Inc. India, December 2010 by Inc. India

DECEMBER 2010

How cardiac surgeon Dr Devi Shetty built Narayana Hrudayalaya into a successful social business.

PAGE 54

DO GOOD, GET RICH

The Magazine for Growing Companies

DO GOOD, GET RICH.

Why smart companies are

TARGETING NEEDS, NOT WANTS. PAGE36

Managing your

ONLINE REPUTATION

MEET THE ENTREPRENEURS WHO ARE USING SHARP MINDS TO BUILD BUSINESSES WITH HEARTS OF GOLD. PAGE 26

PAGE59

THAT’S THE SIMPLE IDEA BEHIND A SOCIAL ENTERPRISE

THE WAY I WORK

PRIA WARRICK of PW Finishing School

PAGE 64

The MAGAZINE for GROWING COMPANIES

What am I,

IF NOT MY BUSINESS?

Is retiring rich all it is made out to be?

December 2010 | 150 | Volume 01 | Issue 11 9 9 Media Publication A 9.9

PAGE 46

December 2010

CONTENTS

26 Do Good, Get Rich

There’s a new breed of entrepreneurs that’s more interested in changing the world than in merely pursuing profits. Meet this brigade of do-gooders. by shreyasi singh and pooja kothari

28 LIFESPRING HOSPITALS 29 HUSK POWER SYSTEMS 30 SARAPLAST 31 SELCO INDIA 32 EKGAON TECHNOLOGIES 33 TECHNABLE SOLUTIONS 35 DESICREW SOLUTIONS

36 The Demand Economy

The smartest companies now are targeting needs, not wants. Here are seven markets in which demand is high—and getting higher. by leigh buchanan

46 “What Am I, If Not My Business?”

Many entrepreneurs dream about selling their businesses and retiring rich. Be careful what you wish for. by bo burlingham

Bigger Ambitions Dr Devi Prasad Shetty gave up a promising start in London to make heart surgeries more affordable for the underprivileged segment of Indian society.

THIS EDITION OF INC. MAGAZINE is published under licence from Mansueto Ventures LLC, New York, New York. Editorial items appearing on pages 09, 12-13, 21-22, 36-44, 46-53, 62 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.

on the cover

Cover design: Anil VK on this page

Photograph by S Radhakrishna

54 How I Did It Dr Devi Shetty

He revolutionised heart surgeries in India with the highly afforadable Narayana Hrudayalaya. Now, he’s hoping to expand to 50 cities with his chain of lowcost cardiac care hospitals. by shreyasi singh

DECEMBER 2010

INC.

CONTENTS

December 2010

05 Editor’s Letter

06 Behind the Scenes

Companies that helped ISB become a world-class campus.

09 Launch

Investors size up the Inc. India 500 honourees The Ticker Anirban Das Blah, the man behind Globosport’s success story, is now running his own show.

12 Get Real

By Jason Fried Why I charge 10 times more than the competition.

14 Passions

Akshat Rathee is as passionate about gaming, as he is about the 14 businesses that he’s associated with.

16 The Scuba Sutras

By Guhesh Ramanathan My 12-year experience as a diver has taught me that lessons from under water apply as much to business.

18 Innovation

A remote control system that lets farmers use power tillers from a distance.

21 The Goods

The new Android tablets Trendy backup options Gifts for this festive season Things that Rudrajeet Desai cannot live without

Guidebook

How to become a socially responsible business. Find the tips following page 24.

68 I Wish

I Knew Then...

Santosh Choubey The founder of AISECT shares the lessons learnt while setting up 8,000 training centres in rural India.

STRATEGY 59 SOCIAL NETWORKING Keeping track of what people are saying about your company online. 61 SALES & MARKETING Four entrepreneurs give tips to Flyboy Aviation on how to appeal to more dare-devils. 62 LEADERSHIP Six characteristics of successful business owners. 63 ELEVATOR PITCH DesiCrew creates job in rural areas. Can investors work up 5 crore for its expansion?

64 THE WAY I WORK

When she’s not conducting training sessions for CEOs, or teaching life skills to students, Pria Warrick, founder, Pria Warrick Finishing School, will be chalking out yet another timetable. by sunaina sehgal

INC. | DECEMBER 2010

CONTENTS

Inc.com

THINGS TO DO

ONLINE THIS MONTH

1. Devise a Social Media Strategy Lessons on how to use Twitter and Facebook with an overall marketing objective in mind

www.inc.com/blogging-and-social-media

2. Streamline Your Schedule

Tips for learning to delegate (otherwise known as learning to let go and not micromanage so much)

4. Assess Your Hiring Style

Take this quiz to find out how good you really are at recruiting and screening job candidates.

www.inc.com/personalproductivity

3. Build a Prototype

www.inc.com/inc5000/ 2010/quiz-whats-yourhiring-style.html

Rapid prototyping can be a great way to get your concept ready for market. Here’s how to do it.

5. Identify Your Breakeven Point

www.inc.com/rapidprototyping

Use this tool to determine when your business will cross out of the red and into the black. www.inc.com/tools/breakeven-analysis.html

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 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

INC. | DECEMBER 2010

SALES & MARKETING VICE PRESIDENT: NAVEEN CHAND SINGH NATIONAL MANAGER (EVENTS AND SPECIAL PROJECTS): MAHANTESH GODI REGIONAL MANAGER (SOUTH & WEST) VINODH K (+ 91 97407 14817) NATIONAL SALES MANAGER (INC. INDIA) PRANAV SARAN (+ 91 98117 77113) 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

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

Noble Intentions In my first job, I worked on a project for a British aid agency. I even travelled to Kolkata for the first time in my life. I visited the slums

of Metiabruz, among others, as part of the research for that project. I met families of 12, living in a single room, all making kites out of that 6 feet by 8 feet space to earn a decent living. That was my first brush with what is now known as the bottom of the pyramid segment. Despite my best efforts, I couldn’t break into the development sector. Moreover, the opportunities that came my way led me to media, and over time, my priorities changed. But I have always held immense respect for those who work to drive change in society—there’s no other ambition that strikes a chord with me more than “making a difference”. As Shreyasi Singh and I worked on this issue’s cover story, I felt nostalgic, and a little jealous, as well. The work some of these “social” entrepreneurs have done in the past decade—and I am not talking about the famous THINGS I LEARNT names in the sector—has cerIN THIS ISSUE tainly changed many lives for It’s important not to the better. To borrow words give yourself the option of going back. from one of our subjects, even if It helps in moving their businesses fail, or cannot ahead in the face of grow beyond their current size, challenges. there’s no taking away the Creating a brand change they have already early on is necessary brought about. And, that is for the growth of a surely worth coveting! business. We’ve tried our best to There’s no success understand the challenges of without focus.

this upcoming sector. There’s a lot of ambiguity—especially on the definition of a social enterprise—and that’s only to be expected given how young this segment of entrepreneurship is. We hope you will enjoy the story on Page 26. Another story—this time, from the US edition—that really resonated with me is the one on retirement. I have never met a business owner who’s given much thought to life after business. Somehow, we assume that, like bad things, this will happen only to others. This story should make you think twice about “retiring at 40”. I also want to introduce to you our new columnist, Guhesh Ramanathan, who borrows business lessons from scuba diving. Do write in and tell what you thought of The Scuba Sutras. Wish you all a very happy 2011.

Pooja Kothari pooja.kothari@9dot9.in

DECEMBER 2010

INC.

BEHIND THE SCENES

Companies at the Heart of Everyday Life

Housekeeping and catering services Students at ISB get a nearly-five-star experience when it comes to accommodation and food. They can choose from single rooms to studio apartments for their stay, and are offered a multi-cuisine menu, thanks to Sarovar Hotels & Resorts. Established in 1993 by Anil Madhok, the group has hotels across India, and offers catering and housekeeping services to institutions, such as IIM Ahmedabad. With 350 employees in its Hyderabad unit alone, the company earns about 60 lakh per month from this account.

Lawn maintenance in campus The lush green gardens inside ISB’s 260-acre campus require constant grooming. This task belongs to Sai Nursery that has been dealing with ISB since 2007, and earns about 1 crore per year. The nursery has six branches across Hyderabad, and employs 125 people. It also caters to firms such as Wipro Technologies and Dr Reddy’s Laboratories, and hotels such as Taj Krishna and Taj Banjara.

INC. | DECEMBER 2010

Indian School of Business, Hyderabad

11.11.10 1:30 PM

Printing, scanning and documentation ISB professors believe in the “case study method”—and use real firms as academic examples. Thus, the institute sees a fair amount of printing and photocopying; from newspapers, company files, and so on. All this action happens thanks to Dalven Printers. Set up in 1974 by Venkateshwar Rao, the 14-staff strong firm also takes care of the mock question papers for the institute. ISB is not the only client that this 2-crore company handles—it has Microsoft and Wells Fargo in its kitty, too.

Branded merchandise The school’s loyal band of alumni wish to keep mementos to remind them of their alma mater. Helping them to do that is E-Yantra. The firm makes class and section specific branded goods, such as sweatshirts, mugs and T-shirts. Founded in 2000 by Phani N Raj, this 50-crore firm caters to corporate houses, political parties and academic institutions. Its famous clients include TCS, Dell and Kings XI Punjab. The company employs 300 staff.

PHOTOGRAPH BY A PRABHAKAR RAO

REPORTED BY DEEPIKA SHARMA

News, Ideas & Trends in Brief

LAUNCH WINE

A Mandela family label

Makeover Magic CavinKare has perfected the FMCG business move, where others have failed.

Taking the Textile Route In its 50 years of existence, Fabindia has found a loyal band of customers.

Hotter Than the Rest Investors pick the best of the best Companies that made it to our annual ranking of the best-performing, mid-sized Indian firms beat at least five others to grab that honour. There is no doubt that each is a winner. However, we decided to add a twist to the tale. We sent the list of the top 500 to three prominent private equity investors in the country, and asked them to single out the best of the best. Here are a few companies that stood out from the pack: VA TECH WABAG Chennai Revenue: 569 crore Three-year CAGR: 30% Rank: 465 What it does: Provides water treatment

solutions

PHOTOS.COM

Why investors like it: Not only does it

enjoy a comfortable space in the Indian water treatment industry, it also has a global operation. “It has beaten many established players of the industry and become an international leader,” says Gaurav Mathur, managing director, India Ven-

ture Fund. Moreover, it’s led by a strong management team. “As the demand for water and wastewater treatments rises, it will continue to grow,” adds Deepak Shahdadpuri, founder and managing director, BCP Advisors. Red flag: The Indian management team recently bought out the parent company. However, opines Mathur, “it remains to be seen if the new team can create value from international operations.” Managing overseas contracts may pose a hiccup. Its reliance on government and public entities for continued on the next page

Makaziwe and Tukwini Mandela bring to their new wine business one of the most revered names in the world. “Yes, my father is a great person,” says Makaziwe Mandela. “But this is not about Nelson Mandela.” Makaziwe Mandela is the eldest daughter of the Nobel Peace Prize winner and former South African President. Tukwini is her daughter. House of Mandela, which launched in South Africa in July, is a negociant; the company sources grapes from several growers, blends them, and markets them under its own label. Its first three offerings—a Chardonnay, a Cabernet Sauvignon, and a Shiraz— should be available in the US sometime next year. Makaziwe Mandela, who five years ago started a business to broker mineral resources, got the idea for House of Mandela from a Norwegian friend who pointed out that “there are no prominent wine brands from South Africa,” she says. House of Mandela is one of only a tiny number of black-owned businesses in the country’s $3 billion wine industry. The brand, Makaziwe says, reflects her pride in her farming heritage, which she traces back to the founding of the Madiba clan in the early 1800s. “The traditions and values—such as courage and compassion—that shaped my father shaped all of us,” she says.—Leigh Buchanan DECEMBER 2010

INC.

LAUNCH

The Ticker

Hotter than the rest... continued

revenue may stall progress. Therefore, it needs to keep a close eye on payments. Another concern is the increased competition from global players. COASTAL PROJECTS Hyderabad Revenue: 937 crore Three-year CAGR: 56% Rank: 27 What it does: Underground

excavations for the private and public sector Why investors like it: It’s a pioneer in its field, and enjoys a reputation for finishing projects before deadlines. It has experience in undertaking a variety of projects, from rail tunnels to road works. It has the ability to carry off joint ventures with big names in the irrigation and power sector. And, “a strong demand for infrastructure services companies exists in the market,” says Shahdadpuri. Red flag: Managing the high working capital and capital expenditure requirements of the business.

