” says Batra. Although the business did well—he was making more money than he had made in a job—it wasn’t enough for Batra’s ambitions. By 2002, he was itching for scale. He first tried to get Airtel’s national business. While waiting for the deal to come through, it hit Batra that even that might not be enough. “I
“I am no longer involved in day-to-day operations. I’m focusing more on building a brand and looking for opportunities.” realised there had to be something that could catapult this organisation into a very large one in the years to come,” says he. It was also the time when financial services, especially insurance, were coming up in this country. “When we looked at how financial services were being sold worldwide, we realised that, in India, there was a lack of distributors in this field,” he says. That’s when it struck home that NetAmbit could sell insurance policies, just as it had sold mobile connections and portals. The idea of setting up a distribution service that went beyond cities to B-class and C-class towns started taking shape in his mind. His set-up seemed perfect for the needs of the new business. “The same issue of reaching the smaller customer in a costeffective manner came up here as well,” he recalls. The model also worked well in meeting the manpower requirements of a large distribution set-up. “Because in our model, 80 per cent of our work force sat in larger towns or centres, and a limited sales force was placed in smaller towns, it wasn’t difficult to hire high-quality people.” From there on, it was a matter of time before Batra turned sales into his winning formula.
T
he big question now is whether Batra can push his organisation through the painful process of scaling up. Says Gupta: “It’s already well established in market. What remains to
be seen is how quickly Girish can take us from 4,000 to 20,000 (employees).” Batra knows it’s a challenge. And he’s already equipped himself—both with money and talent. He’s in the midst of raising a fresh round of money, mostly to fund acquisitions in the near future. In the past few months, he’s hired chiefs for functions, such as finance, technology, and marketing from some of the top management schools. The leadership team at NetAmbit now has 31 members. What’s even more important is that he’s learnt to delegate—an important trait for a founder. Gupta recalls how even till last year, a conversation with Batra would be interrupted by at least seven calls. That no longer happens. “He’s managed to bring people on board, and delegate,” adds Gupta. “I am no longer involved in day-to-day operations. I’m focusing more on building a brand and looking for more opportunities for the organisation,” adds Batra. A lot will also depend on technology. NetAmbit’s earmarked 25 crore to create an IT knowledge management platform. So far, information on customers has existed in Excel sheets. But that cannot continue for long, given Batra’s ambition of doubling his rate of customer acquisition every year from 1 lakh right now. There’s a general consensus that they’ve been slow in rolling out technology. It now has to make up for lost time. For now, though, Batra is ready to rest of his laurels, albeit temporarily. “We are creating jobs, social security by virtue of selling insurance and, wealth for all our stakeholders.” That might not be enough for an IPO, but it sufficient to earn a good night’s sleep. NOVEMBER 2010
|
INC.
|
41
BY MAX CHAFKIN 42
|
INC. | NOVEMBER 2010
COURTESY SPACEX
His aerospace business has contracts worth billions. His electric-car company just went public. He has a movie-star fiancée and provided the inspiration for a Hollywood superhero. But Elon Musk’s real journey is just beginning
space is the place
Elon Musk aims to take up residence on Mars by 2030.
There are many things of which Elon Musk is certain.
Musk knows, for instance, how to get a liquid-fuelled rocket into orbit and how to run a sports car with 7,000 tiny batteries. He knows how to manage 1,700 employees spread between two wildly ambitious companies in two different cities: the Los Angeles aerospace company SpaceX and the Bay Area electric-car company Tesla Motors. He knows how to get rich. And then there are things Elon Musk doesn’t know but simply believes. He believes that Northrop Grumman couldn’t build an inexpensive rocket even if someone literally handed it plans to do so. He believes that the Chevy Volt will be a disappointment when it goes on sale later this year. And he believes that in roughly 20 years, he will step out of a space capsule and become one of the first humans—part of a new generation of explorers, without precedent since the days of Columbus and Magellan—to establish a human colony on Mars. The last, of course, will require hard work. Musk will have to create and then launch a rocket capable of safely transporting humans beyond Earth’s orbit—all while avoiding the machinations of his competitors, the lingering effects of the global recession, and the ill will of members of Congress and the public, who are annoyingly hostile to the idea of having private companies set up colonies on other planets. Yes, getting to Mars will be a challenge, even for someone who knows as much as Elon Musk. So he isn’t worrying much about getting back. His will most likely be a one-way mission: a glorious and romantic and—let’s be honest—insane attempt to take civilisation beyond this planet. WHATEVER ONE THINKS OF MUSK’S IDEAS about multiplanetary life, he is a singular character in American business. Musk has already helped inspire a Hollywood action hero—Tony Stark, portrayed by Robert Downey Jr. in the Iron Man movies—and has hundreds of pages’ worth of press clippings. He tends to remind people of Apple co-founder Steve Jobs. The comparison has merit: both men are committed micromanagers, and both have an instinct 44
|
INC. | NOVEMBER 2010
for the theatre of business. But whereas Jobs is very good at working within constraints—designing the perfect cell phone or the best computer operating system—Musk likes to aim his energies far beyond the normal limits of common sense. “Lots of successful entrepreneurs want to change the world,” says Steve Jurvetson, a long-time venture capitalist who has invested in Tesla and SpaceX. “For Elon, that’s too narrow.” The solar system is the thing. These grand ambitions date at least to college, when Musk had an epiphany about what to do with the rest of his life. “I decided that there were three areas that were most going to affect the future of humanity: the internet, sustainable energy, and extending life beyond Earth,” Musk tells me. “I’m sure you’ve heard this story before.” I had heard this story before. In fact, in some small way, I helped create it. Three years ago, I wrote an article for Inc. about Musk, who had already started and sold two successful internet companies. When he was just 23, Musk co-founded Zip2, an early web software company that Compaq bought for $300 million, and at 27, he helped start PayPal, the internet payments company for which eBay paid $1.5 billion. These accomplishments made him absurdly wealthy, but when I met him in 2007, he hardly seemed qualified to colonise another planet or cure humanity’s addiction to oil. And yet, for some reason, I—along with many others who heard his story—believed he could do it. Why that was, I’m not sure. Maybe it was his background, which reads like a heroic myth of entrepreneurship. As a boy growing up with divorced parents in apartheid South Africa, Musk dreamed of escaping to America. When he was 17, he left home and enrolled in college in Canada. He eventually graduated from the University of Pennsylvania. In 1995, he was accepted into a PhD programme in materials science and applied physics at Stanford, only to decide, two days after he had arrived on campus, to drop out and start a company.
THE EXPLORER
blast off
COURTESY SPACEX
“Lots of successful entrepreneurs want to change the world,” says one investor. “For Elon, that’s too narrow. The solar system is the thing.” Or maybe it was the oversize scale on which Musk seemed to live his life: not a family, but five boys, all under the age of 5. Not just one company, but three: SpaceX, Tesla, and SolarCity, a solar panel company that Musk dreamed up, funded, and then turned over to two of his cousins, Lyndon and Peter Rive. Or maybe it was his physical presence: the imposing frame—Musk stands over 6 feet tall, is thick through the middle, and carries himself like a rugby player—the haughty South African accent, and the striking, if not exactly handsome, face. Or maybe it was the fact that nearly everybody who had ever worked with him, even people who clearly despised him, seemed to think he was a genius. By late 2007, thanks to Musk’s guidance and cash, Tesla Motors had built a prototype for an electric car that, it was said, could beat a Ferrari off the line. His spaceship had yet to reach orbit—its ultimate goal—but there had been two launches and a dozen signed contracts, including a $278 million deal with NASA. SpaceX’s was the first privately-funded rocket that seemed to have a legitimate chance at competing with those developed by the government and operated by the big aerospace companies, and it promised to reduce the cost of a launch dramatically. (SpaceX charges $50 million to launch a satellite, less than half the going rate.) Finally, SolarCity had quickly become the dominant solar panel installation company in
SpaceX’s Falcon 9 rocket was launched in June.
California, with $23 million in revenue and nearly 200 employees. On the strength of these accomplishments, Inc. named Musk the 2007 Entrepreneur of the Year. But to me, even this accolade felt like an understatement. Musk seemed like a superhero—or, maybe an alien. He told me that what he was doing would be one of the biggest events in the history of humanity, at least on a par with the moment when our forebears flippered their way out of the ocean and began walking on dry land. He said this seriously.
I
returned to California this summer to see how the second act of Elon Musk’s story was playing out. It was a Tuesday night at the Tesla Motors headquarters in Palo Alto, and Musk was in fine form, taking meeting after meeting about various aspects of the design of Tesla’s forthcoming sedan, the Model S, and cracking jokes. He had just returned from his first vacation in eight years—four days in French Polynesia and another four in a rental in Brazil after visiting a cousin. “It was the worst place I’ve stayed since I was a teenager,” he says, shaking his head and letting out a laugh. “It stank, there were stains on the sheet, and the bedbugs did bite. It was awesome. We had a good time.” The vacation was a celebration of sorts. Three weeks before, I had watched Musk ring the Nasdaq bell in Times Square. Because Nasdaq companies are traded by computers rather than by guys in numbered blazers, there is no actual stock exchange—just a cramped television studio in New York City—but Musk hadn’t let that fact get in the way of his spectacle. He showed up wearing a purple blazer and a checkered shirt, flanked by his beautiful 25-year-old NOVEMBER 2010
|
INC.
|
45
THE EXPLORER
fiancée, the actress Talulah Riley, and his now-6-year-old twins, Griffin and Xavier. Musk noted, in his opening remarks, that this was the first IPO for a car company since Ford went public in 1956. He rang the bell, pumped his fist, and then took his entourage outside to pose for photos with Tesla cars. “We’ve confounded the critics at every turn,” he bragged to CNBC, as its cameras panned to a bright red prototype of the company’s Model S, a luxury sedan that will sell for roughly $50,000. “At a certain point, people have to get tired of being wrong.” The spectacle worked: Despite skepticism from market pundits—case in point, Mad Money’s Jim Cramer, who, just before the IPO, crowed, “You don’t want to own this stock! You don’t want to lease it! You shouldn’t even rent the darn thing!”—Tesla’s stock settled $3 above the offering price of $17 a share, giving the company a market capitalisation of roughly $2 billion. (Musk sold 5 per cent of his stock in the IPO, but remains the company’s largest shareholder, with 30 per cent of its stock.) Musk spends two to three days a week in Palo Alto, flying in late on Tuesday mornings. He works pretty much non-stop until he flies back to Los Angeles, where he lives. When he must pause to eat, he does so with amazing efficiency. I twice saw him consume an entire meal— chicken, a vegetable, bread, and a Diet Coke or two—in under five minutes, all while holding forth on topics such as how best to fix a rocket vibration problem or the ridiculousness of sales as a business function. “In the early days, when Elon would have lunch meetings, I used to have to tell people that they shouldn’t worry if he’d already finished before they even sat down,” says Mary Beth Brown, his long-time assistant. “He just doesn’t realise how fast he’s moving.” Musk needs those precious minutes. Despite the growth of Tesla and SpaceX, which have tripled their staffs since 2007, Musk hasn’t really changed his management style. He still vets almost all new employees—though lower-level hires are now allowed to answer his interview questions by e-mail—and he remains the lead product designer for both the rocket and the electric car. “A normal workaholic is sober compared to Elon,” says Lyndon Rive, the CEO of SolarCity, for which Musk serves as chairman and in which he holds a 25 per cent equity stake. Musk’s favourite activity is to lead technical meetings at Tesla and SpaceX. There are dozens of these gatherings each week on topics such as the car’s battery pack or the rocket’s navigational software. Typically, Musk sits at his desk with a dozen or more young engineers spread out on chairs, the windowsill, and the floor. Managers attend these meetings, too, but they don’t do much talking; Musk prefers to get his information from the kids doing
Musk noted that Tesla’s IPO was the first for a car company since Ford went public in 1956. He rang the bell and pumped his fist. “We’ve confounded the critics at every turn,” he bragged.
46
|
INC. | NOVEMBER 2010
a keen eye Musk has trouble staying out of any detail, no matter how small, or seemingly trivial.
THE ALLUSION TO HAVING a pot to piss in is apt. Two years ago, Musk and his companies were perilously close to bankruptcy, and Musk was perilously close to falling apart. “Those were dark days,” he says of the summer of 2008. “I think I still have some emotional scar tissue. Just thinking about that time stresses me out.”
COURTESY SPACEX
the actual work. During one of our five-minute lunches, I ask him how many people report to him. “It’s not a zillion,” he says, then recites a few names and guesses that it’s about 20. “It’s probably more than I think it is.” But reporting structures don’t matter to Musk, who has trouble staying out of any detail, no matter how small or seemingly trivial. The new Tesla headquarters, a sprawling 400,000-square-foot campus that used to be a Hewlett-Packard laboratory, was still under construction when I visited, and Musk, not one to miss a bunch of potentially interesting decisions, immediately inserted himself into the process. He cast the deciding vote in a debate over how much red paint to use in the warehouse, he closely scrutinised a plan for the staircase railings, and he engaged in a 10-minute colloquy about the proper material for restroom countertops. (The director of facilities recommended tiles; Musk ruled in favour of a granite slab.) I had a hard time keeping a straight face while the self-taught rocket scientist got worked up about bathroom furnishings. But later that week, when I used the SpaceX men’s room, I noticed a design touch that seemed positively Muskian. When I asked him about it, Musk informed me that he had indeed personally selected the toilets at SpaceX. His favourites: a urinal that incorporates a psychedelic strobe light and another that employs, instead of a porcelain receptacle, a large steel bucket. “I was looking for creative urinals,” he explains. “It’s a nice pot.”
THE EXPLORER
The trouble began in 2007, just as production for the Tesla Roadster was set to begin. That was when Musk discovered that the Roadster, which was supposed to sell for $92,000, was actually costing the company $140,000 in raw materials alone. Musk blamed the failure on lax accounting practices—and on intentional obfuscation by co-founder and CEO Martin Eberhard. He fired Eberhard and installed a new CEO, who began renegotiating supplier contracts, slashing costs, and raising prices. Over the next year, Tesla would fire roughly 30 per cent of its staff and close the Detroit office that had been developing the Model S sedan. Eberhard did not leave quietly. On his blog, Teslafounders.com, he portrayed Musk and his cohorts as coldhearted, shortsighted, and mean, calling the layoffs a “stealth bloodbath.” (The pair eventually resolved their dispute in mediation.) In addition to the public spat with Eberhard, Musk found himself embroiled in a lawsuit with Henrik Fisker, a former Tesla designer who had started a competing company. Meanwhile, Musk’s marriage was falling apart, and his wife, Justine, being a professional writer, was, naturally, blogging about the divorce. “No one who knows my exhusband would accuse him of being weak-willed,” she wrote that October. “The same qualities that helped bring about his extraordinary success, dictate that the life you lead with him is his life...and that there is no middle ground (not least because he has no time to find it).” The result of all this was a barrage of terrible press. A long article in Fortune questioned whether Tesla would ever deliver production cars. A series of posts on the blog Valleywag suggested that Musk was intentionally steering Tesla into bankruptcy, that he had engaged in an extramarital affair, and that he was a habitual liar. Musk did his best to strike back with denials and rejoinders, but the battling took its toll. “I’d never seen him so sad,” says Maye Musk, Elon’s mother. “Everything was collapsing around him.” It got worse. In August 2008, SpaceX suffered its third consecutive launch failure, losing a rocket and two satellites—and the remains of James Doohan, the actor who played Scotty in the original Star Trek TV series. Doohan had paid to have his ashes shot into orbit. Instead, they ended up in the South Pacific, with what was left of the rocket and the satellites. Musk was devastated. SpaceX’s goal had been to make rockets cheaper to launch and more reliable. Instead, the company had lost every rocket it had launched and had spent nearly all of the $100 million that Musk had used to found the company. Then, just as Musk was trying to raise additional funds so Tesla could begin building the Model S, the credit markets collapsed, and the auto industry seized up. Tesla had just four months of operating capital left in the bank at a time when no investor wanted to sink money into an unprofitable car company. Even SolarCity was foundering. Morgan Stan-
ley, which had been financing no-money-down solar panel leases, pulled out of the programme, temporarily cutting the company’s sales in half. “It looked like all three might go under,” says Musk. I had never seen Musk show any kind of emotional vulnerability before he told this story. He looked down and then confessed that he would often wake up and discover that he had been sobbing in his sleep. To Musk, a man who had steered his own destiny since his early teens, the loss of self-control was terrifying. “I’d wake up and just be like, What the f k,” Musk says. “I think that it’s like”—he pauses, suddenly seeming far younger than his 39 years, and then tries to explain—“When you’re asleep, there’s just much less emotional control.”
A
fter SpaceX’s third launch failure, Musk announced that the company was raising outside capital for the first time—$20 million from the Founders Fund, a venture capital fund run by his former PayPal co-founder Peter Thiel. The investment did two things: It showed that somebody other than Elon Musk believed he might succeed, and it gave him enough money for at least two more launches. Rocket companies normally spend months after a launch failure carefully reviewing what happened before they make their findings public. But just four days after the crash, Musk took to the SpaceX blog and wrote that he was “certain as to the origin of this problem.” He planned to have a new rocket on the launching pad within a month. To industry veterans, the swiftness of the response was impressive—and also a little frightening. “A lot of people were seriously questioning whether SpaceX could put everything together and have a successful launch,” says Jeff Foust, an aerospace analyst with the Bethesda, Maryland, consulting firm Futron and the editor of The Space Review, an online journal that covers the industry. “If Elon had failed again, he would have been roundly criticised for not taking a more methodical approach. It was a bit of a bet on his part.” But SpaceX didn’t fail. On September 28, 2008, Elon Musk’s Falcon 1 rocket became the first privately-funded spaceship to reach orbit from the ground. A grainy webcast shot from a camera mounted on the rocket showed the engine burning red above the blue Earth, while loud cheers from hundreds of employees echoed over the feed. In December, NASA announced that it had purchased 12 flights on Musk’s new, larger rocket, the Falcon 9, to resupply cargo to the International Space Station; the
Musk’s chief concern is that by the time humanity is ready to go to Mars, he will be too old. “I don’t want to be doddering around up there, needing a quadruple bypass,” he says.