FABINDIA OVERSEAS Delhi Revenue: 304 crore Three-year CAGR: 17% Rank: 270 What it does: Sells products

made from traditional techniques and hand-based processes Why investors like it: There’s only one Fabindia. “It has a very loyal customer base. Its business model is inclusive and consists of community-owned companies to ensure that rural communities, that are key suppliers to the business, benefit too,” says Shahdadpuri. “It also 10

INC. | DECEMBER 2010

has an exceptional quality of leadership,” adds Gopal Jain, partner, Gaja Capital. Red Flag: “In a tough retail environment, scaling operations will be a challenge,” adds BCP’s Shahdadpuri. ICRA Delhi Revenue: 101 crore Three-year CAGR: 24% Rank: 196 What it does: Provides inde-

pendent and professional investment information. Why investors like it: An old player in the investment risk sector, it provides a host of services from evaluating risks in investments to KPOs. Established in 1991, “it has a very solid franchise, making it tough for a new entrant to break in,” adds Mathur. Red Flag: Appears to have lost out to CRISIL for the top spot among the existing players. CAVINKARE Chennai Revenue: 601 crore Three-year CAGR: 10% Rank: 153 What it does: It sells fast mov-

ing consumer goods from skin care to dairy products. Why investors like it: From a small partnership firm in 1983, it has today “built a very impressive FMCG portfolio in a period when many of the international majors like Hindustan Unilever had failed to achieve meaningful growth,” says Mathur. Red Flag: It is extremely concentrated around CK Ranganathan, its founder. —Pooja Kothari and Sunaina Sehgal

It’s a goal! The Rao family, owners of the 1,300 crore poultry farm, Venkateshwara Hatcheries, has bought Blackburn Rovers, the English Premier League team, for an desai estimated £67 million, with a little help from ICICI....Speaking of acquisitions, Helion Venture Partners-backed Mindworks Global Media now has in its kitty Babychen Matthew’s Dance with Shadows, a firm that’s strictly about automobiles. Matthew, the proud founder who reigns at Alexa’s 17th spot, has become the chief internet officer at Mindworks.... Inc. India honouree Irfan Razack’s Prestige Estate Projects has entered the market with an initial public offering of 1,200 crore. Keeping it company is Chennaibased construction scaling new heights firm RPP Projects that’s offering 6.5 million shares....If that’s not a big bite, how about zomato, or the site formerly known as foodiebay.com. Deepinder Goyal’s now all international site, promises to go beyond just reviews… While Goyal chants zamato, Aajeevika founders, Rajiv Khandelwal and Krishnavtar Sharma, are saying Schwab, as they bag the Schwab Foundation for sharma and khandelwal Social Entrepreneur Entrepreneurship award. Their firm registers migrant workers and issues photo IDs, com complete with the stamp of the worker’s pan panchayat and the state’s labour commis commissioner. This award is defi definitely a stamp of success for them! —Inc. India

The Making of a Star Meet the person behind India’s largest talent management agency It takes gumption to shift from Mark Twain to Mahesh Bhupathi. From the English language, to sports and its management. But, Anirban Das Blah did exactly that. For someone who in his “wildest imagination” could not see himself in business, Blah took Globosport—tennis ace Bhupathi’s celebrity management company—to game, set and match. In 2009, he quit Globosport’s court to launch KWAN, an integrated entertainment management company. Just a year old, the firm has already outgrown its start-up days. It’s been a “solid B+” year, says Blah. He’s being modest. KWAN handles nearly 50 celebrities including A-list biggies like Ranbir Kapoor, Genelia D’Souza and Freida Pinto, and has offices in Mumbai, Delhi and Bengaluru. That’s an “A” we say! —Shreyasi Singh You have had a fantastic year. Could you have hoped for better?

KWAN began in October 2009. We are doing 20 per cent to 25 per cent better than our competitors. Our seven-to-eight businesses lead the market. Still, we aren’t quite the game changers yet—so, we are not really the euphoric lot. We wish to leverage our relationships with celebrities to do more. In the next two years, our focus will be on IP (intellectual property) creation. We’ll bring in the celebrity brands. And our partners will provide the domain expertise. KWAN should have a piece of the television, movie and co-merchandising pie. What have been the defining high points?

We are a seven-month-old firm and, already, we have bagged CNBC’s “Agency of the Year” title. That was a big deal. Signing Ranbir Kapoor was another high. We have met many of our financial goals and managed to set up a solid casting business, and the first south-based agency. Have you broken even? How much capital did you begin with?

As a private company, we don’t share our financial information. I will admit that we have raised capital. The challenge is not profitability. The agency business is cash rich. No real investment is required, as it is mainly rent and salaries. We are now profitable from an operational point of view. Despite being an outsider, how did you manage to get past the cliques?

Bollywood is changing—there are more

people and still be the number one makes us proud. Is that what differentiates KWAN from its competitors?

My 42-member team functions differently; we have a different DNA. I haven’t hired much from the agency industry. A person does not need to blow me away with their intelligence, or experience, at the interview stage. I look for the “right attitude”. My people need to fit into the company’s culture. My biggest role is to set the company’s culture and protect it. It’s challenging to find the right talent. If the environment is right, then it ensures that workers stay inspired to work. But, KWAN does attract similar-minded people. KWAN is a word that was used in the movie Jerry Maguire. What does the movie mean to you?

What I got from Jerry Maguire was the importance of relationships. You really need to care about the people you work with. I tell my team to remember we don’t make ball bearings. We can’t change our supply chain. We are responsible for people’s lives. I am especially conscious of Scripting a Success Saga Anirban Das Blah wants that with the younger set a piece of the television and movie business pie. of talent that we manage. It should be like managEnglish-speaking and educated people in ing your brother, best friend or child. the movie business now. They understand the market, and get the language we speak. You essayed a similar role as CEO at GloSo, our timing was right. Commercially, bosport. Now, you are the founder, owner the gap between Bollywood and Hollyand managing director at KWAN. How wood has narrowed. Nowadays, the indus- has being an owner changed things? try is more open to outsiders. Delhi boys, I started out as a professional. I still am such as Anurag Kashyap and Imtiaz Ali, are one. One could be entrepreneurial in a leaving a mark on the tinsel town. I believe job. I was equally passionate about Globothat Bollywood now prefers effective, sport. Now, it just so happens that I am a transparent, professional and ethical peoprofessional, who also owns a business. ple. The “shady dealer”, or “fixer”, isn’t desirBeing an entrepreneur isn’t as complicated able anymore. That we can be nice, honest as people make it out to be. DECEMBER 2010

INC.

GET REAL BY JASON FRIED

Go Ahead, Raise Your Prices

Sure, some customers will complain, and others might take their business elsewhere. But there’s a good chance you don’t want those kinds of customers, anyway “OMG.”

“Are you guys nuts?” “Is there a gas leak in the 37s offices?” “You are on crack.” These are just a few of the comments that were posted on our company blog in late June. What did we do to deserve such scorn? Did we release a lousy product with a system-destroying bug? Did we triple the price of our software? Did we force people to pay us for something they weren’t interested in buying? Nope. Here’s what we did: We had the audacity to charge $9.99 for a piece of software. And we make no apologies for doing so. Here’s the backstory: A few months ago, our software company, 37signals, released Draft, our first application for the Apple iPad. Draft lets you draw with your finger and share those drawings via e-mail or through Campfire, our business group-chat tool. Draft is dead simple—the background is black, the “ink” is white or red, and your finger is the pen. There are no shape tools, text tools, brushes, textures, colour fills, or anything else. It’s just like you’re sketching on paper. If you search the App Store, you’ll find dozens of similar drawing apps. Some, like Penultimate and Brushes, are fantastic; others, less so. But no matter what you’re looking for in a drawing app for the iPad, you’ll likely find it in the App Store. You’ll also find a mix of prices. From free to 99 cents to $9.99, there’s a product and a price to satisfy nearly everyone. Like most apps in the App Store, many drawing apps tend to cost between free and $4.99. Given that there are already so many drawing apps on the market and that many of them are available for less than a buck, you might wonder why 37sig12

INC. | DECEMBER 2010

nals would spend the time developing yet another one. We built Draft to solve our own problems—the same reason we build all our software. The other drawing apps on the market solve different problems than the problems we were having. Prior to Draft, when one of us wanted to sketch an idea and share it with other members of our team, he’d first sketch the idea on a piece of paper with a Sharpie. Then he’d scan the paper. Then he’d upload the scanned sketch to his computer. Then he’d upload that sketch to

GET REAL

the Campfire chat room where his team was collaborating. Draft cuts out a bunch of those steps and saves a pile of time. Now, we can quickly sketch out an idea, tap a button, and automatically upload it directly to a Campfire chat room. No Sharpie, no paper, no scanner, no waste, no extra steps. Just draw, tap, done. Draft is the only drawing app for the iPad that works this way. Other apps let you share sketches by e-mail (Draft does that, too), but Draft is the only one with Campfire integration. Some days, we may share dozens of sketches. Saving a few minutes on each one

price. We’re a rare company in the Webbased software business—we actually charge for things. We think free is a business cancer. Offering some stuff for free is fine as long as you have something else to sell. But “we’ll give it all away for free and figure out how to make money later” isn’t much of a business model in our minds. We provide our software like a restaurant provides its food, a cabby provides transportation, and a clothing store offers a shirt—in exchange for money. That’s not the only thing that makes us different. Most companies seem to want as many customers as they can get. At 37sig-

We have no interest in participating in a race to the bottom. Ninety-nine cents is not for us. has a significant impact on our productivity. This is exactly what we needed. That’s why we built it. We were so pleased with Draft that we wondered: Why not turn it into a product and offer it to our customers? It wouldn’t be the first time we decided to market something originally created for our own use. After all, if we’re solving our own problem, we’re likely solving other people’s problems, too. Given the number of people who use our other products, we had a pretty good idea that there were thousands of folks who would be interested in Draft. At the same time, we’re a small company with just 20 employees. We don’t have unlimited resources. Our four primary products—Basecamp, Highrise, Backpack, and Campfire—consume nearly all of our time and resources. From development to design to customer service, we’re pretty maxed out. What would adding another product mean? Would supporting it be a burden to the existing team? Would it be worth it? That’s when we started thinking about

nals, we don’t want lots of customers. We want lots of the right customers. Our goal is to maximise profits, not market share. We also want to maximise happiness—for the customers and for ourselves. The more people you have using your products, and the more people you have working at your company, the harder it becomes to keep everyone happy all the time. So when we set out to put a price tag on Draft, we decided not to pay attention to what the other drawing apps sell for. We didn’t look to compete on price. As App Store consumers, we knew that most apps sell for 99 cents or thereabouts. I think the software industry is killing itself by trending toward a price of 99 cents. Software is more valuable than 99 cents, but as long as software developers say it’s worth only 99 cents, then most customers are going to get used to paying only 99 cents. We have no interest in participating in a race to the bottom. Ninety-nine cents is not for us. What about $1.99? Or $2.99? We could have gone there, but we wanted to use price

as a tool to reduce customer demand for Draft, not increase it. That’s right: We wanted fewer customers to buy Draft. With a price tag of a buck or two, I think we could have easily sold 10,000 copies of the software. On the surface, that sounds great. But not when you think about all the resources required to serve 10,000 customers. A good number of those 10,000 people are going to need help. Some are going to complain. Some will request a lot of features. Some will ask a lot of questions. That’s the software business, of course. And we love being in the software business and making our customers as happy as possible. We work really hard at it. However, our main products sell for $24 to $149 a month. At those prices, we can afford to provide excellent service. Could we provide excellent service for many thousands of additional customers paying a one-time price of $1.99? Would that reduce our ability to service our $24-a-month or $149-a-month customers? We believed it would. So instead of going for the land grab, we created a small island. We priced Draft at $9.99—significantly higher than most of the products out there. The people who buy Draft know exactly why Draft is valuable to them. And they think $9.99 is a fair price. So far, we’ve sold nearly 2,000 copies of Draft. That’s about $20,000 in revenue. We are much happier with $20,000 in revenue from 2,000 customers than $20,000 in revenue from 10,000 or 20,000 customers. Given our current resources and team, we can happily serve 2,000 Draft customers, plus all our other customers. As the outcry over Draft’s $9.99 price tag demonstrated, this has not made everyone happy. Plenty of people even think we’re nuts. It’s certainly not the first time we’ve been called crazy. But giving away your products? That’s what I call truly insane.

Jason Fried is co-founder of 37signals, a Chicago-based software firm, and co-author of the book Rework. DECEMBER 2010

INC.

PASSIONS

Life Outside the Office

At the age of five, his uncle gifted Akshat Rathee an Atari–a single joystick console. Thus began his 20-year affair with gaming. What fuelled the passion further, was the fact that his family were addicts, too. “My parents had their own consoles. I shared one with my brother,” recalls Rathee. This love for gaming crossed several levels during his days as an engineering student in Manipal. “I wanted money. I loved games. So, I married the two,” he laughs. All his batchmates had personal computers in their rooms. So, Rathee connected them all via routers and cables, allowing students to play against each other for 50 a month. With 3,000 subscribers of sorts, he soon stopped asking his parents for money. His addiction to gaming was such that he even missed an exam in his final year to finish a game. “I slept during the day and played at night.” Rathee still plays at night. But, the owner of 14 businesses, which make up the Nodwin Group of Companies, doesn’t miss a meeting for a game—ever.

Gaming Rules Gadgets: 6 video consoles. A laptop dedicated to gaming Game: Starcraft II Hunting hours: Midnight to 4am Preys: 10 million people across North America, Europe and South East Asia. Rathee ranks sixth in the world

INC. | DECEMBER 2010

Akshat Rathee

Gaming

“Gaming teaches me to multitask, solve problems and respond to complex situations.”