NOVEMBER 2010
|
INC.
|
47
THE EXPLORER
contract was worth roughly $1.6 billion over seven years. Musk made a similarly risky gamble to shore up Tesla. At a board meeting in October, with the company’s future in doubt, Musk informed the board that he was raising a $40 million round from existing shareholders—even if it meant that he would be the only shareholder putting in money. He eventually invested about $20 million in cash. “That was it,” he says. “I was all in.” Musk’s investors were floored. “I don’t think I’ve ever seen an entrepreneur with so much resolve,” says Steve Jurvetson. “That was a heroic act. It was a risky act. It saved the company.” The gesture helped persuade Jurvetson and other Tesla shareholders to dig a little deeper. Kimbal Musk, Elon’s brother and a board member at Tesla and SpaceX who contributed to the round, told me that it never occurred to him to advise his brother not to bet the remainder of his wealth on Tesla. “There was no question he was going to do it,” says Kimbal. “Elon’s psyche is so tied up in the idea of changing the world. His attitude was, So what if I don’t have any money left?” Musk’s official titles at Tesla had been product architect and chairman, but as the largest shareholder, he had long been a de facto CEO. Now he took the title formally and announced that he would personally refund buyers’ deposits, if Tesla failed to produce a car. He also began aggressively campaigning to tap several hundred million dollars’ worth of government-guaranteed loans that had been approved as part of the $7.5 billion Advanced Technology Vehicles Manufacturing Loan Program, a green-auto initiative that President George W Bush signed into law just before leaving office. The decision to apply for government funding was controversial, especially in the light of the financial crisis and the auto industry bailout. New York Times columnist Randall Stross wrote a scathing column in November in which he questioned whether it was appropriate for taxpayers to help out a sports car manufacturer and proposed the loan programme be renamed the Bailout of Very, Very High-Net-Worth Individuals Who Invested in Tesla Motors Act. Musk had always been an enthusiastic patron of the press—he accepts most interview requests, rarely seems to censor himself, and does not use a publicist—but he took an especially aggressive tack in defending Tesla during the financial crisis. “Randy Stross is a huge douche bag and an idiot,” he said in a video interview with Yahoo’s finance website. (Musk stands by the assertion. In fact, when I asked him about it, he spent a few minutes parsing the difference between the two slurs and then he added another: “Renowned dickhead.” I didn’t ask for an explanation, but I’m sure he had one ready.) Musk defended Tesla’s application for the loan guarantee by pointing out that government dollars were already going to gasguzzling carmakers. How, he asked, could anyone begrudge a tiny electric-car company a few million dollars when Washington was giving billions to General Motors and Chrysler? The argument worked. Tesla won approval for a $465 million loan, the chief source of financing for the Model S. (The big companies made out just fine. As part of the alternative-fuel programme, Ford received $5.9 billion, and Nissan got $1.6 billion.) The confrontational pose has since become Musk’s default. During my visits, he made cracks about the astronaut (and vocal SpaceX oppo48
|
INC. | NOVEMBER 2010
nent) Neil Armstrong, Audi, GM, BMW, Democrats, Republicans, the US Senate, Lockheed Martin—as well as a smattering of lesser villains that included enterprise software companies (useless, overpriced) and Santa Monica restaurateurs (purveyors of low-quality fare). These barbs can be quite funny—and they make for excellent copy—but Musk’s tendency to publicly humiliate anyone who stands in his way can also be coercive and a little creepy. On the other hand, Musk has little choice but to defend himself. He points out that his rivals in the auto and aerospace industries are among the most entrenched in the world. “The lobbying power they have is gigantic,” he says. “They have literally buildings full of lobbyists in DC. We have one guy. If this was something about who has the most lobbying power, we would be screwed.” Musk has received plenty of government money—and the Obama administration has embraced
How, he asked, could anyone begrudge a tiny electric-car company a few million dollars when Washington was giving billions to General Motors and Chrysler? The argument worked. Tesla won approval for a $465 million loan, the chief source of financing for the Model S.
Tesla and SpaceX—but suggestions by commentators that this is the result of some kind of quid pro quo arrangement seem off base. During the 2008 election, Musk, a registered Independent, contributed more money to Republicans than Democrats. He gave $2,300 to the Obama campaign. Still, his days as an outsider are probably numbered. Tesla is on track to book about $100 million in revenue this year, on sales of the Roadster and battery packs for Daimler’s electric Smart car and the Mercedes A-Class—as well as Toyota’s electric Rav4. (Both automakers now have substantial investments in Tesla; the batterypack deals are joint ventures.) In 2012, the Model S is set to start rolling off production lines in a Bay Area factory that once made Chevy Novas and Geo Prizms for GM. SpaceX, meanwhile, has 40 launches on its manifest—including the NASA deals, a $500 million contract with the satellite giant Iridium, and contracts to provide launch services to the space agencies of Taiwan and Argentina. “For many years, we’ve seen proposals for lots of new launch vehicles, but most of them never materialise,” says Foust, the aerospace analyst. “For SpaceX to have launched the Falcon 9 successfully is a major accomplishment. Commercial space has moved past the PowerPoint stage.”
THE EXPLORER
superhero Hollywood’s
take on Iron Man, portrayed by Robert Downey Jr, was inspired by Musk.
B
etween the electric cars and rocket launches, Musk clearly has a lot on his plate. But that hasn’t stopped him from plotting another trio of ambitious business proposals. “The simplest,” Musk tells me, “is to use aerospace engineering to double-decker the freeways.” He plans to start a company that will create prefabricated metal risers out of space-grade aluminum. Then, he wants to drop those risers onto Los Angeles’s famously congested 405, doubling the capacity of the freeway without stopping traffic. “It’s a no-brainer—easily done,” he says. “They would also look quite pretty.” His other two ideas are more speculative, but not entirely so. Musk hopes to one day turn his attention to solving the problem of commercial nuclear fusion—that is, generating nuclear power without nuclear waste—and to design and manufacture a zeroemission airplane. “The idea would be to go several generations beyond what’s currently available,” he says. “It would be an electric, supersonic vertical-takeoff plane—much more convenient. I know that would work, too.” It sounds pretty wild, but so did Musk’s ideas when, in 2002, he looked into shooting a greenhouse into space and landing it on Mars. But after making three trips to Russia in an attempt to buy a cut-rate launch on a decommissioned intercontinental ballistic missile, Musk learned that even the least expensive rocket launch would cost $20 million or more. “The cost was prohibitive,” he says. “It’s 100 times worse than it needs to be, and it hasn’t been improving. The US had almost no rocket infrastructure in 1960. Nine years later, we were on the moon. And so you’d think, Sure, we can go to Mars by now. No way. We can’t even get back to the moon.” SpaceX is working on a version of its rocket that will use two extra boosters to carry as much as 35 tonnes into orbit. Musk says
the parts necessary to build a Mars spaceship could be launched on these more powerful rockets and then assembled in space, the same way the International Space Station was built. Or SpaceX could build a much larger craft—“A big freaking rocket,” Musk says—to go straight to the Red Planet from our own. None of this, of course, is paid for yet, and there is no clear market for Mars rockets. “We’re taking a walk-before-you-run attitude,” says Lori Garver, the deputy NASA administrator and the former space adviser to the Obama campaign. “We’re hoping there will be some near-term successes to prove out our plan for commercial space.” To date, Falcon 9 has flown only once, and there are two test flights remaining before it can begin flying to the space station. If it suffers more failures, any talk of Mars would seem to be off the table. In that case, it’s hard to imagine Musk failing gracefully. The psychic blow would be too great—or he would destroy himself financially trying to salvage his dreams. Musk hopes to eventually devote the bulk of his energy to SpaceX. Tesla’s government loans require him to hold on to most of his stock until the loans are repaid, and an agreement with Daimler mandates that he stay on as CEO at least until the completion of the Model S in 2012. “I’m committed to Tesla, but nobody should be CEO forever,” he says. “I think I’ve burnt out some mental circuits over the past couple of years.” Musk’s chief concern is that by the time humanity is ready to get to Mars, he will be too old or frail to survive the journey. “I don’t want to be doddering around up there, needing a quadruple bypass or something,” he says, adding that, ideally, he will be on Mars by 2030, and by 2040 at the very latest. But even that sounds ambitious. I ask him if he can really, really get it all done in his lifetime. “Probably,” he says. “Hopefully.” Then he pauses for a few seconds to consider the enormity of that question. He will be 69 in 2040. “Thirty years,” he says. “That’s me since I was nine. I think I can get a lot accomplished in that period of time.” Max Chafkin is Inc.’s senior writer. NOVEMBER 2010
|
INC.
|
49
HOW I DID IT
KOCHOUSEPH CHITTILAPPILL Y THE SOUTHERN POWER I grew up in a remote village of Thrissur, Kerala. The nearest town
was 16 kilometres from where we stayed. My family was into farming. I was the third among six siblings.
I went to a school run by the local church and completed my grad-
uation from Christ College, Thrissur. I followed it up with a postgrad degree in physics from St Thomas College. I was quite an average student—never brought home dazzling results. Back then, my aspiration was to become a scientist at the Bhabha Atomic Research Centre or the Indian Space Research Organisation.
What I finally settled for had nothing to do with my grand scheme of things. I became a supervisory trainee at this small company that built emergency lamps, battery chargers and stabilisers. I worked there for three years and went up two or three levels during my tenure. However, I wasn’t content making 800 a month. It wasn’t that my
salary was low. It helped me live comfortably and even allowed me the luxury of a scooter. But, I knew I could easily make more money by myself; I just did not know how.
Of course, I had never dreamt that I would become an industrial-
ist. My ambition was to simply make a little more money—around
50
|
INC. | NOVEMBER 2010
Building a 450-crore company out of the beautiful and often-sleepy landscape of Kerala is no easy task. But Kochouseph Chittilappilly, the founder of V-Guard, has been able to do just that. Of course, with some help from the electricity board’s power fluctuations, which ensured that his stabiliers remained in demand. Chittilappilly has seen it all—a failed product, trouble with labour unions, and a boom brought on by Gulf returnees. In 2000, despite warnings from bankers and auditors alike, he started an amusement park in Kerala. Though far removed from the company’s core strength of electronics manufacturing, the decision paid rich dividends. It also put V-Guard on the map of south India and its founder among leading entrepreneurs. AS TOLD TO JACOB CHERIAN PHOTOGRAPH BY SANTHOSH
On a Power Trip The problem of voltage fluctuations in Kerala helped K Chittilappilly grow V-Guard.