PHOTOGRAPH BY SUBHOJIT PAUL

REPORTED BY DEEPIKA SHARMA

THE SCUBA SUTRAS BY GUHESH RAMANATHAN

Lessons from Under the Sea Staying focused is as important for a company and its leader, as it is for a diver

I have been a certified scuba diver for the past 12 years. And I have been a mentor to organisations for even longer. Having experienced both, I can say with confidence that one can successfully apply principles of scuba diving to business and leadership. Whether it is the principle of neutral buoyancy that allows a diver to remain underwater for much longer, or, the simple mantra of never diving into the waters without checking equipment first, each of my sutras—the principles I have drawn up from the underwater world— is just as applicable to the world of business. I have arrived at 10 principles from my diving explorations that I pass on to the businesses I consult with. Over the next few months, I’ll walk you through each of these and help you apply them to your organisation. These principles aren’t rocket science. They are common sense—and also available on my blog, if you want to read those at one go. However, I would prefer to take them up one or two at a time, and discuss them at length. I’m picking one up at random: it’s the second Diver’s Wisdom Losing neutral buoyancy can cut a dive sutra: “I will maintain neutral buoyancy”. short. Similarly, lack of focus can be fatal for a business. Many among you may have gone scuba diving at an exotic holiday destination. You would have kitted yourself appropriately—a wetsuit, a weight belt, mask, fins, and a BCD jacket can stretch out the time you can spend under water— (Buoyancy Control Device). The BCD allows you to fill in, or remove, air from and turn a good dive into a great one. the jacket; essentially, helps you maintain neutral buoyancy by ensuring the Why do divers lose neutral buoyancy? Sometimes, right amount of air in the jacket. when they are distracted, they start bobbing up and Why is neutral buoyancy important? Well, it allows you to almost experi- down like a yo-yo. At other times, it is under threat, ence weightlessness. Except you aren’t in space, you are under water. You or fear. For example, when they see a large fish, they spend the least amount of energy swimming, so you conserve your air. You may panic and shoot up or down to avoid it. Either

INC. | DECEMBER 2010

THE SCUBA SUTRAS

way, they end up wasting energy and consuming huge amounts of the limited air in their tanks. And, in the process, they cut the dive short. That is a lot like what happens in the world of business, especially to young businesses. In the desperate search for revenues, entrepreneurs sometimes get distracted by low-hanging fruits. They take a wrong turn here or there—and then, they run out of time or resources, sometimes both. In 2003, I met two founders of a VCfunded Silicon Valley start-up. Let’s call it CSF. Their vision, partly dictated by

Its first strategy of going through whitegoods manufacturers didn’t work: consumers walked in to look at 25-inch television screens, and not 14-inch monitors (especially if you played the same movie on both!). Large chunks of money went into inventory in Kerala and Andhra Pradesh. The distribution strategy failed. CSF then put together a diskless system to be sold (along with a server) to government-funded schools. Developing this took additional money. Sales lead times were long and the head of sales lost his job. The company didn’t break into the schools market.

In the desperate search for revenues, entrepreneurs take a wrong turn here or there—and then, they run out of time, or resources—sometimes both. their VC (a large semi-conductor company), was to blow the Indian personal computer (PC) market sky high, and install a million plus computers in one year. And this was at a time when the PC was just beginning to make its presence felt in tier-2 and tier-3 towns. They faced two key constraints. First, smaller towns meant a low price-point: below 10,000. Second, distribution required an established channel, such as retail distributors of TVs or audio systems, since there were rarely any PC distributors in these towns. To achieve both objectives, CSF put together a low-cost system running the Celeron processor, without a DVD/CD-ROM drive, and a small 5GB hard drive. The system came pre-loaded with a Linux variant, not Microsoft Windows. Finally, CSF knew that it had to pass on high margins to TV retailers, and it had factored that into the pricing. To crack this market and hit the magic number of a million, CSF rapidly started chasing options—any option. And completely lost neutral buoyancy.

It then experimented with Windows CE for selling low-cost, low-end systems to banks as terminals. CSF set up a lab, complete with senior technology professionals, to see how banking applications worked on these systems. And yet more money was gone—as were the banking experts in a few months. Thereafter, the company spoke to large distributors to do some OEM work for them. This would have knocked out costs of operating systems and applications. Smelling desperation, OEMs put on a squeeze that would put a rural-India money lender to shame. Within two years, CSF had burnt through $5 million, mostly in hardware inventory that was worthless in a year. They chased every potential opportunity they saw, and saw the opportunities disappear, as they got closer to them. Needless to say, the VC wasn’t amused. They pulled the plug, and CSF died a quick, quiet death. If you think this happens only in young, VC-backed entities, think again.

Let me take you back 30 years to show you how even the most successful of entities can lose neutral buoyancy. Remember the cola wars of the 1980s? By 1983, Coca Cola’s market share for its flagship Coke had dwindled under threat from Pepsi Cola to around 24 per cent. Roberto Goizueta, Coca Cola’s then CEO, decided to launch a new formulation of Coke to coincide with its centenary year in 1985. The multinational firm’s senior executives commissioned a secret effort to test and perfect the new flavour of Coke. Market research, including blind tests, though, was ambivalent. Many felt neutral to the flavour of the new formulation, while close to 12 per cent of those tested violently opposed it. But Coke was under threat at that time, and needed to do something to counter Pepsi. When the formulation, New Coke, was launched in April 1985, and the old formulation discontinued at the same time, Coca Cola lost neutral buoyancy completely. Within weeks, the backlash hit. In just three months, the Coca Cola company had to reintroduce the old formulation—of course, under a new name, Classic Coke— but not before going through “the worst marketing failure of all time”, and a tremendous drop in market share. Within six months of the re-launch, Classic Coke was outselling Pepsi all across the nation. By reintroducing the old taste of Coke as Classic Coke, the Coca Cola Company had got back to neutral buoyancy. Over the past years, I’ve come across many situations where companies deserted this simple sutra—maintain neutral buoyancy. Applied to a business, it means remain focused on what you started out to do. Don’t lose focus. Or, you might lose your shirt.

Guhesh Ramanathan is a mentor at the entrepreneurship cells of IIM Bangalore and IIM Ahmedabad. He serves on the boards of several companies, and is an advanced certified scuba diver. DECEMBER 2010

INC.

INNOVATION

Companies on the Cutting Edge

Making life easier

It’s a familiar scene on a farm; workers tilling the land, come pelting rain, or scorching sunshine. There’s respite now, thanks to Prajwal Kumar’s remote control system that allows a farmer to work from a distance. Manufactured by Mangalore Robotronics, the device consists of two units—a hand-held remote and its controller unit. Using the remote, anyone can move the tiller left or right, and engage the brake levers. This system has won the British High Commission’s “Best Electronic Product Award (Agriculture)” for 2010. It has helped Kumar be recognised as one of MIT Technology Review’s top innovators, under 35. A closer look A farmer typically pays more than 1 lakh for a tiller. At an additional cost of around 20,000, he can fit the remote control kit. The only downside; the kit is only usable with tillers produced by VST Tillers and Tractors.

INC. | DECEMBER 2010

Remote Control System

Mangalore Robotronics

“My uncle couldn’t find labour. So, he asked me to develop a remote control system to operate the tiller.” Prajwal Kumar, CTO & co-founder, Mangalore Robotronics

PHOTOGRAPH BY S RADHAKRISHNA

REPORTED BY AKHIL BERY

Your Business Toolbox

THE GOODS

A Tablet for Everyone Finally, some real options for PC fans

COURTESY COMPANY (4)

Until recently, the iPad was the only serious tablet in town. Now, hardware makers are rolling out tablets that are more likely to appeal to PC users. The devices, powered by Google’s Android operating system, offer access to thousands of apps. Unlike the iPad, models with the new Android OS also support Flash video. We tested four tablets, rating them according to features and ease of use. —John Brandon

SAMSUNG GALAXY TAB

DELL STREAK

ELOCITY A7

AUGEN GENTOUCH78

The Galaxy’s 7-inch touchscreen is 2.7 inches smaller than the iPad’s. Our top pick, the Galaxy responded quickly to taps and swipes. The keyboard was responsive as well. The 13-ounce tablet runs on the latest version of Android, which supports Flash movies. It has a rear camera for taking pictures and one on the front for making video calls. The tablet has a 1GHz processor and 2GB of internal memory, with the ability to add up to 32GB. You can choose among service plans from Sprint, Verizon Wireless, AT&T, and T-Mobile. cost: 40,000.

A close runner-up, the Streak has a 5-inch touchscreen that quickly registered our swipes, gestures, and taps. As was the case with all the tablets we tested, the small keyboard felt cramped. The 7.7-ounce tablet was a bit sluggish during video games, despite a powerful 1GHz processor. The Streak runs on an older version of Android that does not support Flash, though Dell plans to update to Android 2.2 over the air this year. The tablet has 2GB of memory, with the ability to add up to 32GB. Its battery lasts about nine hours. cost: 34,990.

Unlike the Streak and Galaxy, which run on both 3G and Wi-Fi, this tablet connects to the Web only via Wi-Fi. The tablet has a forward-facing camera and a bright 7-inch touchscreen. The prototype we tested did not always respond to swipes, but the keyboard registered every tap. The 1.02-pound tablet runs on a powerful 1GHz NVIDIA processor, making it ideal for gamers, and is set to ship with the latest version of Android. It has 4GB of internal memory, with the ability to add up to 32GB, and its battery lasts five to eight hours depending on usage. cost: 16,280.

This 1.5-pound tablet, which does not have a camera, is better suited for browsing the Web than typing emails or making phone calls. Its 7-inch screen often failed to respond to swipes and taps, and we even experienced some crashes. Powered by an 800MHz processor, the tablet was sluggish; it took a long time to play certain games or make a phone call using the Fring app. The tablet runs on the older version of Android and connects to the Web only via Wi-Fi. It has 2GB of memory, with the ability to add up to 16GB; the battery lasts six hours. cost: 6,600. DECMEBER 2010

INC.

THE GOODS

Products + Services

A Trendy Way to Backup Files Style and content on the go Many of us prefer to carry an external storage device that helps us back up files from

our laptops. But, with so many choices and such little information, picking the ideal portable drive can be a nightmare. Here are a few options. —Rossi Fernandes

PRODUCTIVITY

Apps for getting things done Are task management apps helpful, or do they just add one more thing to your to-do list? We spent a week testing apps for a variety of smartphones to find out. —J.B.

ADATA SH93

It comes with a rubberised finish that makes it quite impressive to look at. The USB cable can be attached along the edges of the drive. It’s not a very fast portable hard drive. Nor is it compact. But its performance makes it a good buy. write speed: 27 Mbps read speed: 28 Mbps price: 4,070

IOMEGA SKIN DRIVE

This one’s a looker, thanks to its different design. And, it packs in a good performance. It is small and sturdy, but does not come with a USB interface. Its stylish looks command a premium, making it rather expensive for a 500 GB drive. write speed: 27 Mbps read speed: 32 Mbps price: 5,900

REMEMBER THE MILK

OMNIFOCUS

This nuanced iPhone app lets you determine how often you want to receive reminders about tasks related to individual projects. You can create subsets of tasks—say, those related to designing a marketing brochure. The app syncs with iPads, iPhones, and Mac computers. cost: $20 TODOMATRIX PROFESSIONAL

The interface on this BlackBerry app looks a bit dated, but the program is easy to use. You can drag-and-drop tasks among neatly organized cascading folders. You can also create and delegate tasks using your BlackBerry email account. cost: $4.99 a month or a one-time fee of $60.

INC. | DECEMBER 2010

TRANSCEND STOREJET 25D2-W

This one comes in an all-white glossy finish with rubber feet. The bundled back-up software helps to back up and synchronise data easily. If you’re a Mac enthusiast and looking out for a portable drive that performs, then this one is for you. It comes with a travel pouch, too. write speed: 28 Mbps read speed: 30 Mbps price: 6,300

APACER AC203 500GB

The rubberised strips on the body add to a nice grip and appeal. It’s sturdy, sleek and stylish. However, its performance isn’t as impressive as that of others. At 143 grams, it’s easy to carry around. The 500 GB capacity is sufficient, and provides good value for money. write speed: 23.57 Mbps read speed: 30.14 Mbps price: 4,250

APPLICATION

Help in the virtual world

If you want to hop onto the eBook bandwagon, keep in mind Calibre, a comprehensive eBook manager and reader that can support all popular brands. It can help even if your book is not in a format supported by your reader— by converting it before sending it to your device. It comes pre-configured with hundreds of news sources. It has another feature for connecting to iTunes, and making your files compatible with your iTunes Library. Calibre includes a server for storing your eBooks over the internet! Calibre is a free application and can be downloaded from www. calibre-ebook.com.—RF

COURTESY COMPANY (4)

Our top pick, this app lets you sort tasks by urgency, due date, or tag. You can send reminders to yourself via text or email. The app also lets you send tasks and reminders from Twitter. It syncs with Google Calendar and Gmail. cost: There is a free basic version for iPhones; the professional version for Android phones and iPhones is $25 a year.

Work + Play

Finding the Perfect Gift This Season A new take on corporate gifting

THE GOODS

FIRST PERSON

Gone are the days when corporate gifting was about dry fruit packs and silver coins.

Companies are experimenting with a variety of options these days—from exotic fruit for the health conscious to planters for those conscious of the environment. The ones with deeper pockets have even ventured into crystal decorations and handmade wonders. Surely the days of handing out cheap ‘Made in China’ goodies are long past. Here is a look at a few gifting options this season. —Sunaina Sehgal SILVER ITEMS

Now available in a new avatar, silver’s back in vogue. You can choose from fancy bowls, motif candleholders, and tilak-puja sets—shiny options that will make your clients feel “special”. Here are a few options to suit your pocket. price: 1,000 to 4,000

CRYSTAL

If you’re doing business with embassies, or want to send something special to a client abroad, go no further than the nearest Swarovski outlet. Its rocking stars will rock their way into the receiver’s heart. You can choose between the snowman’s jet crystal eyes and black printed mouth, or siam satin crystal stars and a platinum white golden shadow on the Xmas tree. price: 2,900 onwards

COURTESY COMPANY (5)

WOODEN HANDMADE GIFTS

An impressive addition to the office table always makes for a welcome gift, especially if it looks as good as these handmade items do. The three-in-one set, consisting of a card-holder, a table clock and a pen-holder, can be customised with your company logo. There’s an option of wooden clocks, too. price: 700 to 1,200

How Triplt helps me organise my travel plans

AARON BOOKER FOUNDER AND CEO, VARVID BELLINGHAM, WASHINGTON

As the head of a company that produces videos of events and conferences, I travel at least 15 times a year. Last year, I realised I needed a better way to plan and book my trips, so I started using a webbased service called TripIt. Before using TripIt, I would scour through my email inbox searching for hotel, airline, and car-rental confirmations before every trip. Now, when I make a reservation, I just forward the confirmation email to TripIt, and the app builds an itinerary listing all my travel details, including confirmation numbers, flight times, and hotel addresses. TripIt has an iPhone app, so I always have my itinerary with me. After using the free service for a few months, I upgraded to TripIt Pro, which gives me access to a host of other features for $49 a year. Now, I receive a text alert if my flight is delayed or cancelled, or if my gate number changes. I can also share my itinerary with family members and employees. TripIt also helps me stay in touch with friends and colleagues on the road by automatically sending travel status updates to my LinkedIn and Facebook profiles. Sometimes, people in my network will see that I’m in town and ask me out for lunch. —As told to JJ McCorvey

DECMEBER 2010

INC.