HOW I DID IT
2,000 per month. I soon realised that I could make even more than that by just selling 50 stabilisers a month. Since I worked for an electronics company,
my friends and relatives would often bring over their faulty stabilisers and ask for repairs. That’s how I got to know the inner workings of all the brands in the market. Back then, two brands, Keltron and Nelco, dominated the stabiliser market. In both cases, I noticed that the stabilisers would burn off, if the voltage shot too high. So, I thought why not build a stabiliser that would automatically switch itself off from the power supply if the voltage shot up. It would kick back to life as soon as the voltage level returned to normal. Thanks to my experience in research and development, I was able to design this circuit all by myself. It turned out to be my unique proposition.
In 1977, I quit my job to launch V-Guard.
It was the middle of the Emergency, but we were largely unaffected, being a small business in Kerala. I rented a 400-square-foot shed and hired two 18-year-olds, who hadn’t even passed their tenth standard. I knew how to build stabilisers, and now I had to teach them. My contacts from my earlier job helped me procure the required machinery from Bombay.
People often crib about the way our gov-
ernment functions. I am very grateful to it. If it wasn’t for the inefficiency of the Kerala Electricity Board, I would never have been able to build V-Guard. The power fluctuations in Kerala, some 20 years ago, became our big meal ticket. It helped me grow the company immensely. About six months into the company, I got
married. I was the first among all my cousins and siblings to start a business of my own. My wife, Sheila, on the other hand, came from a business background, and proved to be a huge support. I learnt the importance of hard work from
my parents. They were agriculturists and reasonably well-off. And yet my mother would always find some work to do around
52
|
INC. | NOVEMBER 2010
Standing Tall
Chittilappilly has built a 450the house, despite the of them wanted to risk paycrore business in a state known presence of a number ing up front for an unknown for its labour troubles. of domestic helps. My brand. So, I would give them father taught me to be a couple of units and come systematic, punctual and straightforward. around to collect the money only if the gadHe also loaned me 1 lakh over a number gets were sold. The good thing was, we sold of years to get V-Guard off the ground. almost everything we made.
In our first month, we built 50 stabilisers.
By the fourth, we had hired two more people and were putting together 100 pieces a month. Like every start up entrepreneur, I was the purchase manager, HR manager, marketing head, everything rolled into one. I did absolutely anything that was required of me. In those days, I would ride all the way to Kochi on my scooter and sell my stabilisers out of the two-wheeler. I would accost any refrigerator shop owner who would listen to my spiel. The only problem was none
In 1978, I finally hired a graduate as a marketing executive. He would carry the stabilisers to other cities of Kerala by train. By 1980, we were selling in the entire state through our distribution channel of refrigerator dealers. That’s when we bought 15 cents of land for 40,000 in Kochi. In 1984, television finally arrived in Kerala, and a new door cracked open. The new TV dealers doubled our turnover. This was also the time when the Gulf boom was chang-
HOW I DID IT
ing the economy and landscape of Kerala. A lot of youngsters were returning to India, bringing with them a whole load of consumer electronics that they had become used to. The voltage fluctuation problem, however, still existed. Both these factors shaped the contours of our business, creating a unique demand pool. Two years later, we started selling in
Tamil Nadu and Karnataka as well. Then, we introduced our second product—a clock carved out of rosewood. I felt it would sell, but the steep price tag bumped off the customers. We discontinued it and began making water pumps instead. The move seemed to be a good one and we soon had the customers on our side.
By 1995, I was completely taken in by a new idea. Amusement parks had always fascinated me. Whenever I would travel abroad with my family, we would inevitably visit these amazing entertainment parks. And then I was hit by this thought, “why not build one in Kerala?” V-Guard had, by then, reached a position where it could run on its own. I could afford to get into a new area.
La, in Bengaluru. Now, we are doing more parks in Tamil Nadu and Andhra Pradesh. My son, Arun, spearheads the growth and operations of these parks. My other son, Mithun, works at V-Guard, which went public about two years ago. It was a success. Most of our staff went smiling to the bank, since all of them owned shares in the company.
Our bankers and auditors discouraged me
reduced my role in these companies to what some people would call a mentor. Now that I have time, I like to focus my attention towards charitable causes. The companies are doing fine without me, but I still enjoy working.
from opening such a park in India. But I believed that the country had grown significantly since I had started out. Many nonresident Indians, who had been exposed to such parks during their stay abroad, were returning to Kochi. That was reason
“If it wasn’t for the inefficiency of the Kerala Electricity Board, I would never have been able to build V-Guard.” In the mid-eighties, we got a taste of Kerala’s infamous labour unions. It was very disturbing. Till then, my entire life force was being sucked by marketing and production. I had forgotten to keep an eye on the union. Most of the problems were triggered by a union leader who had come from the outside and instigated the workers. We, however, refused to give in to their demands, and began outsourcing work to subcontractors around, and outside, Kerala. When the union members saw that our business was growing even without them, they backed down. Today, there is no labour union at V-Guard. In hindsight, this problem was a blessing in disguise as outsourcing became a large part of our business model.
enough to start off. A lot of people did not see this as clearly as I did, but we took the plunge anyway. In those days, there was no expertise in
India to build such a park. I took my chances with a young architect who had a good track record. We travelled to several amusement parks outside India. I showed him things I wanted to implement in our own park. He understood well and put those ideas to production.
Four years later, in 1999, the amusement
park, Veega Land, opened its gates for the first time. It broke even in three years. The timing was impeccable. Riding on its success, we launched the next park, Wonder
As the years have gone by, I have slowly
Currently, I am working on the second
part of my book, Practical Wisdom—In Real Life and Management. The first part, published in 2003, was a collection of articles that I had written for our in-house publication. It was my way of sharing my knowledge with the company. After six years of doing this, we had enough material sitting around. So we decided to choose the best pieces and compile them into a book. I have almost stopped writing now; but I always encourage others to do so.
In the past few years, I have received
numerous awards from the Kerala government. Awards don’t mean much and one shouldn’t take these things too seriously. Besides, I feel the recognition came since I was doing business out of Kerala. If I was operating out of Mumbai or Delhi, frankly no one would have paid much attention.
Staying out of the northern region had
been a conscious decision for a long time. Quite frankly, I value my sleep too much for that. It’s only after my sons graduated that we decided to make inroads into the north. Till then, I found it difficult to distribute our products up north, since they were being produced all the way down the peninsula, in Kochi. Today, I’m glad to say that we have factories in Himachal Pradesh, as well as Uttarakhand.
NOVEMBER 2010
|
INC.
|
53
START-UP
DIARIES Tracking radical ideas from different cities
November 01-2010 Hyderabad. Another start-up from the city. The idea seems interesting— allowing users to search information on people... Mumbai. Lots of action since May. New clients, such as Vodafone. A deputy to free up time. More people on the rolls...
Imagine being able to do a background check on your next domestic hire—everything from address, to education, to criminal record, if any. That’s the power of Tarun Bangari’s idea. Started in 2009, JantaKhoj is a portal that accesses all public repositories to hunt for information.
Hyderabad: I Spy with Online Eyes It’s not every day that an entrepreneur starts out with an idea as lofty as “making India a more transparent society”. However, Tarun S Bangari sounds most sincere when he shares his ambition. He’s done his bit in the past few months to at least make Indians more transparent about themselves. The company he cofounded in April this year, JantaKhoj.com, provides people-search and background verification services to individuals as well as corporate clients. Although new to India, this concept has been a part of the western (corporate and social) culture for a long time. “People search engines that gather information from directories were missing in our country,” says 37-year-old Bangari, who was quick to cash in on the idea. The site works rather simply: visitors can log in and search its 450-million strong database for information on not-so-familiar people—for free. Incidentally, Bangari claims that his database is already the largest integrated public repository on Indians. However, he is quick to rubbish any Google-eseque ‘inspirations’. “Google is a generic search engine and doesn’t go into a lot of databases, or dip into many local servers,” explains the IIT Banaras Hindu University and IIM Calcutta alumnus. But, his Sherlock Holmes portal does. So much so that it allows users to even search information on their domestic help, driver, tenant or future spouse. “To do verifications on your own is a challenge. Accessing authentic government records isn’t easy. And, we help our customers do just that,” says Bangari. The feature, he claims, is innovative, simple and dynamic. Individuals can choose from a series of background checks— address verification, criminal record, and education qualifica54
|
INC. | NOVEMBER 2010
tion—each of which comes with its own price tag. The online request form is dynamic and provides the turnaround time for the information requested. For instance, verifying an address in a metro typically costs 375 and takes four days. A similar request for areas, such as the Northeast or Jammu and Kashmir can take up to seven days, and costs more. A fully-loaded verification package would be 2,000, or more. Traffic on the website has been brisk, averaging up to 700 to 800 visits a day. Bangari, who has worked for a clutch of cutting-edge technology companies, both in India and the US, during his 14-year career, rattles off numbers, saying his is among the 0.46 per cent most trafficked sites globally. Bangari’s hunt for information started in June 2009 with some angel funding from Ajit Gupta, a Silicon Valley-based serial entrepreneur and the co-founder of JantaKhoj. The two had worked together at Speedera, a content delivery specialist. Together, they had thrashed out many ideas—from online videos to clean technology— before zeroing in on the people search one. Armed with a rough business plan, and assurance of funds from Gupta, Bangari went to work. He had been living in Hyderabad since 2009 to be closer to his family. His wife is an associate professor at the Indian School of Business. So that’s where the online detective agency (well, sort of) is based in—rather humbly in a three-bedroom apartment. “We began with two critical hires, a search expert and a technology guru. One is our head of verifications, while the other is the head of engineering,” he explains. Now, his team is breaching double digits and Bangari is keen to try out tactical retention strategies to grow a committed cadre.