THE GOODS

Beyond Business

Things I Cannot Live Without... A baseball bat I have always enjoyed baseball. My cousin from the US gifted me the bat almost 15 years ago. When taking a lengthy call on the phone, I like to swing a few strikes.

Mirza Ghalib CD A recent buy, I am very possessive about it. I check my CD rack at least thrice a day to see if it is in its allotted place or not.

Business books I have read Good to Great, Built to Last and How the Mighty Fall by Jim Collins a gazillion times. I have shaped the company, to a large extent, on this book.

CEO, IDEACTS INNOVATIONS

Rudrajeet Desai

INC. | DECEMBER 2010

...and What I Covet Years back, my dad sold his bike—a Java—to a dealer in Delhi. I would love to get the rusty-rickety ride back.

PHOTOGRAPH BY S RADHAKRISHNA

A toy gun and a plastic duck I bought this from a toy shop, inspired by all the 007 movies. Made out of plastic, I enjoy shooting the duck with it. But, I dare not shoot at my wife!

Rudrajeet Desai loves ghazals. He doesn’t just listen to them. But also pens down a few of his own. Introduced to this genre of music early in his life, Desai has his grandfather to thank. Of course, Bollywood movies fuelled his interest further; the lyrics from Masoom—jeene ke liye, socha hi na tha, dard sambhalne honge—are itched on his mind forever. The co-founder of Ideacts Innovations, an internet media company, has barely 20 ghazal CDs in his collection, but is awfully possessive about them. He even guards his poems—whether scraps or long paragraphs— zealously. But nothing tickles this poet’s funny bone more than running behind his neighbourhood brats, who wish to steal his toy gun. —Sunaina Sehgal

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

IMPLEMENT CSR JRD Tata, the visionary leader of the Tata Group, believed that: “No success in material terms is worthwhile, unless it serves the needs or interests of the country, and its people.” For him, contributing to nation-building was an integral part of business growth—a responsibility shouldered by responsible businesses. The sentiment is echoed by the current crop of business leaders. Says Prateek Garg, managing director and CEO, Progressive Infotech: “For growth to be responsible, it should go beyond numbers... It should do well for the society, create a better world.” This outlook is all the more relevant now, when a lot is being said and written about India’s incredible story of economic growth. As Amita Joseph, director, Business and Community Foundation, questions: “Of what use is India’s healthy GDP growth, if all it does for the nation is to distribute its prosperity to little pockets across the country?” What, indeed? Arguably, the lives of the people at the bottom of the pyramid will only improve when individuals and corporates take up their cause in earnest. By adopting social responsibility as championed by Tata and other citizens of India Inc, corporations can play a significant role in furthering the cause of the greater good. If that inspires you, read on to find out how to implement sustainable corporate social responsibility (CSR) initiatives.—By Charu Bahri VOL. 01 NO. 11 | INC. GUIDEBOOK

IMPLEMENT CSR : : : : : : : : : : : : :

DO WELL UNTO OTHERS 1

Understanding CSR

The need for being responsible: Social responsibility requires looking beyond the firm’s needs and benefits, and inculcating the same attitude in employees. “It is about being a responsible business—and not about getting into hand-out mode,” says Joseph. Adds Deepa Menon, head, PVR Nest, the CSR endeavour of entertainment company, PVR: “A corporation should use its resources, skills, location and funds to help alleviate social and environment problems. It’s a way to give back to society and nature.”

employee blossoms during such interactions. It has helped raise staff morale and has been a useful bonding exercise,” says Amit Verma, head, corporate communications.

Keep a number in mind before embarking upon any CSR initiatives.

Spin-offs of CSR: At its most superficial level, adopting CSR will make you a good corporate citizen—and that alone is reason enough to get into it. However, more than that, businesses engaging in CSR gain social respect, and to some measure, support for their products and services. Anita Roddick’s campaign against animal testing attracted millions of customers to her cosmetics company, The Body Shop. However, believes Menon, CSR should not be taken up “simply to add value to an annual report, or brand”. Think of it as a means to benefit the community. And, if designed well, it will benefit the company too. At Progressive, employees are encouraged to contribute and distribute social assistance (read food, literacy aids, or clothing items), to the economically weak communities around its corporate headquarters in Noida. Interestingly, it’s not just the receiving communities, who gain from this. “Even the most reticent INC. GUIDEBOOK | VOL. 01 NO. 11

Implementing CSR

Create a budget: This isn’t just about the money a firm spends on doing good. Therefore, says Menon, it needn’t “cost the earth to be effective”. However, it’s a good idea to keep a number in mind before embarking upon any initiatives. You can use existing guidelines to figure out the “ideal CSR budget”. Karmayog, a platform for Indian not-forprofit organisations, suggests companies spend a minimum of 0.2 per cent of their sales. PVR spends around 1 crore (or, 0.33 per cent) of its 300crore turnover on PVR Nest. Still others suggest investing 3 to 5 per cent of profits after tax on such initiatives. Last year, the central government released Corporate Social Responsibility Voluntary Guidelines (2009), suggesting that firms allocate specific budgets for CSR, without specifying a percentage. “CSR should be seen as a long-term investment, with a gestation period prior to generating returns, just as any conventional business. Having said that, many companies start out with what we call ‘cheque book philanthropy’, and establish hands-on CSR

programmes, as they gain expertise,” says Dr Aqueel Khan, director, Association for Stimulating Know How. Bring on board key stakeholders: “Even an enlightened CEO can’t drive CSR alone. It’s essential for those at the lower rungs to believe in the concept,” says Joseph. This means that top executives should share objectives with their teams, who then could help company employees see meaning in CSR. Practically, says Menon, “This may involve making presentations to managers, employees, and even senior managements of organisations that the company seeks to partner with for its CSR ventures.” At Progressive, the corporate communications and human resources departments put their heads together to come up with a CSR events calendar, which is put up to the top management for approval every year. Get professionals on board: Joseph believes that even philanthropy must be strategically planned. “Sustainable CSR programmes are well-designed, planned and professionally implemented,” she adds. An executive, who is hard-pressed for time, may not be the best person to rally employees round an idea. Its better to get a person with the necessary qualifications and experience. For instance, PVR appointed Menon, who brought five years of experience in the social sector, to launch PVR Nest. Four years on, she has a team of four and receives a lot of help from the managers of PVR cinemas.

Plan well: Experts suggest that companies align their CSR programme with their core functions. For instance, Yes Bank has chosen to align its contribution to society with banking. Menon suggests taking employees on board for this selection process, since they’ll be expected to help implement the programmes. At PVR Nest, she adds, managers came up with the idea that PVR Nest should focus on children, particularly those living and working in the vicinity of the firm’s multiplexes in Delhi. At Mahindra & Mahindra, a programme called ESOPs (Employee Social Options) encourages staff to volunteer their skills to solve the problems of economically weak communities.

Establish measurable yardsticks: According to Dr Khan, a company should identify a combination of quantitative and qualitative indicators to find out if its CSR activities are making the desired impact. “This could include keeping track of the number of people it is reaching out to, and reviewing their feedback,” he adds. Yes Bank’s taken stakeholder engagement to another level with its Yes Community initiative. It connects with clients and civil society actors to get both structured and unstructured feedback. The government’s guidelines also suggest that targets with time frames help assess the impact of programmes and compare the outcome with the

preliminary needs assessment. Companies adopting transparent methods could also invite independent evaluators to review their CSR programmes. 3

Expand and grow

Chances are that CSR pursued in a strategic manner will make a positive impact on the primary stakeholders– and in time, grow. A well-designed programme is also likely to be sustained, irrespective of the fortunes of the company. For a company running a successful CSR programme, the next step would be to share its positive experiences and strategies with stakeholders, the public at large and other organisations. After all, it’s all about making a difference and encouraging others.

IMPLEMENT CSR : : : : : : : : : : : : :

CORE ELEMENTS OF CSR

The Ministry of Corporate Affairs’ Corporate Social Responsibility Voluntary Guidelines (2009) recommend that “each business entity should formulate a CSR policy to guide its strategic planning and provide a roadmap for its CSR initiatives, which should be an integral part of overall business policy and aligned with its business goals”. The policy should direct the company to:

Care for all stakeholders: Respect the interests of, and actively engage and be responsive towards all stakeholders. This includes creating value for them, informing them of inherent risks and mitigating risks when they occur. Function ethically: Be ethically and transparently governed and be accountable. Abusive, unfair, corrupt or anti-competitive business practices are a no-no. Adopt measures to contain pollution, recycle, manage and reduce waste, and manage natural resources in an optimal, sustainable manner. Respect human rights and not support human rights abuses: Provide workers a safe, hygienic and humane environment, which upholds their dignity. Desist from employing child or forced labour and uphold workers rights’ to associate and bargain. Opt for social and inclusive development: Undertake activities to promote economic and social development of underprivileged communities, particularly those living in the vicinity of their operations.

NOTES:

THERE’S MORE THAN ONE WAY TO COUNT All organisations like to keep track of their profits—simply defined as income minus expenditure. Responsible companies, however, go a step further. They track their performance in terms of the positive social impact they make. This is called “double bottom– line” reporting. There are some firms that go even beyond, to “triple bottom-line” reporting. They track how their actions have impacted environmental issues, and what measures have been set in place to ensure the safety and satisfaction of all the people they interact with—be these employees, or clients, or people affected by their projects. Double and triple bottom-line reports show that corporations are committed to coming clean about their overall performance.

Resources

Read more about Mahindra’s Social Initiatives, Employee Social Options, at http://mahindra.com/socialinitiatives/ socialinit_esops.html

Download Corporate Social Responsibility Voluntary Guidelines 2009, Ministry of Corporate Affairs, Government of India, at http://www. mca.gov.in/Ministry/latestnews/CSR_ Voluntary_Guidelines_24dec2009.pdf

Read about who in India Inc is doing what in the name of CSR, download recommendations, guidelines, and reporting formats to adopt at http://

www.karmayog.org/CSR/

INC. GUIDEBOOK | VOL. 01 NO. 11

THERE’S A NE W AMONG ENTR E THEY ARE RU N BUSINESSES SOCIAL NEED AND KEEP AN ON PROFITS. THEY MAKE M WHILE SOLVI N PROBLEMS O F 26

INC. | DECEMBER 2010

E W TREND R EPRENEURS. U NNING S THAT SERVE A D OR GOAL, N EYE MONEY, BUT I NG THE O F SOCIETY. DON’T MISTAKE THEM FOR BLEEDING HEARTS. THEY ARE SIMPLY BELIEVERS OF THE DO-GOOD-GET-RICH MANTRA

BY SHREYASI SINGH AND POOJA KOTHARI

DECEMBER 2010

INC.

“THE FIRST TIME MY MOTHER VISITED ONE OF OUR CENTRES IN RURAL TAMIL NADU, SHE TOLD ME SHE WOULD NEVER HAVE ALLOWED ME TO DO THIS, IF I WAS BACK HOME IN DELHI,” SAYS SALONI MALHOTRA, THE 28-YEAR-OLD FOUNDER OF DESICREW SOLUTIONS. She relates this anecdote over a phone call from her headquarters in Chennai, where she moved six years ago. At that time, Malhotra had in her kitty what most young people wish for after they earn their engineering degrees—a well-paying job in a new-age firm in Delhi and a shimmer of bright possibilities on the work horizon. And then, she heard a speech that changed the course of her life. It inspired her to quit her job, pack her bag and baggage, and move miles away to Chennai. Once there, she worked with Dr Ashok Jhunjhunwala of Indian Institute of Technology Madras, whose thoughts had motivated her to chalk out her entrepreneurial ambitions. Together, they hatched her business plan—to set up IT-enabled services centres in rural areas to meet the back-office demands of corporate clients.

The concept was simple—use innovative business methods to bring about positive social change. Do good to the world, and for yourself. Two years of research later, Malhotra finally set up DesiCrew in 2007 along with the professor. Since then, she has built a 250plus team that works with domestic and international clients. The five business process outsourcing centres her company runs are

SPOTLIGHT | LIFESPRING HOSPITALS

MEDICINE MAN “I THOUGHT THEY had the wrong person when I got the call,” says Anant Kumar, CEO, Lifespring Hospitals, a chain that provides maternity healthcare services to low-income women in Hyderabad. The ‘call’ was to set up a meeting with Barack Obama during his recent trip to India. Kumar was among a handful of entrepreneurs who met the President of the United States in Mumbai. Such humility is not surprising in Kumar. Though he put his sweat and toil into building Lifespring, he holds no equity stake in the chain. For him, “the outcome’s enough.” After graduating from Delhi University and the IRMA, Anand, Kumar joined a foundation run by Hindustan Latex, the makers of condoms. It was while working there that he first noticed the gap between state-run

INC. | DECEMBER 2010

government hospitals and their fancier private counterparts. “It struck us that we could set up something in the middle—not free, but then, not expensive either,” he recalls. The idea remained with him for some time, and he discussed it with a few donors and investors, who thought “it was too good to be true”. Finally, in 2005, with capital from Hindustan Latex, Kumar set up the first hospital in Hyderabad as a proof of concept. Three years later, he had Acumen Fund on board as an investor. It gives him immense satisfaction that Lifespring has provided dignity to women at a very crucial period in their lives. “When I was working on contraceptives, I didn’t know who was buying my products. Here, I am able to see my customers. I know

ANANT KUMAR whether they are happy or unhappy with my offering,” he adds. He’s now in the middle of expanding his chain. “We’re identifying 18 to 20 cities, including Delhi and Mumbai, where there is a significant pool of urban poor to benefit from our services,” he says. Having midwifed the birth of a new model, Kumar sure wants to watch it grow.—PK

DO GOOD, GET RICH

located in back-of-the-beyond areas of Tamil Nadu and KarnaSPOTLIGHT | HUSK POWER SYSTEMS taka—some of the addresses as unheard of as they are unpronounceable—and whose locations had shocked her mother who had dropped by for a visit. “It’s the satisfaction of having made a difference that keeps me going in the face of challenges. There are so many rural youths, who can now earn a decent living near their homes,” she adds. FEW COMPANIES get written about in The Economist And she isn’t the only one. In every corner of India, from Bihar twice in two months. It’s even more unusual when that to Hyderabad, there’s a new breed of entrepreneurs, who are company happens to be a start-up in rural Bihar. But, dreaming beyond the dollars they may count at the end of their Husk Power Systems (HPS) is getting used to such entrepreneurial pursuits. They follow the profits, but only after distinctions. In just over three years, the company, cothey’ve counted the lives they have made a difference to. founded by four young professionals—three residents of Bihar and an American friend of theirs—has manThere’s Santanu Bhattacharjee, who tests students in West aged to achieve for 260 villages in Bihar, what succesBengal and the Northeast on their skills and helps them find suitsive governments failed to do for decades. able jobs through his company, Technable Solutions. In neighDeploying World War II technology, consisting of a bouring Bihar, Gyanesh Pandey and his three co-founders at compressed natural gas generator, HPS uses rice Husk Power Systems are electrifying villages husk, an abundant source locally, to create (proprietary) 35kW to 100kW worth of in the “rice rich” but “power poor” state using electricity through mini power plants. the seemingly useless rice husk. Miles away in This husk was previously fed to livestock, Pune, management graduate Rajeev Kher has or left to rot, giving out methane. given up corporate aspirations to set up a porHPS doesn’t stop at generating electable toilets company, Saraplast. tricity. It sets up distribution systems that wire households, and irrigation and Do-gooders they are, but not without the commercial enterprises in a village. Up pragmatic vision of making money. These to 600 families can be covered with one entrepreneurs are quick to dispel any notions of generator—and powered at an affordsainthood that have been tagged along with the able price of 80 per 30 watts of delivtitle of social enterprise. From where they stand, ered power. Since cash is collected up front, there are no cash flow problems. Malhotra & Co. are leveraging business smarts The government provides a 30 per cent to cater to the needs of an oft-ignored segment subsidy on construction under renewof society—what the late author CK Prahalad able energy initiatives. This ensures that chose to call the bottom of the pyramid. the model is sustainable and profitable. “Attacking a social problem is at the core of “What makes me most proud is that GYANESH PANDEY we are reversing some of the disrethe business for them. That impact is not a byspect for Bihar. We want to build a world-class product,” says Anurag Agrawal, senior vice president, Intellecap, a organisation right here,” says Gyanesh Pandey, cosocial sector consulting firm headquartered in Hyderabad. founder, CEO and CTO, over a noisy phone call from a Simply put, where a business might view profit as the primary small village in Bihar. yardstick to assess its success, companies, such as DesiCrew, meaHPS began in Tamkuha in 2007. Today, it provides power to more than 100,000 people. Unlike coal, diesel sure the extent to which the business has made an impact on the or kerosene lamps, which had hitherto been used to society. These entrepreneurs apply the original principles of busilight up homes, power derived from rice husk drastiness and use innovative approaches to solve social problems—be cally reduces carbon emissions. In addition, HPS creit healthcare, education, or even state responsibilities, such as proates livelihoods in the village economy by staffing its vision of electricity and water. power plants with locally-trained talent. The company’s easily-replicable and green model That such a market exists was first pointed out by Prahalad in has attracted the attention of investor forums, both in his bestseller The Fortune at the Bottom of the Pyramid in 2004. India and abroad. HPS has so far raised $2.5 million in The noted management guru laid out the immense opportunity funding from six investors, including International of selling to the poorest of the poor around the world who lived Finance Corporation, Acumen Fund and Shell Foundaon less than $2 a day and yet made up a market of 4 billion. “It’s tion. “We are ambitious. We plan to electrify 5,000 villages in three-to-four years,” says Pandey. been our failing that we haven’t been able to cater to their But, even if that doesn’t happen, Pandey and his demands,” says Harish Hande, founder of Selco India. “We can’t team are thankful for the successes so far. “When blame consumers for being poor. We need to hand them solutions people get access to something like electricity, it that they are willing to pay for.” leaves a deep positive impact on their lives. My busi“Rural India represents almost 70 per cent of the population,” ness might fail, but for that individual, the change can’t be reversed.” —SS adds Vineet Rai, who founded Aavishkaar in 2001, possibly the

THE POWER OF FOUR

DECEMBER 2010

INC.

DO GOOD, GET RICH

first early-stage investing fund for Indian social businesses. “If that demographic starts contributing to our economy, we could grow double-digit for years on end.” It’s a hypothesis that has ignited the dreams of entrepreneurs like Pandey who are eagerly looking at successes, such as Grameen Bank in Bangladesh, and Aravind Eye Hospital, closer home, to build businesses around the buying power of the Bottom of the Pyramid segment.

SPOTLIGHT| SARAPLAST

Says Anant Kumar, CEO, Lifespring Hospitals: “We’ve identified a customer—the working poor. We know their earning capacity and how much they can afford. And, we price our service for them. It’s very similar to Hindustan Unilever trying to sell Rin detergent. It looks at the customer and determines the right price. We try to run this business as close to a commercial venture as we can.” Kumar’s nine hospitals in Hyderabad provide maternity and childcare services to urban poor women at prices that defy convention. A normal delivery costs 4,000, a figure quite unthinkable at a regular hospital.

MR CLEAN RAJEEV KHER has a tough mission on hand. He plans to bring “total sanitation” to India through Saraplast, the company he founded in 1999 to sell high-quality, ecofriendly and portable sanitation products and services. Kher’s is a unique one-stop shop. Under the brand, Shramik 3S, it manufactures and services portable toilets, urinals, wash basins and septic tanks for large public events, construction sites, slums and such settlements. It also builds and provides on-site cleaning and waste evacuation services. Sanitation infrastructure is a necessity in India, given that more than half of its population still defecates in the open. Recently, a Canadian think tank revealed that India had 545 million cell phones, but 366 million toilets. “People can talk about sex, AIDS and condoms, but talking about toilets is still a taboo. Sanitation is one of the most critical areas in our country,” says the Pune-based Kher, who first saw a portable toilet in Canada, while working there after his MBA. But, it was an encounter with an elderly woman in 2005 that deeply RAJEEV KHER affected him. He met her at one of his Pune sites. “She came and touched my feet. She said that there had been incidents, where women from her settlement had been raped when they had gone to an open toilet before the break of dawn,” he recounts. “She told me that the women felt safe now, since they didn’t have to wake up at an ungodly hour any more to do a basic bodily function. It changed the way I looked at my business.” Now, it is his “duty”— and not his “job”—to ensure that more people are bestowed the dignity of privacy. Saraplast leases out toilets, priced between 6,000 and 12,000, to construction companies, tourism corporations, municipal bodies and others. Now, Kher is devising a pay-and-use model for streets and public schools. The company already provides sanitation to 2 million users a month across 2,400 installations in Mumbai, Pune, Delhi, Tamil Nadu, Maharashtra, Goa and Kerala. In 2009, Aavishkaar picked up a 21 per cent stake in Saraplast.—SS

INC. | DECEMBER 2010

What’s in a name? It is this ability to make a profit while serving the poor that separates this breed of entrepreneurs from traditional non-profit organisations. Things, however, aren’t quite black and white. A whole lot of descriptions and theories float around, attempting to grasp the exact nature and meaning of a social enterprise. Some have even pushed NGOs and organisations run by social activists into the same space. Brian Trelstad, chief investment officer, Acumen Fund, describes it as “any enterprise that tries to solve a social problem by operating a financially viable business.” Jayant Sinha, partner and managing director, Omidyar Network India Advisors, a global fund started by eBay founder Pierre Omidyar, however, is quick to point out that “there are few grey areas. There are either forprofit ventures that are funded on a commercial basis, or there are NGOs that run on grants.” He uses the example of d.lite design, a company which makes solar lanterns for the poorer parts of the world, and in which he is an investor. The social impact, he points out, comes from the nature of the business, not from subsidies or soft capital. Unlike non-profits, social enterprises can’t live on grants and endowments. This financial accountability is a key strength

SPOTLIGHT | SELCO INDIA

ENERGY GURU HARISH HANDE could have been sitting in the world’s best science labs, or teaching the brightest minds at MIT or Stanford, after his doctorate in solar engineering from University of Massachusetts. However, he chose to move back to Karnataka, his home state, to start up Selco India, a solar lighting and appliances company. Founded in 1995, Selco services more than 1 lakh rural customers, some of whom earn less than 3,000 a month, in Karnataka and Gujarat. Its products—CFL and LED lights, water heaters, inverters and cooking stoves—use solar energy. But all wasn’t bright and sunny when he started. It took Hande five years to sell 500 lights. Not that he’s really interested in scale, or in adding numbers. “We don’t want to scale up. Ours is a highly-replicable model. We

have chosen four entrepreneurs in Madhya Pradesh, Maharashtra and West Bengal. We want them to take Selco and run it,” explains Hande. “We have kept our organisation open source. That’s truly sustainable. We want people to duplicate it.” While some do exactly that, Hande wishes to go deeper into Karnataka. By that, he means designing products that are within the reach of families that earn less than 2,500 a month. This ambition to jump the almost impossible threshold is Hande’s biggest driver. “Our team looks at frustration as motivation,” says he, of his 140 employees. When he founded Selco, it was also to dispel three myths associated with technology, and the rural sector as a target customer base. The myths were: poor people couldn’t

HARISH HANDE afford sustainable technologies, they could not maintain it, and such business ventures could not align interests of all their stakeholders. In what’s become a case study, Selco leveraged the potential of India’s significant rural banking system to help consumers avail finance to buy its products. Its work has been extensively recognised by prestigious organisations, and it has been invested in by E + Co, Lemelson Foundation and Good Energies.—SS

values-driven business bandwagon are surprisingly clueless about and helps them escape much of what ails the not-profit sector. the nomenclature. “I had never heard the term ‘social enterprise’,” Adds Acumen’s Trelstad: “Social enterprises are another way to says Bhattacharjee, whose company solve the world’s problems that can Technable is surely trying to impact the complement traditional aid prosociety by training students in West grammes and NGOs.” So, while vacciBengal and the Northeast for jobs. nations stay in the domain of aid His reasons for shaking the social programmes and government, services, enterprise tree had nothing to do with such as healthcare—something that the noble intentions. “I was trained in the poor are willing to pay for—have been corporate arena. So, I knew how to form taken up by social enterprises. a company and operate it. I had no idea And of course, there is the element what it meant to start an NGO,” he of risk without which a business cannot adds. All he knew was that “training grow. Social-minded businesses have an and gainfully employing one member incredible appetite for risk. “You need to in a family improved the lives of the go beyond tried and tested modules, other members in the long run”. and identify opportunities that have “It’s both about doing your bit and been excluded from the economy,” meeting the needs of the market,” adds explains Rai, who, with Aavishkaar, has Vijay Pratap Singh Aditya of Ekgaon invested in 22 social businesses in the Technologies, a software solutions compast nine years, 18 of which have been pany that makes mobile applications for rural enterprises. There is no doubt that the cost and risk of operating such a the rural poor. Ekgaon’s platforms helps it 700,000 customers in India, Nepal business in rural UP or Bihar, or of selland Sri Lanka avail financial help and ing lanterns to a population that has agro-advisory services, sometimes for lived on kerosene lamps for generations, as little as 25 a month. is a very different proposition. While a debate rages over the exact According to Sinha, the confusion Jayant Sinha meaning of the social enterprise, the comes from the stage of the sector: “It’s Partner and Managing Director Omidyar Network India Advisors very people who have jumped on to this a new industry. That’s why the labels

“THERE ARE FEW GREY AREAS. THERE ARE EITHER FORPROFIT VENTURES THAT ARE FUNDED ON A COMMERCIAL BASIS, OR THERE ARE NGOs THAT RUN ON NGOs GRANTS.”

DECEMBER 2010

INC.