START-UP DIARIES
The Official Spy Tarun S Bangari’s portal gets upto 800 visitors every day for its people-search and background verification services.
“When Speedera was bought over by Akamai, I experienced firsthand the windfall that can come from stock options. But, that culture still needs to catch on in India. Here, employees want the full cake; market-level salaries, plus the icing in the form of stock options,” says Bangari of his challenges. That’s not the only challenge in front of him, though. Like other start-ups, he is quickly learning that great ideas also need warming up. “We’re in the early stage now,” he confesses. “We were banking on verifications and would have liked to see more action there. Though there have been a lot of enquiries, not many verifications have happened.” Fortunately for him, though, the B2B service for employee verification is surging ahead. “We already have a double digit list of clients. And, the pipeline is strong.” He believes that the growing
pharma and infrastructure company sectors offer a solid opportunity for growth—and could lead to him breaking even within the next three months on working capital. He’s unwilling to reveal how much initial funding the company has received, but admits it is sufficient for the time being. For now, he’s gearing up for the bumps ahead. His company outsources verifications to agencies specialising in the function. It will be critical to ensure that they understand JantaKhoj’s value proposition—timely, accurate, and cost-efficient checks. More than accuracy of data, it is turnaround time that’s become a big pain point, explains Bangari, saying that multiple follow-ups are required to extract information from state authorities and universities. Pricing is another key concern. “There is no automatic database, so each inquiry requires manual and real-world effort. We want to democratise the verification process, and pass on the benefit to the people.” He’s picking up the ropes of entrepreneurship fast. “We started out with three business lines. Already, we have realised one hasn’t progressed the way we wanted. You have to keep your eyes open and be willing to re-allocate resources.” In any case, the thrill lies in this dynamism. “I finally feel like I am using my MBA. There are no theoretical discussions. Start-ups allow you to execute. I am sold to this lifestyle, including our modest office,” he admits. “We are poised for success. But, even if I throw in the towel, it will be to start something else. I can’t go back to a big company. That phase is over,” he says resolutely. As JantaKhoj gets busy helping people search, its creator, it seems, has already found himself. NOVEMBER 2010
|
INC.
|
55
START-UP DIARIES
Update
How our earlier entries—the ventures and their founders— are faring in start-up land.
Mumbai: Mirakle Couriers When we first profiled Dhruv Lakra and his Mumbai-based courier service that employs deaf adults, in May, the young entrepreneur was struggling to get more clients on board—a common ailment that strikes most start-ups. Five months later, Mirakle Couriers is enjoying its marketing momentum, with companies such as Bain Capital, Ravissant, O3 Capital and Vodafone on its roster. These acquisitions have pushed up the number of packages being handled—from 500 to more than 3,000 a day. In fact, Mirakle now delivers Vodafone bills in South Mumbai localities, such as Churchgate and Nariman Point. “I think the media coverage has helped tremendously,” says Rohan Mehta, Lakra’s deputy at Mirakle. “Companies are excited about working with a social business like ours. Also, we are now targeting multinationals, which have a greater sense of corporate social responsibility,” continues Mehta, a postgraduate in development economics from the prestigious School of Oriental and African Studies in London. Mehta, too, gave up promising job offers from international aid organisations and financial firms to join Mirakle in January. He is now pretty much Lakra’s go-to guy for everything, and heads business development and marketing. Together, they are focusing on building on their recent growth. Their immediate plan is to expand their domestic and international reach by partnering with agencies that fly out of the city. This will ensure clients access to all major metros in India and to key international cities the world over. This ramp up has led to hiring—Mirakle’s strength has grown to 60 employees. With two operations managers on board, 56
|
INC. | NOVEMBER 2010
both Lakra and Mehta have more time to devote to marketing. Both are looking forward to higher client conversions, and adding up to 40 more people in the next few months. Mirakle finds it difficult to convince deaf adults to join in. “We are going to deaf schools to recruit. Our staff performs a skit to show students there how Mirakle has improved their lives beyond the salaries it gives them,” says Mehta. Many don’t understand the benefits, looking solely for short term gains, he rues. “We have to educate them about provident funds and benefits like that. They have a hard time grasping long-term advantages.” Not that it’s easier managing people once they are on board— as the duo is finding out. “There is heartburn when someone becomes a supervisor. There is resistance to new faces. It happens in all companies. People tussle and internal politics will happen as we grow,” says Mehta. Mirakle hopes to break even “any day now”. “Payments don’t come in on time, so tallying our accounts is a challenge.” Still, working capital is not a concern at present; new business is steady enough to cover expenses. Lakra isn’t keen on raising capital either, and wants to grow organically. There has been heartening news from unexpected quarters as well. Muhammad Yunus, Nobel Laureate and founder of the Grameen Bank, recently mentioned
The Sound of Money Dhruv Lakra (in blue) has added clients like Vodafone and Bain Capital.
Mirakle and Lakra as an example of a great social business working model in his new book, Building Social Business. “It’s such an encouragement that somebody like him has heard of us. We have never met him or talked to him,” adds Mehta excitedly. Over the next few months, a larger office space is also a definite requirement as staff strength goes up. Armed as they are with their recent wins, all of this looks well within hearing distance for this gutsy company. “We just need to keep the momentum going. It’s in the right direction,” concludes Mehta.
Sales & Marketing Should you hire a sales consultant? this page Sales & Marketing How can toy store Mama's Little Donut fire the imagination of parents? page 59 Elevator Pitch Will investors be game for a play on children's fitness? page 60 Managing How to deal with nightmare bosses. page 62
The Way I Work
G Balasubramaniam of Grey Caps page 64
STRATEGY Timing it Right If you're spending too much time on sales and not enough on running your company, then it's time to get help.
Sales & Marketing Calling in the pros Should you hire a sales consultant?
PHOTOS.COM
Michael Davis knew it was time for a
change. Although he had hired two salespeople, handling sales was still taking up most of his workday. That left precious little time for Davis to focus on other aspects of running his business, Savid Technologies, an IT security consultancy in Chicago. “I knew I could close deals,” says Davis. “But I didn’t know how to build and manage a sales team.” He decided to hire a sales consultant. The topic of sales consultants gets mixed reactions from entrepreneurs. Some CEOs swear by them, while others dismiss them as snake oil peddlers. Certainly, if you type the term sales consultant into Google, you will find thousands of men and women who claim to be experts on the art of selling. Although some are worth their salt, finding a good sales consultant requires a lot of shopping around. Davis talked to four consulting compa-
nies before finding one he liked, Accountability Partners in Aurora, Illinois. The clincher: The CEO and lead consultant of Accountability Partners, JR Samples, used to be the head of sales at one of Savid Technologies’ competitors. “I knew he understood our business,” says Davis, who agreed to pay Accountability Partners an hourly fee and an upfront retainer of $5,000. Samples worked with Davis on
mapping out a guide to sales operations, an 80-page document that details how the company makes money and how sales commissions fit into that structure. The document also lays out a variety of customer scenarios and suggests ways to approach a sale. “That document became our training tool,” says Davis, who, with the help of his consultant, hired three new salespeople. Davis ended up paying about NOVEMBER 2010
|
INC.
|
57
STRATEGY
$80,000 for a year’s worth of consulting services—money he says was well spent. In the two years since he started working with Samples, annual revenue at Savid Technologies has jumped about 400 per cent, to $2.5 million. And Davis no longer needs to close every deal himself. Hiring a sales consultant can also be beneficial for small-business owners who find themselves in the role of company pitchman, but lack sales experience. That’s why Don Kennedy, owner of ProMaster Home Repair & Handyman, a Cincinnatibased remodelling and home-repair business, hired one. Kennedy, who had been an Air Force pilot for 10 years before buying his business, handles sales for the six-person company. But his close rate was abysmal. “I had great communication and
relationship management, or CRM, software. Roth also encouraged Kennedy to raise prices. “Mike worked with me on improving the skills and tools I didn’t have,” says Kennedy. “He didn’t waste time on the stuff I was already good at.” After paying Roth about $12,000 for a year of training, Kennedy has his close rate up to 60 per cent, from just 17 per cent prior to working with Roth. Revenue at ProMaster has increased from $220,000 to $700,000 a year. Consultants can also help with managing technology like CRM software. That’s what prompted Stefanos Damianakis to hire a consultant. Damianakis, CEO of Netrics, a Princeton, New Jersey-based company that makes software for cleaning up data records, was having problems with Salesforce. His sales team was spending more time updating the information in the software than selling. “We became so obsessed with updating data,” says Damianakis. “People were telling me, ‘Our CRM is getting in the way of doing my job.’” Damianakis turned to a local firm, Princeton Sales Partners, for help. Many companies struggle with these sorts of issues, says Jim Lewis, founder of Princeton Sales Partners. Lewis taught the salespeople at Netrics how to track only the most relevant client information in Salesforce and how to use the software to track one another’s progress. Lewis also showed Damianakis how to use Salesforce to spot accounts stuck in the pipeline, as well as identify salespeople who were struggling, so that they could be coached. “If, say, one person is having trouble getting access to more people,” says Lewis, “you can work with them by using role playing or other techniques rather than just telling them to make more calls.” After the changes, sales at Netrics increased about 20 per cent in 2009, leading to its acquisition by TIBCO, a software company, this year. “Now, we’re doing less busy work and selling more,” says Damianakis.
“If you don't give this person some weight to make changes, then all you have done is hire another consultant.” managerial skills,” says Kennedy. “But I didn’t know the first thing about selling or what a sales process even was.” Kennedy scoured Cincinnati looking for a sales coach. But many of the consultants offered what he calls “cookie-cutter solutions”. Some charged as much as $30,000 for a three-month class, he says. Kennedy didn’t have the money or time for that. “I had real problems I needed to solve,” he says. “I couldn’t wait until I got to Module 14 or got my diploma before making some changes. I wanted someone willing to get their hands dirty inside my business.” Eventually, Kennedy asked fellow business owners for referrals and, after getting a few names and numbers, found Mike Roth of Sandler Training by Roth & Associates. Roth was willing to mentor Kennedy at his office. He helped Kennedy improve his phone closing skills and set up customer 58
|
INC. | NOVEMBER 2010
Like many consultants, sales experts typically consider themselves done after they have made their recommendations. Unfortunately, turning those recommendations into reality can be time consuming, particularly if sales isn’t a founder’s forte. If you need more hands-on assistance, a sales consultant may not be the best fit, says Shirley Balarezo, CEO of Tone Software, which makes software that lets companies monitor the use and cost of their digital phone systems. Last year, her Anaheim, California-based company acquired a product called Streamline, a VoIP monitoring application. Her 10-person sales team was presented with a new set of products to sell. Balarezo also wanted her salespeople to start selling the new products overseas. Although the team needed help, Balarezo was reluctant to hire a sales consultant. “I had worked with sales consultants in the past, and they write beautiful reports and research,” she says. “But we were always left with the problem of how to follow through on their recommendations.” Balarezo wanted someone who could lead the charge. So she decided to hire a temporary sales executive. After hearing about Cerius Interim Executive Solutions, a firm in Irvine, California, Balarezo hired James Obermayer, a seasoned sales executive, on an interim basis. Obermayer stepped into the role of vice president of sales and marketing, if only temporarily. “I’m getting a professional I can count on to execute our plans immediately,” says Balarezo. She has charged Obermayer with developing a sales process, as well as accurate sales forecasting and tracking. She also plans to begin looking for a full-time replacement for him, someone whom Obermayer can train. Until then, Balarezo is including Obermayer in various company meetings to give him a broader understanding of Tone's objectives and challenges. She wants Obermayer to help other departments, such as engineering and marketing, make changes to help boost sales. “If you don’t give this person some weight to make changes,” she says, “then all you've done is hire another consultant.” —By Darren Dahl
STRATEGY
Sales & Marketing A store that sells educational toys Will it tickle the imagination of parents? It’s common for parents to have Einstein-ish aspirations for their children. Not so for mothers Ashima Razdan and Shiffali Wadhawan. They would rather encourage children to use their imagination and creativity. Realising that they aren’t the only parents to think so, the duo decided to convert their philosophy into a selling proposition. In 2008, they opened Mama’s Little Donut in Delhi to sell fun educational toys. Through tie-ups with international brands, such as Melissa & Doug, Wonder World and The Puppet Company, the store sells non-toxic toys, costumes, books, and so on. Prices range from 50 to 2,000—thereby catering to the upper middle class. The two entrepreneurs also organise a variety of activities, such as puppet theatre workshops and pottery classes. —Sunaina Sehgal
How would you sell that?
COURTESY COMPANY
PITCH NO. 1: Find distributors Jyoti Ramnath, gift expert and founder, Craft My Gift, a customised gift shop They should find distributors in different cities to sell their educational toys. Their advantage lies in becoming exclusive distributors for their international partners. They can tie up with Montessori schools to market their products and workshops. Another possibility is selling the toys to pre-schools. They can also conduct their fun workshops in gated communities and high-end apartment complexes during long holidays or festival seasons, and use the medium of workshops to market their products. If Mama’s Little Donut is looking to scale up, it needs to consider the franchising route and target metro cities in India. PITCH NO. 2: Create entry barriers Manoj Kumar, co-owner, Rentoys, an online toy rental company Toy stores and activity centres for kids are a growing area. There are many local players in this space, but not popular brands. I think MLD’s differentiation comes from the variety of items, especially puppets and costumes, which it has managed through its tie-ups with international brands. However, that does not provide much entry barrier to this space. It needs to think about its competitive niche, and also about scaling up the business through franchising.
Toy Story Can a store that promotes creativity in children fire the parents’ imagination?
FEEDBACK ON THE FEEDBACK: We are in the first phase of expansion. We will soon launch specialty toy store franchises in Mumbai, Bengaluru and other cities. We have introduced lots of projects, like the Happy Tree of Toys (recycling old toys) and Magic Tree House (book donation) in association with nongovernmental organisations working with kids. We are looking to introduce new categories of toys as well. We’ve got new tie-ups in the pipeline. We are also planning to make our website more interactive as well as to get into e-commerce with deliveries across India. We will be introducing a panel of experts online to whom mothers can turn to for advice. Besides, we plan to promote tie-ups with complementary service providers and exhibitions.
PITCH NO. 3: Get an ambassador Shruti Dhanda, co-founder, EntrAct, a business advisory service Make the website more childrenfriendly; maybe a short puppet show, or some other activity that will increase engagement. Display toys in pre-schools, and put up stalls in schools during PTAs and annual day functions. Carry out similar activities in paediatric wards to engage with children. Put up toy carts/ kiosks at parks frequented by mothers and children, and hold activities, such as puppet shows, live games, or story-telling sessions. Create a brand ambassador for toys, who will make it easier to associate with the brand. Promote this character through merchandise, such as pencil boxes. PITCH NO. 4: Sell online Kakoli Das, idea generator, The Red River, an organisation creating handmade arts and crafts Mama's Little Donut is doing the right things. The store and their website look good. Since their differentiation lies in fostering creativity, they should include more information on how a toy will help/ facilitate creative expression. The could have regular crafts classes and story-telling events, and use these events as a brand-creation exercise. Include online buying. Sometimes, that’s all that you need for the conversion to a sale. NOVEMBER 2010
|
INC.
|
59
On a roll Prashant Pitti hopes to teach children that exercise is fun.
60
|
INC. | NOVEMBER 2010
PHOTOGRAPH BY NITISH SHARMA
STRATEGY
FOUNDERS:
Prashant Pitti and others LOCATION:
Bengaluru EMPLOYEES:
19
LAUNCHED:
Elevator Pitch IndiaKhelo promotes fitness. Will investors be game for 1 crore?
2008
2009 REVENUE:
9 lakh
2010 PROJECTED REVENUE:
54 Lakh
PRODUCTS:
Indian Regional League for grass roots level sports; Fitness AIR for children FEE FOR SCHOOLS:
600 per student for two visits a year FEE FOR FRANCHISEES:
25 per cent of total earnings FEE FOR IRL:
Participation fees and sponsorships CLIENT BASE:
12 franchisees in seven states; 77 schools with 21,000 students FUNDING SOUGHT:
GUTTER CREDIT HERE
1 crore
The Pitch “IndiaKhelo helps children get fitter. Child obesity is a growing
concern in our country. Yet, the 4,000-crore fitness industry has done nothing for children’s health. Fitness clubs and gyms cater to adults. But IndiaKhelo’s Fitness AIR (Assessment, Improvement and Reporting) model approaches children through schools and makes them fitter. Consisting of a series of physical tests, including those for muscular strength, it assesses a child’s health on various parameters. The result is a report card detailing a customised plan for diet, exercise and sports. A follow-up three months later helps monitor progress. Started by a group of IIT Chennai alumni, this platform also helps budding sportspersons showcase their talent at the local level.”—As told to Sunaina Sehgal
The Experts Weigh In OFF TO A PROMISING START
REVAMP THE BUSINESS MODEL
The market need, both real and perceived, is high. There seems to be propensity on part of parents to invest in this area. Having a franchise model will have the usual challenges of standardisation; the idea of marketing through schools seems valid. It would be interesting how doctors interplay in this as key influencers in the decisions. The other risk that will need to be thought through is emergence of clone services— there’s little defensibility in the service delivery itself. It is not clear to me if IRL is a core piece, or an ancillary one—the delivery overheads on that can turn out to me much higher than in fitness AIR.
The strategy to approach schools is extremely tough. School budgets are squeezed and except for high-end schools, they are unlikely to spend 600 per student. Passing on the cost to parents will not be easy either, as most Indian parents still prioritise academics over sports, or fitness. From a VC investor’s perspective, it is unlikely to be attractive at this stage without proving the scalability of the model. Consider opening retail outlets, or gyms for children and position them as a fun way of exercising. This will allow them to directly tap into the rising affluent class of parents, sans the school model.