SPOTLIGHT | EKGAON TECHNOLOGIES

RURAL BANKER HE MIGHT HAVE won the 2010 Nasscom Social Innovation Awards, but Vijay Pratap Singh Aditya, co-founder and CEO of Ekgaon Technologies, prefers to keep things simple. “We are really just a value added data services company. And, since all our clients are based in rural areas, we design our software solutions for them.” It’s possibly this calm view of things that helps Ekgaon code rural and under-served communities into connectedness, with the help of the seemingly ubiquitous mobile phone. Founded in 2002, Ekgaon develops information management solutions on a range of financial inclusion, citizen entitlements and agro-advisory tools to link rural markets. “With the mobile revolution, there was a huge potential to link rural areas. This infrastructure has ensured we could do something, which was not possible till now,” explains Aditya. An alumnus of the Indian Institute of Forest Management, Bhopal, Aditya realised the value of using technology to help villagers, while working on a World Bank-IIM project on wide area networks and rural connectivity. VIJAY PRATAP SINGH ADITYA Since then, Ekgaon has tied up with banks, micro-finance institutions and insurers. It also partners with more than 30,000 self-help groups in four states. Each member gets a card with a bar code to be able to access these services. Ekgaon enables enterprise services for financial service providers (as of now, there are nine in India) collect client details for registration of accounts, and its systems allow client verification using biometrics and smart cards. OneMobile and OnePOS, their signature transaction systems, help villagers avail services like withdrawals, transfers, deposits and remittances. “It saves them going 20km to 50km to transact a 50 entry,” explains Aditya. The company, through its clients, services more than 700,000 individual micro-finance customers. Ekgaon also works in Nepal and Sri Lanka, and has recently signed memorandum of understandings for partnerships in Africa. But, the business continues to be tough, admits Aditya. Working capital is a challenge. And, changes are slow. Motivation for him comes from the value his clients see in their services. “Farmers come and tell us they have saved 550 in fertilisers because of our OneFarm agro-advisory services, recently also launched in Rajasthan. They calculate the benefits—by just spending 120 in a crop season on the advisory has enabled this,” he says proudly. Their agro services provide customised crop disease and pest alerts, weather forecast crop management advisories and market connect services to over 11,000 farmers. Over the next five years, they want to reach 15 million farmers.—SS

INC. | DECEMBER 2010

and terminology are still being worked out,” he explains. Decoding the buzz Undoubtedly, these businesses and their passionate founders resonate with the greater masses hungry for do-gooder stories. Their celebration is evident in the media hype around such enterprises. It also shows up in the money that’s being poured into the sector. Estimates suggest that by the end of 2011, investments worth $250 million would have been injected into businesses that aim to have a positive social impact. Sinha’s Omidyar is looking to pump in $200 million in such Indian companies over the next five years. And that’s only one of the many funds operating in the country. What began as a trend in the middle of this decade in India is slowly establishing itself as an industry. “Much of the credit must go to the scaling up of micro finance institutions (MFIs),” says Intellecap’s Agrawal. That the micro finance industry grew at upwards of 100 per cent in the last five years, and was de-linked from global economic cycles has inspired many social ventures, he adds. The sudden shine that this sector has acquired is also fuelled by the fact that there is a growing interest in India across the world. “India became hot internationally,” says Rai. Innovative solutions developed here are being closely watched, some ideas even being transported to Latin America and Africa. The successes of social enterprises, such as Aravind Eye Hospital and Narayana Hrudayalaya, have only added to the glamour of the “do good, get rich” possibilities. As Kumar puts it, “I get to do good for the community, and do well for myself.” It would be hard to argue on that. “I see a big sexiness around social entrepreneurship,” says Selco’s Hande. “But, the change in the ecosystem has been subtle,” he adds. Hande is well poised to track the growth. He founded Selco (Solar Electric Light Company) to deliver low-cost solar home-lighting solutions to the rural poor of Karnataka in 1995. Most of the jargon used for this sector wasn’t even coined then. “Of course, it’s only the articulate, Englishspeaking social entrepreneur who is glorified,” points out the IIT Kharagpur and

DO GOOD, GET RICH

“IT’S ONLY THE ARTICULATE, ENGLISH-SPEAKING SOCIAL ENTREPRE ENTREPRENEUR WHO IS GLORIFIED.”

University of Massachusetts alumnus. “By romanticising us, the real social entrepreneurs in rural areas get alienated.” There might be some truth in that, as is evident from the examples that get bandied about, including those in our story. There are very few things that can match up to the folksy charm of an IIM alumnus who gambled away his bright dollar-earning career options for the not-so-shiny life Harish Hande of an entrepreneur—and that too, in a Founder, Selco India business that’s unlikely to send him laughing to the bank any time soon. Still, many feel that all publicity is good publicity, especially since the do-good label often attracts weak hearted. While running any business is a challenge, the talent to the field. “Great branding is a necessity even here. If I call issues of marketing and finance acquire huge proportions for a Saraplast a toilet company, nobody will work with us,” says Kher, social enterprise. whose company manufactures, installs and services portable toiSeveral of these products are category changers, thus they have lets at slums, construction sites and large public gatherings. “So, higher marketing costs, explains Trelstad. “These businesses have we became a sanitation service provider.” to spend a significant amount of time in marketing, training and demonstrating the effectiveness of their products. That’s very difShow me the money ferent from a product that has well-understood features.” And yet, despite the hype, running a social enterprise isn’t for the Such risks usually make it difficult for the social entrepreneur

SPOTLIGHT | TECHNABLE SOLUTIONS

TALENT SCOUT SANTANU BHATTACHARJEE had lived in the US since the 1980s. He had even started a few technology businesses during that time. However, he wasn’t satisfied with “sending money back to India”. He wanted to do something that made a substantial difference to someone’s life— like finding them a meaningful job. That’s exactly what he set about doing upon his return in 2003. His Kolkata-based company, Technable Solutions, offers job-oriented skills training to students of West Bengal and the neighbouring Northeastern states. Acting as a bridge between academia and industry, Technable assesses the skills of undergraduate students, and thereafter, trains them to become more employable in industries, such as retail, IT and ITeS, and insurance. Estimates indi-

cate a success rate of nearly 80 per cent for those who have undergone such training in the past. The firm runs an aptitude, competence and employability test (ACET) in collaboration with the West Bengal government’s Department of Information Technology. The threehour test assesses students’ skills in areas, such as analysis, listening comprehension and English. Given that barely 2 per cent of those who have been tested so far under the ACET programme have scored enough to be declared ready for employment, it isn’t surprising that there is immense interest in the firm’s training programme. Even some colleges have joined hands with Bhattacharjee to manage their development and placement cells. The gap between the knowledge and

SANTANU BHATTACHARJEE skills imparted by educational institutions, and those demanded by employers has been a widely acknowledged problem all over the country, not just in the east. It isn’t surprising then that the firm has grown more than 88 per cent to a turnover of 1.5 crore (2008-09) in the past two years alone. Bhattacharjee has even franchised his brand to widen his firm’s reach, and hopes to become a name across the country. —PK

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DO GOOD, GET RICH

to raise money through regular channels. Recalls Kher of Sarabe put in place and structures that require higher rounds of due plast: “I remember a banker laughing at me when I started in diligence. Often, as Rai says, the process begins with the basics of 1999. They wouldn’t even consider giving me a loan.” accounting and other management functions. Adds Technable’s Bhattacharjee: “The investor community There seems to be both a demand and supply problem. “VCs still hasn’t woken up to the fact that it is possible to make money complain they don’t have enough investing opportunities,” says and run a social enterprise.” His company had to shrink its opera- Intellecap’s Agrawal. tions in the recent past over a minor cash flow crisis. “From 300 people in 30 centres, we are down to 80-odd people in 10 centres,” What next says Bhattacharjee. The social enterprise sector is still its infancy stage in India. The Creating better risk guarantee mechanisms is critical for downpour of funds on the sector is beginning to raise some conunlocking the potential of social businesses, opines Selco’s cerns. “I think a boom-bust cycle is a real worry. We’ve seen it Hande. “Ventures should grow with a combination of debt and often in asset markets. People believe it’s the next big thing and a risk capital. But, no debt here comes without the personal guaran- lot of money comes into it and drives up valuations,” says tee of a house, or land.” Selco has, in fact, started its own incubaOmidyar’s Sinha. tion lab to guide entrepreneurs. However, Aavishkaar’s Rai thinks there’s little danger of the sec Banks, which form a crucial part of the finance chain, are not tor inflating right now. “We are just five or seven early stage funds in equipped to listen and understand the needs of for-profit compaIndia.” India needs many more funds with $50 million to $100 milnies driven by a social mission, feels Husk Power System’s Pandey. lion in each of their kitty, he adds. “But, we need to make sure we “There are so many promising business ideas that keep blossominvest in real business, not esoteric ideas. The needs of rural India ing in the interiors of Bihar. But a young boy there has no access are simple—technology, agricultural productivity, healthcare, eduto the funds that we do,” says the cation and energy.” IIT BHU engineer, who perEvery industry has its share fected his technology while of bad ideas, so there is no readoing his masters in the United son to believe that things will States. HPS has raised $2.5 milbe any different in social impact lion in funding from six invesinvesting. Acumen’s Trelstad tors so far, including Acumen likens the phase to the early Fund and Shell Foundation. days of the Internet, or the BPO “We thought we could meet industry in India. “There’s our working capital loans bound to be failure. People are through SME loans,” Ekgaon’s going to make mistakes, ideas Aditya tells us. “We had been are going to flop, but at least profitable since we launched, there are more entrepreneurs but not last year. But, SIDBI out there trying new things” refused to fund us because of There is no dispute on that. that.” Many entrepreneurs also There are more businesses trysay venture money is a hardball ing to make a social impact in game not everybody can play. India today than ever before. “The VCs look at an entrepreThe success of microfinance has neur’s profile and banks at your paved the way for innovations, balance sheets. Nobody sees the such as micro health insurance. holistic picture,” he adds. “We see a robust pipeline of Others complain that a businesses,” adds Sinha. few industries—clean energy, Newer platforms, such as microfinance, health—have cormobile technology and the curnered a disproportionate rent unique identification projamount of funding. ect, have generated oodles of On the other side of the excitement across the entreprespectrum, investors crib about neurial spectrum, given the their own set of challenges. potential for the base of the Working with rural entreprepyramid applications. Financial neurs does not come easy, they transactions over mobile Brian Trelstad explain. There are processes to phones are already a reality. Chief Investment Officer, Acumen Fund

“THERE’S BOUND TO BE FAILURE. PEOPLE ARE GOING TO MAKE MISTAKES, IDEAS ARE GOING TO FLOP, BUT AT LEAST THERE ARE MORE ENTREPRENEURS OUT THERE TRYING NEW THINGS.”

INC. | DECEMBER 2010

SPOTLIGHT | DESICREW SOLUTIONS

BPO BOSS

A FEW YEARS AGO, there were only two things that Saloni Malhotra was sure of; one, she wanted to make a difference. And two, she wanted to build an organisation with a rural connect. She was inspired by Professor Ashok Jhunjhunwala of IIT Madras, who was incubating 16 companies at that time—most with a rural connect. She had no idea whether to form a company, or a foundation. She didn’t know what service to offer. With the help of Jhunjhunwala, Malhotra worked it all out—she wished to start a rural BPO. “There were thousands of people coming to urban areas from the hinterlands. They lived on a minimal salary and bore the expenses of a big city, which beat the point of coming to a metro for savings. So, we decided to take the jobs back to where they were needed the most,” says Malhotra. There are at least 250 people who

are thankful that she did that. They are the ones employed in her company, DesiCrew, which runs five centres located in towns as unheard of as Kollumangudi. These BPOs fulfill the back office needs of clients, whom she won’t name, but qualify as “a large IT company that took two years to set up shop with us” and “renowned insurance giant”. The work done could be as simple as data entry, and could cover the range from translation and transcription to secondary research. Though she wants to build a business, the world’s been quick to thrust noble intention upon her. “A social objective is one of the reasons that attracts people to us. But my biggest strength is also my biggest challenge. If I stress more on the social aspect, the business won’t survive,” says Malhotra, who undergoes the same pressures of balancing her P&L that any regular business does.

With a unique identity number in place for every Indian, there would be endless possibilities that could be tempered into cutting-edge innovative solutions, which ultimately usher in change within the society. “It’s what bottled water would have been years ago. Who could have ever thought people would pay for water,” reasons Kher. Meanwhile, a slew of challenges remain for the sector, the biggest being that of scale. There are no well-documented success stories of social businesses that have attained scale. Even entrepreneurs concede that they are still scratching the surface. Considering that a tremendous amount of work needs to go into solving India’s problems, it wouldn’t be too farfetched to think that some of these businesses will grow much bigger than others have in the past. “We need the government to work with us. Large industries should also join in,” says Kher. The ability to scale up also depends on how long you can hang in there with your goals intact. “It’s so easy to get frustrated. That’s one of the main things we look for in our entrepreneurs—focus and an appetite to sustain the frustrations,” says Agrawal. Trelstad echoes the sentiment. “We try to understand why the entrepreneur cares about the customers’ problems. We’ve seen a couple of health-oriented businesses that have not gone according

SALONI MALHOTRA Having been funded by IIT Madras, Villgro and an angel investor previously, DesiCrew’s in the middle of raising a fresh round of capital to fund its next phase of growth. “I’ve had investors tell me that if you go to a bigger city like Trichy, we’ll give you money. But that isn’t what we want to do,” sighs Malhotra. However, she isn’t worried. Having laid the foundation of the business and built it to revenues of 2 crore, Malhotra’s hopeful that scale is just a matter of time. “We’re at a point where we’ve proven its commercially viable project. People’s reservations have to be proven wrong.” With the right intentions, it really might be just a matter of time. —PK

to plan. One of them in East Africa, a network of clinics, just didn’t make much progress on serving low-income consumers. The entrepreneurs involved were more focused on building a profitable health business than serving the poor.” Most of these businesses will also need strong infusions of capital to scale up. They will have to build valuable businesses that will attract even the regular investors to come on board. Without such a plan, it will be difficult for them to grow. On the other hand, the investors, too, have some growing up to do. The new crop of funders—such as Acumen and Omidyar—have, till now, largely sourced their capital out of grants from high networth individuals, or by tapping philanthropic sources. They haven’t had to venture out into the market to raise the money—something they might have to consider in the near future. They will then need to demand better returns from the businesses they invest in. Trelstad acknowledges the need to hunt for bigger social investors. “We’ll need to find a way to attract investment capital, without abandoning the kind of high-risk-high-impact investments that need our capital.” There should be enough reasons to do so. Just as the problems of the world can do with innovative solutions, investors can do with finding the next Aravind Eye Hospital, or Grameen Bank, before they become the stars of tomorrow. DECEMBER 2010

INC.