ALOK MITTAL, managing director, Canaan Partners India, New Delhi
DEEPAK SRINATH, director, Viedea Capital Advisors, Bengaluru
REWORK THE PITCH
The business model is very innovative. They should pitch it accordingly. Since the business model is B2B, and not B2C, the revenue depends on convincing school managements. The pitch should include the various ways in which they seek to make money from franchising. It should even enumerate the process of collecting money from franchisees. It should include the cost of delivering their services, and the typical size of a school they will service in that cost. A training programme to address the issues highlighted in the test could be a potential spin-off. GIRISH MADHUKAR TALWALKAR, director, Talwalkars Better Value Fitness, Mumbai
NOVEMBER 2010
|
INC.
|
61
STRATEGY
Managing The dark side of management Lessons from nightmare bosses Robert Sutton is like a priest or psychiatrist of office life: People tell him everything. And because he is not bound by vows of secrecy, Sutton, a professor in Stanford’s department of management science and engineering, is free to share the tales, both comic and tragic, that pour in to him from managers and the managed alike. Sutton’s 2007 book, The No Asshole Rule, When Bosses Go Bad CEOs can sometimes suffer from 'power poisoning,' says Robert Sutton. was a bestseller. Its thesis—don’t hire jerks—became policy at companies around the world. He recently followed that up with the equally canny and diverting Good Boss, Bad Boss: How to Be the Best...and Learn From the Worst (Business Plus). Sutton spoke with Inc. editor-at-large Leigh Buchanan about how to produce inspiration, rather than desperation, in your followers. What's different about being the CEO and being a middle manager, in terms of how you behave as a boss? Employees are always watching the boss. For bosses in the top position, that scrutiny is intense. Everything you do is magnified. You have to pay attention to every little thing. Bosses also tend to get both more credit and more blame than they deserve. That, too, is magnified for the CEO. When the CEO receives a lot of credit for an achievement in the press, employees feel confident because they are working for a winner. But they also are aware of how much of the work they did. So the CEO needs to pile praise on employees. Also, if the leader accepts blame for a mistake, he is seen as more powerful and competent than if he tries to pass the buck. Middle managers are supposed to protect their people from being distracted or exploited by the higherups. I guess if you are the CEO, that's not a problem. If you're the CEO, then it’s easier to protect employees from forces in the organisation that can distract or demoralise them. But that doesn't mean you will. Sometimes, the person on top suffers from power poisoning. They become selfish and oblivious to those around them. So as your ability to protect your people rises, the likelihood that you are not going to do so also goes up. 62
|
INC. | NOVEMBER 2010
You often hear about abusive people who experienced abuse as children. Are bad bosses the product of similarly dysfunctional management? There’s a bifurcation. One of my poster boys for an asshole is Scott Rudin, the famous Hollywood producer. Apparently, people who work for Scott Rudin learn to act like him. But there are other people who say, “I’m going to use my lousy boss as an example of what not to do.” An attending surgeon at a large university hospital told me that back when he was a resident, he and his fellow residents would meet every Friday for a drink, and they would nominate the asshole of the week. They’d write down in a book what that person did. Throughout their careers, they have put social pressure on each other not to become like the people they despise. So, yes, the kind of boss you have will affect the kind of boss you become. Is it harder for bosses whose reports range from the highest- to the lowest-level employees? It is harder. Because the people you oversee will have different motivations. With all due respect, this is where Jim Collins is full of shit. I have a friend whose family bought a chain of movie theaters. Maybe all that get-the-right-people-on-the-bus stuff applies
STRATEGY
to the managers of those multiplexes. But a couple levels down, you’re dealing with teenagers who are going to be in the job for a year or less. My friend said there are four things you want those people to do: show up to work, look decent, not make out or get stoned while they're on the job, and not steal. If you can find people like that, you have a successful business. Work may be the most important thing in your value system, but that may not be true for those around you. Especially if you have all the equity, and to the people around you, it is just a job.
There are many ways in which people show they are authentically confident. Some people are quiet, calm leaders, and some are more inspirational. But for most leaders, there are times you need to fake it. What is the alternative? Do employees want to follow a leader who constantly conveys his doubts that something is going to work out? Still, I do generally believe in authenticity. It is a dilemma. If you are hiring managers, what questions should you ask to ascertain whether they are good bosses? Interviews are among the most useless ways to select people. If you can get real information from employees who have actually worked for a candidate, you’ll get a much more accurate picture. Another good predictor is to give someone a trial period and watch them closely. Our daughter’s high school principal has been trying to turn around this very complicated school. It’s the kind of place where some kids end up at Harvard and some kids end up in jail. He spent a lot of time sitting in the backs of classrooms trying to figure out which teachers were lousy. He said it was easy for the teachers to fake it for 10 minutes. But they couldn’t fake it for an hour.
The Right Approach Sutton’s new book advises CEOs to talk less and listen more.
In your book, you quote someone who called his boss “all transmission and no reception”. What is the right balance between talking and listening? On one hand, there is the blabbermouth theory of leadership. In Western cultures, the person who talks the most is viewed as having the highest status. And interrupting people is a way to seize power. Certainly talking is more pleasant than listening. But most bosses ought to shut up and listen more. If you are a founder who hates firing and disciplining employees, is it OK to hire someone to be the bad guy? That’s a standard part of the COO’s job. Alice Waters, throughout her career at Chez Panisse, never had to be the bad cop. She always had someone else to say, “Alice isn't happy about the way things are going. Maybe you should look for a job someplace else.” Still, everyone loved Alice, even the people she fired. So there’s an argument from a leadership perspective that having a bad guy you can blame isn’t all bad. But while it’s OK to have someone do your dirty work for you, the most effective bosses do it themselves. They learn to do it in a way that does as little damage as possible. From your book, it sounds as though being a good boss involves a lot of acting: acting confident, acting like you are in control. That sounds exhausting. And doesn't it compromise authenticity? At the time you make a decision, no one knows whether it is right or wrong. But research shows that if you, as the authority figure, act confident about implementing the decision, it increases the odds of success. If you lack confidence, people will be less committed to your decision. They have less faith in you as a leader. So you have to convince them you are in control. Then, if it turns out you are wrong, you say, “I was wrong” and explain what you’re going to do differently. And say that you are really confident that this new approach is right. You start the confidence cycle again.
Are there sadomasochistic boss-employee relationships that look twisted from the outside, but actually work well for the people involved? Please do not portray me as an expert in S&M relationships. But there are definitely employees who love being martyrs for their abusive bosses. People who, if they didn’t have their boss to complain about, wouldn’t know what to do with themselves. But in the end, even people who are masochists are going to suffer all kinds of physical and emotional health issues if they stay in a toxic environment. I was surprised by the use not only of your trademark word asshole throughout the book but also other expletives. Given that your last book was a bestseller, can we expect a wave of copycats producing profane management literature? What I’ve learned is that the occasional swearword has an impact—an almost physiological response. A writer on my blog put it this way: If you’ve got a tool box, sometimes you want to use a hand drill, and sometimes you want to use a really powerful electric drill. Swearwords exist because they pack more of a wallop. So can I count on you to write a blurb for my forthcoming book, High-Performance Teaming for Douche Bags? Sure. I can do it now. “This is good shit.” NOVEMBER 2010
|
INC.
|
63
Following the Mahatma G Balasubramaniam loves MK Gandhi’s clarity of thought and philosophy of simple living.
STRATEGY
THE WAY I WORK | Giri Balasubramaniam, Grey Caps
“I hate finance. And I dislike accounts even more.” If Giri “Pickbrain” Balasubramaniam had his way, he would never sleep. Sleep, according to this CEO, is a complete waste of time. He would rather toss clues around, hunt for questions and do some drilling down for answers. Because that’s what he does all the time he is awake. Balasubramaniam runs Grey Caps, a seven-year-old company that helped him turn his obsession for quizzing into a full-time profession. Together with his team, he has hosted more than a thousand quiz shows across India, Singapore, Oman, Sri Lanka and the US, including Tata Crucible, India’s largest corporate quiz for five years now. He’s also presented what is considered the world’s biggest IT quiz, attracting over 1.3 million school students each year. In 2005-06, MIT nominated him for the Global Innovator Award. He is also the recipient of seven Limca Book of Records awards. As a man seeking answers to tough questions, he fell hard for the Mahatma. Such has been his fascination with the Gandhian philosophy that he has even earned a degree in it. When he is not travelling, this popular quizmaster likes to oversee the research operations of his company and tickle the grey cells of his employees by holding quiz sessions.
AS TOLD TO SHREYASI SINGH | PHOTOGRAPH BY S RADHAKRISHNA
When I am at home, I begin my day early, around 6am. However, on days when I wake up
in other cities, flight schedules dictate my mornings. I always get up to an alarm clock. I don’t sleep for more than six hours; eight hours is too much. I like to tell young people that God has allocated a time for sleeping—and that’s in our graves. So, while you are living this life, don’t waste your time sleeping. I hate it. It’s totally over-rated for wellness.