With consumers and businesses pinching pennies,

there’s only one way to survive:

target needs, not wants

BY LEIGH BUCHANAN

THE

OT LONG AGO, entrepreneurs expressed their faith in the relative balance of production and consumption with a movie quote: If you build it, they will come. Those days are over. Now, if you build it, it will sit in inventory until the holding costs eat you alive. Welcome to the demand economy, in which the great thirsty sponge of consumption has shrunk to the size of a sink scrubber. Demand, in the most general terms, is what people will buy at a given price. In a demand economy, people are unwilling to buy much at any price, and the resulting drop in consumption becomes the preoccupation of business. The culprit, of course, is the state of the economy. The number of long-term unemployed is at a historic high, total consumer credit is negative for the first time since 1969, and the US household savings rate—which hovered around 2 per cent just three years ago—is 6.1 per cent, with each percentage point representing $109 billion in spending stripped from the economy. These kinds of conditions, which have persisted for two years now, are leading to dramatic changes in the spending habits of both consumers and businesses—changes that may be here to stay. “The longer and deeper the downturn, the more likely that coping behaviours people have adopted to deal with having less money will

INC. | DECEMBER 2010

ECONOMY become ingrained,” says John Quelch, a professor of marketing at Harvard Business School. Among such behaviours: More Americans are joining the ranks of what Quelch calls simplifiers—people who choose to live below their means. Up until a few years ago, “you could create supply and go in search of demand to absorb the supply,” says Rick Kash, CEO of the Cambridge Group, a consulting firm in Chicago and co-author with David Calhoun of the new book How Companies Win: Profiting From Demand-Driven Business Models No Matter What Business You’re In. “But efficiencies and technology have given us oversupply at the same time that demand is contracting. Today, you first have to understand demand. Then you take your current or new supply and align it with the demand that gives you the most profit.” Understanding demand requires knowledge of macroeconomic trends and the demographics and psychographics of one’s particular market. In the former category, John Gerzema, chief insights officer at the advertising giant Young & Rubicam, sees opportunities in what he considers overlooked mass audiences, such as the developing world’s middle class (projected to be larger in 2030 than the populations of the United States, Europe and

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Japan combined) and households headed by single women, particularly in the United States and Latin America. Psychographically speaking, Gerzema spies potential in products that help people make sense of an increasingly complex and data-driven world. He is a fan, for example, of Flipboard, a Palo Alto, California, business that aggregates the content posted by members of multiple social networks. He also likes services that provide personal feedback, such as Mint. com, the personal finance website, and Bodybugg, which lets users track their calorie intake. The new primacy of demand doesn’t render innovation any less important. Kash advises those with sufficient funds and chutzpah to seek bonanzas in emerging and latent demand—desires so embryonic, consumers have yet to express them. “No one went to Sony and said, ‘Can you make music portable?’ ” says Kash. Providing consumers with things they don’t yet know they need requires equal measures of imagination and realism. At Inc.’s request, Kash and his team brainstormed several such offerings. Among the most intriguing: storefront health care offices, staffed by nurses and co-owned by nurses and entrepreneurs, that would replace crowded and dreary clinics. (The nurses would also make house calls.) Another: Companies that don’t just repair things but refurbish them so they don’t have to be replaced. Such businesses would send out service people on a schedule—two or three times a year, perhaps—to perform checkups, maintenance, and updates on cars, appliances, and other big-ticket purchases.

O HOW CAN you identify non-obvious pools

of profitable demand? Big, complicated problems are good bets, because they benefit from diverse avenues of attack. Consider, for example, the 17 million people in the United States without bank accounts; the 34 per cent who are overweight; the 884 million worldwide without access to safe drinking water. You might look for inspiration abroad—an approach that has paid off handsomely in the food, fashion, and reality-TV industries. The seven companies profiled in the pages that follow have identified deep wells of demand in a parched marketplace. They range from a prelaunch start-up to a 26-year-old family business. Some pounced on opportunities, while others gestated their ideas for years. What they share is a nuanced understanding of who their customers are and what they want, need, and are willing to pay for. Now all they have to do is supply it.

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THE AGEING POPUL ATION

Baby boomers are hitting old age—and they are terrified of nursing homes. If only there was

some way to keep the elderly in their homes and healthy. by 2030, 71 million Americans will be over age 65, according to the US Census. Currently, 30 per cent of elderly Americans who are not in assisted living live alone, and 90 per cent say they want to grow old in their homes, according to AARP. Home health care, much of it for the elderly, is one of the fastest-growing segments in the country’s fastestgrowing industry. THE INSPIRATION: In 1993, Charles Hill-

man, an engineering consultant, was living on a farm in Wisconsin. His great-aunt Clara, then in her late 80s, occupied a cottage 100 yards from the main house. One ILLUSTRATIONS BY PC ANOOP

THE DEMAND ECONOMY

indicators. A communications base, accessed through an ordinary television, delivers content that includes weather and spiritual offerings and enables communication with family, friends, and caregivers. HOW IT GOT STARTED: After rescuing Aunt

day, Aunt Clara called to complain she was cold. Arriving at the cottage, Hillman found all the windows flung wide; his aunt said she had opened them because the room was smoky. “I went down into the crawlspace and saw her furnace was on fire,” recalls Hillman. After extinguishing the blaze, Hillman asked his aunt why she hadn’t mentioned the erratic temperatures and strange noises that had been emanating from beneath the house for days. Says Hillman: “She gave the answer that boomers caring for ageing parents hear all the time: ‘I know you’re busy and didn’t want to bother you.’ ” THE BUSINESS: GrandCare Systems, based

in West Bend, Wisconsin, makes technology that helps seniors live independently. Sensors installed around the home monitor motion (tracking, for example, if the resident appears to be wandering or fails to rise from a chair or bed and how often doors open and close); check room temperature; and allow remote reporting of blood pressure, pulse, weight, and other health

Clara, Hillman had to wait for the technology to catch up to his idea for a system to help seniors and their caregivers avoid similar situations. He bided his time by studying the market. He joined the boards of a local long-term-care organisation and the American Association of Homes and Services for the Aging. “As we would discuss finances and state reimbursement, it was pretty clear that institutional longterm care was not a sustainable model,” says Hillman. “Also, the view of nursing homes has really changed. People fear them more than death.” As he prepared to launch the business in 2004, Hillman joined a consortium of companies developing technology for the aged. The consortium’s large corporate members—including Intel and Philips— were generous with their survey data. That research helped Hillman determine how to price his offerings, market simultane-

ously to seniors and their personal and professional caregivers, and design products that wouldn’t simply be unplugged or ignored. “People are used to getting information from their television and their telephone, so that’s where we started,” says Hillman, who purchased sensors and other hardware components from GE and hired programmers to develop software linking it all together. The company launched in 2005 and spent several years testing the system in the independent-living units of longterm-care facilities. Those facilities may become his customers as well, Hillman says. THE RESULT: GrandCare released its new

core system, HomeBase, last summer, and had sold several hundred units by mid-August, after the product was featured on CBS’s The Early Show. The company, which expects to become profitable this year, has seven employees— chiefly programmers—and markets through a network of almost 200 independent dealers. It has sold systems in every US state, the United Kingdom, Canada, and Australia.

ECO-FRIENDLY HOMES

Homeowners have switched from supersize to the diet menu. Forget McMansions—

tomorrow’s home is smaller and greener. americans’ ideal home size, which peaked at 2,400 square feet a few years ago, has fallen to 2,000 square feet, the first decline since the 1950s, according to the real estate website Trulia. Thirtysix per cent of homeowners expect their next residence to be smaller than their present one, a survey by Better Homes and Gardens found. And the US green building market will expand from $71.1 billion today to $173.5 billion in 2015, according to EL Insights, a trade publication. THE INSPIRATION: Bill Haney is an entrepreneur with a string of

environmentally themed businesses under his belt. Maura McCarthy is a former VC who in the mid-2000s was researching clean technologies. The pair met at a health care nonprofit and discussed DECEMBER 2010

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doing something related to green building. “There was a lot of talk at the time about ethanol and solar energy,” says McCarthy. “But there wasn’t enough of a consumer focus.” THE BUSINESS: Blu Homes, based in Waltham, Massachusetts, manufactures and erects aesthetically pleasing, eco-friendly modular homes that start at 750 square feet. The structures fold so they can be transported on ordinary trucks.

The fees are high. The service is lousy. And strange charges appear for no reason. There has

to be a better way to bank.

HOW IT GOT STARTED: After locating a pro-

fessor at the Rhode Island School of Design who was interested in the future of housing, Haney underwrote a two-year graduate seminar on the subject. “We looked at what characteristics would allow houses to be more economical, healthier to live in, require lower maintenance, and be expandable to accommodate home offices and multi-generational living,” says Haney. The answer: modular homes. But Haney and McCarthy had two big problems to solve before they could move forward. First, the cost of transporting a house is so high that most modular housing companies don’t service customers who are more than 300 miles from their factories. Plus, erecting a traditional modular house requires a general contractor working on-site for five or six months. The pair solved both problems by collaborating with a graduate student at the Massachusetts Institute of Technology—now a Blu Homes employee—on the design of structures with steel frames that fold up like origami so they can be cheaply moved cross-country on a flatbed truck. Blu Homes employees unfold the houses on-site, which takes eight days or less. “Our big ‘aha’ was, ‘Holy crap—we don’t need 30 factories,’” says McCarthy. “We can serve a 5,000-mile geography with just one or two or three.” Real estate industry research indicates that more than half of homeowners concerned about their families’ health will pay a premium for an eco-friendly home. So McCarthy and Haney targeted markets by mapping, for example, Prius sales and Whole Foods stores. The homes sell from about $80,000 for a one-bedroom to $450,000 for a high-end luxury home.

forty per cent of americans say they have very little confidence in traditional financial institutions, according to a survey by the global PR firm Edelman. About one-third say they have more faith in PayPal and other online services, according to a survey by Cisco. And by 2014, an estimated 80 per cent of families led by GenYers will do their banking online, Forrester Research has found.

THE RESULT: Blu Homes, which has about 50 employees, sold eight

THE INSPIRATION: Joshua Reich’s disen-

ConSova

houses last year and expects to sell 20 this year, which is about how many it can make. Although the company has its eye on the residential market, last year it sold four homes to TBS, for use by the cast and crew of Lopez Tonight, and one to HomeGoods, which moved it to six locations in seven days for a traveling home show. The U.S. military also has expressed interest.

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chantment with American banking set in when he and his new wife were sorting out their finances. Their bank was so stingy with information, they could barely get a handle on it. Then there was the 36-page preamble of terms and con-

THE DEMAND ECONOMY

ditions for his checking account and the mysterious charge to his savings account that Reich couldn’t clear up because no one at his bank would answer the phone. For Reich, who previously ran a datamining consulting firm and an equity research group, those experiences were especially harrowing for being novel. In Australia, where he grew up, “interactions are so much simpler that I never had to think about my banking relationship, which is a good thing,” says Reich. THE BUSINESS: When it launches, in 2011, BankSimple, a start-up in New York City, will provide online banking services designed to be easy and transparent. Savings, checking, and other financial products will be accessible through a single card, and there will be no fees for things like opening an account or overdrafts. To provide cash and FDIC coverage, BankSimple is partnering with other banks.

HOW IT GOT STARTED: Last summer,

Reich and co-founder Shamir Karkal launched a website and asked visitors to sign up for an invitation to join BankSimple. More than 20,000 have done so, and the company has contacted more than 8,000 of them, using one-on-one interviews as well as multiple-choice surveys to solicit input on features and policies. This has helped the founders create a detailed psychographic profile of the BankSimple customer. “We’ve come to think of these people as the ‘financially guilty,’ ” says Reich. “They are college educated—27 per cent have some form of postgraduate education. They read newspapers and financial blogs. They listen to Suze Orman. So they know what they should be doing with their money—moving money out of checking and into a time deposit, for example. But they’re not doing it, because it’s complicated. And they feel bad about that.”

To allay those concerns, BankSimple will use a predictive banking model, in which consumers use one card for everything and the company draws funds from whichever account—checking, savings, credit—produces the best yield. It’s similar to a popular financial product in the UK that consolidates balances from multiple types of accounts and automatically moves money around to ensure that customers pay as little interest, and earn as high returns, as possible. THE RESULT: Not even out of the gate, Bank-

Simple has stirred excitement among potential customers and the press. Reich and Karkal, both first-time entrepreneurs, attracted high-profile Twitter developer Alex Payne to join the founding team and have raised an initial round of $3.1 million from First Round Capital, IA Ventures, and others.

ORGANIC AND LOCALLY-PRODUCED FOOD

Tainted burgers. Contaminated eggs. E. coli scares. No wonder

Americans are looking close to home for their food. in 2007, the new oxford American Dictionary crowned locavore word of the year. The number of farmers’ markets has more than doubled in the past 10 years, according to the USDA. A third of all adults in the US say they regularly buy natural and organic food when possible; and 59 per cent say they buy local whenever possible, according to Mintel, a research firm. THE INSPIRATION: In 2002, Tracey Ryder and Carole Topalian

were putting in long hours at their Ojai, California–based design firm. Leisure moments typically found them picking over produce at the town’s bustling farmers’ market, sitting in friends’ kitchens watching them prepare meals, and engaging in endless conversations about the best bakeries and wine and DECEMBER 2010

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cheese shops. Their enthusiasm for local food reached a peak when the advocacy group Slow Food USA named the pixie tangerine of Ojai Valley to its US Ark of Taste (a list of outstanding foods in danger of disappearing). “Just being in the middle of it, noticing what was going on, it was a very organic—pardon the pun—way of recognising need,” says Ryder. THE BUSINESS: Edible Communities, based in Santa Fe, New Mexico, licences regional publishers to produce magazines about local foods. The magazines—with names such as Edible Aspen, Edible Portland, and Edible Chicago—are distributed free in their communities; subscriptions cost $28 a year. The magazines are supported by advertising, chiefly from farmers, farmers’ markets, specialty stores, and restaurants. The company charges franchisees a start-up fee and collects 5 per cent of ad sales.