NOVEMBER 2010
|
INC.
|
65
STRATEGY
The first thing I do every day is go and get some fresh air. There is a huge park near my house and I like walking through the greenery out there. Earlier, I was a gym guy. But, I didn’t enjoy the treadmill routine. I prefer the outdoors any day. I walk for about 45 minutes and use that time to clear my e-mails. I am quite hooked to gadgets in the morning. My BlackBerry gets as active as me while I walk. Once my attention is on the BlackBerry, I don’t realise the distance I am walking. It takes me 10-15 minutes to respond to messages that need my attention. Then, I am mentally prepping for the day. My Outlook Express is open in the mind. I am back home by about 7am to a mad rush. That’s the time when my daughter and son have to leave for school, so everything is wrapped around packing them off on time. If I am in town, I even drop them to school. I have been on a strict diet regime over the past eight months. So, the breakfast menu is more measured. Being a vegetarian and a south Indian, I hardly go beyond the typical idli or dosa. However, the chutney has been replaced by sambhar these days. I am generally in office by 9:30am. What I do for the first two hours has usually been worked out during my morning walk. Typically, I start with critical updates, and conference calls, unless the client is based overseas. The team is fresh and I am fresh. And, we can follow up, if something goes wrong. Mornings are a great time to get some solid work done. Although I am technically the CEO, I head research in the company. For knowledge-based businesses like ours, the research and content forms the core. A senior colleague handles the marketing and business development function. I work on clients only after their acquisition. Marketing takes away too much bandwidth. Because of my travel, I am usually not available for meetings. My clients dictate my calendar. Last year, I travelled for 183 days. That’s more than half the year—but, unfortunately, crunched into nine months. I am completely jobless during April, May and June. Schools and colleges shut down for summer holidays; and the number of corporate shows also dwindles. But besides that, my schedule can be pretty hectic. Take my current itinerary, for instance. Today is Friday and I am in Delhi. I was in Indore on Wednesday, Ahmedabad on Thursday, Mumbai on Saturday, Pune on Sunday and Goa on Monday. I get home to Bengaluru on Tuesday and leave on Wednesday again. My busiest days are usually between Friday and Sunday since most quiz shows are slotted for those days. For me, Monday and Tuesday are as close as it gets to a weekend. I’ll usually be in Bengaluru on those days because there is still office to go to on Monday morning. My last weekend was the first Sunday of August. I remember that day because I went out to have dinner with my wife. She had taken a look
at my calendar and pointed out that that was going to be my last holiday this year. I realised we needed to do something fun. Travel is my most productive time. There are few people to interrupt me—and even fewer phone calls to deal with. The time belonged exclusively to me, until my office figured that out and decided to dump work on me. I also like travelling because I can read a lot. As a rule, I don’t spend time on books at home. That’s time devoted to the family. I rarely read fiction. Of late, I have been reading more business books to glean entrepreneurial insights. But, that isn’t limited to books on Google and IBM. It’s about people’s lives. I recently finished a book on Lance Armstrong. He’s inspirational. I am now reading SimpliFly by Captain Gopinath. What I dislike is delayed flights. My secretary dislikes them even more because I get very impatient. I want to be put on to whichever flight is leaving earliest. I try and curb that habit now since cancelling flights costs a lot of money. I am a lot milder in my tantrums. Since I am on the road for a long time, I depend heavily on technology to stay connected. We are an all-laptop organisation. My research team consists of 16 people; they are my core group. We also use the services of several freelance consultants, who are mostly domain experts. For instance, our consultant for this quiz on architecture, sits in Switzerland. But, distance hardly matters in today’s world. Technology is a boon for companies like ours. Most of our meetings are on Skype or Yahoo chat, and they usually end with somebody asking, “So, Giri, where are you?” People don’t know where I have logged in from.
P
66
|
INC. | NOVEMBER 2010
reparations for holding any quiz session starts at least a month in advance. We have to understand what the entire programme is about, who the audience is, and what objective are we trying to achieve. And of course, we have to be ready with our research. Every quiz is about a clutch of questions and their answers. But, at the end of the day, the programme has to meet a client objective, or a theme. We need to grasp that even before we reach the drawing board. I try and reach an event venue at least an hour and a half in advance. My getting there early puts pressure on the logistics team— the carpenters and electricians. I never get on stage before testing the sound and light arrangements. It’s my show that becomes shoddy if I don’t prepare properly. I try and squeeze out time to hold such quizzing sessions at our office too. Often, we test our questions on our employees. It helps us keep our own grey cells revitalised. And, it’s a great way to bond. By the way, I lose both ways—I pay for lunch, even if I win. Sometimes, I feel blessed that I have been able to carve a profession out of my passion. I am a quizzer who’s become a quizmaster. I
STRATEGY
“Travel is my most productive time. There are few people to interrupt me.” love the whole process. Boredom is out of the question here. I love the fact that we are continuously filling someone with some information or knowledge that he didn’t have. That makes me real satisfied. I also get very excited when somebody cracks a question, which I thought was beyond his reach—especially if it is a child. I have to admit, however, that I don’t enjoy everything about running a business. I hate finance. And I dislike accounts even more. It’s a compulsion. I respect law and statutory requirements. They are sacrosanct for our company since we believe in being a transparent organisation. Nobody values the cost of regulatory compliances on companies in India. We need much easier solutions. We don’t have the typical employee engagement issues. I’d like to believe that my guys see me as a mentor. We don’t have a hierarchy. Everything is about roles and responsibilities. I am more the friendly guy in office, the good cop. It’s the COO who has to play the bad cop. We have realised that dissonance within the system stems from poor clarity on roles and responsibilities, and the monetary compensation from them. If the deal has been defined in writing and agreed upon by both parties, the dissonance is at a manageable level. We know it’s working for us because most of our employees have been with us for around three-and-half years. That’s not bad for a seven-year-old company. Getting the right set of talent is a phenomenal challenge, especially because we are at the knowledge end of the knowledge business. My main audience is the IIT/IIM crowd. We constantly deal with high expectations, which is why our content and research needs to be done by a similar group. I make my team from these institutes. It’s a tall task. First, because the space we are in does not even qualify as an industry. We seek individuals who are young and more importantly, convinced that this can be a career path for them. Second, choosing us often means a choice not to take a McKinsey or a Goldman Sachs. Now, that’s tough. I consider myself lucky to have worked and interacted with some of my living inspirations. Abdul Kalam is one such person. He inspires me hugely. He is also keen on promoting quizzing in India.
I have also had the privilege of working with people such as NR Narayana Murthy. Infosys is one of our biggest clients. Another man whose thoughts have had an impact on my life is Edward de Bono. His concept of lateral thinking is the base of most of our quizzes. I wish we could use even a fraction of what he has documented. Fundamentally, I am a big fan of Mahatma Gandhi. I think he is India’s biggest brand. I have even studied the Gandhian philosophy from Madurai Kamaraj University. While I was doing the course, I was a laughing stock at my office and home. To add to it, I was on the advisory panel of the college, which was my examination centre. But, I am definitely doing a doctorate on Gandhi. I admire his clarity on things. His life has taught me how to live simply and put aside one’s ego. I follow that consciously. I start winding down while I drive back home. I am quite a ghazal enthusiast. This is the time when I like to get a good dose of such music. I let the music wash all over me and calm my senses. I don’t mind listening to classical instruments either. It’s a great way to destress. I am not much of a TV guy except for news, and even that I read or watch more and more on the web. I am generally home by 7:30pm on a good day, 9pm on a bad day. My wife, though, seems to think it’s always the latter. As a family too, we are not TV junkies, or into movies. With both of these timesucking things out of the way, we get a lot of time to ourselves. I always take three months off. Whatever I do or not do, I would definitely do the holiday. It’s time reserved for the family. Any holiday is a good holiday, whether you spend it at a beach, or on a mountain. Over a period of time, you run out of options in any case. It’s embarrassing when you go back to a hotel. But, with young children—my younger one is two years old—you don’t have much choice. I like to have a light dinner before retiring for the day. Breakfast is my heaviest meal. Lunch is always a grab-and-go thing wherever I am. I am basically a dal-roti guy. I do go out to restaurants and pubs, but to meet up with friends in the cities I travel to. That over, I usually turn in by midnight, or so. NOVEMBER 2010
|
INC.
|
67
I WISH I KNEW THEN...
RK Somany, chairman and MD, HSIL
Born into a business family, RK Somany decided to chart his own path in life. In the 1960s, he introduced vitreous China ceramic sanitaryware to India. Since then, his firm, Hindustan Sanitaryware & Industries (HSIL), has become a global player with a turnover of 800 crore. The pioneer looks back at what 50 years in the ceramic sanitaryware industry have taught him. When I started out, the Indian market was dominated by earthenware sanitary products. It was cumbersome and time consuming to make those products, first blasting the wares in hot ovens and then glazing them. Globally, a new technology was gaining currency. It simultaneously fired and glazed vitreous china, thereby saving both time and effort. It made sense to bring this three-year-old technology to India, but selling our goods was no easy task. We had to educate vendors about the advantages of low maintenance and greater hygiene. We had to spend a lot of time convincing people. That taught me that it wasn’t enough to have a great product. We have to fight my way into people’s minds. Later, when we went global, we had to face a few hiccups in terms of distributors. I learnt not to take people at face value. We had a rift with our distributor in Australia. He raised unnecessary issues about the product pricing, and later, was adamant that we must lower our globally-accepted quality of product. The Australian standards of sanitaryware were considered low. We flatly refused. We may have lost a customer, but we did not budge. Thereafter, we made it clear that we will not compromise on the quality of our product, no mat-
68
|
INC. | NOVEMBER 2010
learnt that getting paid requires constant persuasion and reminders. Back in India, we operated under the Licence Raj; the government allotted us a specific capacity to manufacture wares. Once, we went over that. To me, that meant we were being efficient and that we could earn more. But the government questioned our motives. I wish I had known that producing more would alarm the government. I learnt that there was no space for disobeying laws—even if that meant lower productivity. A Fighter From government sanctions to labour I have also learnt to live problems, RK Somany has fought many battles. with labour problems, no matter where I locate my factory. I once shared a flight with the then ter how huge a deal or opportunity. I am chief minister of Andhra Pradesh and disobsessed with “fixed quality”. I can lower or cussed labour issues with him. He advised raise the price of my product, but I will not me to set up a factory 60 kilometres from a produce bad quality. city to avoid any problems. Having done Another lesson I learnt was while that, I am still bogged down by labour doing business with Kenya. Our distribu- problems. tor there had agreed to pay us on a spe—As told to Sunaina Sehgal cific day, but kept stalling. It also had to take care of some paperwork involved, which didn’t happen. These constant reminders for payment made even the simplest of deals painful. I