GrandCare

HOW IT GOT STARTED: Ryder and Topa-

lian launched Edible Ojai as a lark. Then, in 2004, Saveur named the publication to its annual list of 100 favourite people, places, and things and encouraged other localities to get in on the act. Ryder and Topalian put up a website, and within a week they had 400 requests from people around the country who wanted their own Edibles. Casting about for a business model, Ryder and Topalian accepted a consultant’s suggestion that they licence the brand and provide support for publishers. “These people own and operate their own magazines in their own communities,” says Topalian. “They have advertisers in their own communities. They spend the money they make in their own communities.” Adds Ryder: “We can say to advertisers that 100 per cent of our readers are your customers.” National businesses such as Organic Valley, Niman Ranch, and even Eileen Fisher have staked out turf in Edible’s pages as well, but the company preserves 90 per cent of its space for the locals.

THE RESULT: Edible Communities now consists of 70 titles, and

the company adds, on average, one magazine a month. Most have been profitable after the first year or so, and none have closed (although a few have been sold). The parent company is also profitable, with revenue doubling every year for the past three years.

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INSOMNIACS

The problem with an always-on, 24-hour, caffeine-fuelled culture: When you want to go

to sleep, your humming brain won’t let you.

roughly 40 million Americans suffer from chronic long-term sleep disorders, another 20 million experience sporadic sleeplessness, and sleeplessness is rising as the population ages, according to the National Institutes of Health. The market for over-the-counter sleep aids is expected to hit $759 million by 2013, according to ReportBuyer.com, a market research firm.

THE DEMAND ECONOMY

THE INSPIRATION: As a student at Florida

International University in 2005, Vincent Porpiglia had trouble sleeping. He tried over-the-counter medications as well as prescription drugs, but he was wary of growing dependent on such treatments. Porpiglia made the intuitive leap from buzz to zzzz. There are so many liquids that wake people up—coffee, sodas, energy drinks. Why not a liquid that does the exact opposite?

THE BUSINESS: Dream Water, based in Miami, makes an over-the-counter liquid sleep aid and packages it in 2.5-ounce shots, like popular energy drinks. HOW IT GOT STARTED: After graduating, Por-

piglia spent two years working with independent labs to devise a formula based on three natural ingredients associated with sleep and relaxation: melatonin, GABA, and 5-HTP. He brought on two co-founders: David Lekach and Adam Platzner. Lekach became CEO and zeroed in on the beverage and retailing industries. Because Dream Water trades on the widespread acceptance of energy shots (a $700 million market last year), Lekach chose to target shots’ most ardent consumers: twenty- and thirtysomethings. In 2009, the product launched in New York City and quickly signed up drugstore chain Duane Reade. Retailers such as Walmart, Walgreens, GNC, and Kmart followed. Those squat bottles have an advantage besides familiarity: They pass through airport security. “Part of the idea of designing it as a shot was to fill the need in the travel segment,” says Lekach. “You have anxious travellers, exhausted travellers, travellers who need to get their sleep in order to function in different time zones. It’s so logical.” The company is negotiating with an operator of airport convenience stores nationwide.

THE RESULT: The seven-employee company

projects profitability next year.

THE OUTSOURCED WORKFORCE

More businesses are turning to remote workers. But can you

really be sure that your off-site employees are working? some 40 per cent of the us working population could do at least part of their jobs from home, and roughly 30 million work from home at least one day a week. Although 75 per cent of managers say they trust employees, a third of that number would like the ability to monitor remote workers, according to the Telework Research Network. Meanwhile, 74 per cent of business leaders say outsourcing can help a company survive, according to Capgemini, a consulting firm. THE INSPIRATION: In 2003, Odysseas Tsatalos, co-founder of

the online accounting firm Intacct, wanted to hire his friend Stratis Karamanlakis to do some development work. The problem: Intacct is based in Silicon Valley, and Karamanlakis lived in Greece. Tsatalos’s boss raised objection after objection, wondering about time zones, communication, code sharing. Finally, Tsatalos drilled down to the CEO’s abiding concern: He had no way to make sure Karamanlakis was doing the job. Tsatalos responded by creating software that allows supervisors to monitor and communicate with remote employees.

THE BUSINESS: oDesk, based in Redwood City, California, is an online marketplace in which companies hire remote contractors for tasks as varied as software development and customer service. The company provides tools that let employers track work as it is performed and the number of hours contractors spend on the job. The company also picks up the HR chores of payroll and taxes. HOW IT GOT STARTED: Tsatalos left Intacct and together with Kara-

manlakis (still in Greece) launched a company to help large employers manage remote full-timers. To save money, they kept staff lean and hired contract engineers and developers from around the world. Tsatalos and Karamanlakis managed the staff members’ work and paid them through the oDesk system. During sales calls, Tsatalos and CEO Gary Swart—a former IBM business unit executive and software-sales veteran—used a demo from their own business to illustrate the product’s capabilities. Buyers saw the work- and time-monitoring tools in action. They also saw the internationally dispersed talent logged in to the system. “They said, ‘Who are these guys?’ ” says Swart. “We said, ‘They are people we found from around the world.’ They said, ‘How can we get access to these people?’ ” DECEMBER 2010

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The founders swiftly realised there was significant demand for a marketplace in which companies could source talent that has been vetted (by oDesk) and rated (by other employers). They began lending out their contractors to clients; the contractors told friends and talked about the service on professional sites. Within a few months, 1,000 contractors had signed on looking for work. About 1,500 more now sign up with the company almost every day. oDesk has more than 750,000 contractors and about 200,000 corporate clients.

THE RESULT: oDesk has revenue of $120 million, with three-year

growth of more than 1,000 percent. Swart says demand is “unbounded.” “Take every company with 100 employees and ask, ‘What percentage of those jobs could be done remotely, and can I save money and get access to the very best talent by doing them that way?’ ” he says. “If it’s five out of 100, then that’s the oDesk market. And it is massive.”

LaHood announced the government would stop favouring automobiles over bikes when funding infrastructure projects, Miller paid attention some more. THE BUSINESS: Duo-Gard, founded in 1984 and based in Canton, Michigan, makes outdoor structures and lighting systems. The company recently introduced a line of architecturally distinctive bike shelters for commercial buildings. HOW IT GOT STARTED: Duo-Gard had

BIKE COMMUTING

In urban areas, the average motorist spends nearly two days a year stuck in traffic. Perhaps biking is the answer. half of all americans believe that automobiles are the main cause of air pollution in their communities, and 65 per cent are concerned about congestion on their roads, according to the Bureau of Transportation Statistics. Forty per cent of those surveyed by the publisher Rodale said they would commute by bicycle if storage facilities were available. THE INSPIRATION: In 1990, San Luis Obispo, California, outlawed smoking in all public buildings. Predicting that that stand would swell into a movement, Al

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Miller, founder of a specialty architecture firm called Duo-Gard, devised a line of smoking shelters. The new products quickly became 50 per cent of DuoGard’s business and remain healthy sellers today. That taught Miller’s son David, now the company’s president, about seizing opportunities created by changes in public policy. So when the US Green Building Council recommended amenities such as bike racks and shower rooms to builders seeking LEED certification, Miller paid attention. In March, when Secretary of Transportation Ray

previously created bike shelters at the request of clients. Early this year, Miller assigned his architects to come up with standard designs—avant-garde to utilitarian—that could be easily customised. The shelters cost $5,000 to $30,000, depending upon size and style, and hold up to 40 bikes. “There are quite a few companies making these in Europe, but almost nothing here,” says Michael Arvidson, Duo-Gard’s executive vice president, who presides over the bike line.

THE RESULT: By September, Duo-Gard’s

bike shelters, introduced in April, had been specified in 30 to 50 large construction projects, to be executed in six months to a year. The company has sold shelters to cities in Connecticut, Iowa, and Ohio and is in discussions with several colleges.

“ What am I, if not my business? ” All successful entrepreneurs share at least one trait: a passion for the businesses they have created. But what happens when it’s time to move on? In the rare moments when entrepreneurs pause to think about it, they are by turns terrified, exhilarated, and just plain mystified by the prospect of life after business BY BO BURLINGHAM PHOTOGRAPH BY JEFF SCIORTINO

THE MEMBERS HAVE dribbled in one by one, all nine of them. The serial entrepreneur who is thinking about selling his fourth business, but in the meantime is dealing with a regulatory change that could soon put the company in jeopardy. The woman who inherited a company from her father, built it into an industry leader, and has begun to prepare for whatever will come next. The founder still haunted by his decision six years earlier to sell his company, thereby undermining what he cherished most about it: its intimate and vibrant culture. The family business owner who had what the rest of the group regards as the perfect exit and is now financially independent, retired, dividing his time between three homes, filling his days with travel, sailing, golf, writing classes, and grandchildren. Yet he’s unable to shake the feeling that he has lost something important and doesn’t know how to get it back. And others. 46

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They have come from all over Chicagoland on a steamy afternoon in August to a sprawling white-brick ranch house overlooking a verdant golf course in the woodsy suburb of Inverness, Illinois—the home of Dave Jackson and his family. He was an early entrepreneur in the home healthcare business and sold his company in 1998. The following year and a half he recalls as one of the most difficult of his business career, a time when he felt utterly alone, lost and confused. The experience played a major role in his decision in 2008 to start a new business called Evolve USA with another erstwhile entrepreneur, Bruce Leech. Evolve is a member organisation for business owners who have sold, are thinking about selling, or are in the process of selling their companies. The people gathered on Jackson’s screened-in porch that afternoon were the first to sign up. Their mood is cheery as they go around the room, updating the

Joel Altschul has all the money and free time he could possibly want. But since selling his business in 2003, he says, he sometimes feels as if he is drifting through life, without passion or a purpose.

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group on personal and business developments since the last meeting. They listen and laugh and give one another gentle digs, until it comes time for the serial entrepreneur, Michael Le Monier, to check in. He has been struggling with a number of issues lately, and the regulatory threat to his business, MedPro Staffing, is the least of them. He has also had to place his father-in-law in an assisted-living facility, empty the old man’s home, and put down his dog. But Le Monier leads off with another piece of news that he finds even more distressing. It concerns someone he met prior to embarking on his entrepreneurial career, when he was working as a regional manager for a national staffing firm. One of his branch managers introduced him to a young employee named Hugh, who he quickly recognised was destined for bigger things. “He was handsome, articulate, and incredibly bright, far smarter than me,” Le Monier recalls. “He wound up replacing me in some of my jobs. I loved it, and I loved him. He lifted the whole team. Eventually he left to start three related businesses that did extremely well. Combined sales went from nothing to $220 million in 11 years. A couple of years ago, he sold to a private equity firm for $100 million, or so I have heard. “In June, he hung himself. My wife and I went to the memorial service in downtown Chicago. I think everyone there was in shock. It was so confusing. I mean, How could the world have lost such an incredible person at such a young age? I asked his former business partner what had happened. He said, ‘He lost his sense of purpose.’” IN THE ALMOST 28 years I have been

observing the entrepreneurial landscape, I have noticed that leaving is a subject most business owners would rather not think about, and so they put off dealing with it as long as they can. I’m talking about selling the company and moving on. There are exceptions, to be sure. Some people have an exit plan in place before they even get started. Others take on investors whose need for a “liquidity event” is clear from the get-go and whose very presence forces the entrepreneur to contemplate the possibility of having to part ways with the company at some point in the future. Still others view themselves as investors and the businesses they buy or start as investments, pure and simple. For them, the whole idea is to maximise a company’s monetary value and then sell it at the top.

INC. | DECEMBER 2010

But those people are a distinct minority. In my experience, they are far outnumbered by founders and owners so preoccupied with making sure the business grows or simply continues from day to day, month to month, and year to year that they don’t take the time to get themselves ready for the final phase of their relationship with it. The result is that they are unprepared—both practically and psychologically—not only for the sale itself but also for what happens after the deal is done. And make no mistake: Sooner or later, every business gets sold, given away, or liquidated, and every entrepreneur leaves the company he or she has built. You may leave feet first, and your estate may handle the sale or liquidation, but both events are going to happen. They can’t be avoided. The only question is, How much of a say are you going to have in either one? Even if you do lay the proper groundwork for your eventual exit, however, it’s not clear what, if anything, you can do to prepare for the immediate aftermath—that is, the metamorphosis from top banana one day to ordinary piece of fruit the next. Some owners need years to acclimate themselves to the change. If you have spent most of your adult life building an enterprise—and especially if you started with nothing—it is probably inevitable that you are going to have trouble determining exactly where your business ends and you begin. There may be emotional ties you aren’t fully aware of. Chances are, you haven’t had time to reflect on them—or much of anything else, for that matter. Running a business is nothing if not intense. Maintaining some semblance of a life outside the business is challenge enough. And let’s face it: Being the boss brings a kind of ego gratification that’s tough to let go of. When you’re the owner of a private company, people depend on you. They need you. They value your opinion. They want your input. You are an important person in their lives, and they let you know it in a thousand different ways. It is easy to get used to being the centre of attention—and it can be profoundly disorienting when suddenly you aren’t so important anymore. Yet people who have sold their businesses tell me that the biggest obstacle to a graceful transition has to do with something else: the change in the nature of the questions they are facing. Successful entrepreneurs tend to be highly goal-oriented. That works to

Being the boss brings a kind of ego gratification that’s tough to let go of. When you’re the owner of a private company, people depend on you. They need you. They value your opinion.

“I would get up at 6 o’clock, shower, get dressed, and go to the basement. Then I would sit down and rearrange the pencils all day. It was like playing business.” —Dave Jackson, founder of FirstChoice Health Care, which he sold when he was 38.

COURTESY COMPANY

your advantage in a business context, when you are constantly focussed on setting and achieving objectives, usually ones that are quantifiable. The questions you deal with all revolve around your progress toward a goal. How far along are we? What is holding us back? When will we hit the target? And so on. But once you have sold and left the company, you suddenly find yourself in a place in which quantifiable objectives are much less relevant. The most pressing questions you face are existential ones: Who am I? Why am I here? Where am I going? “Running a business day to day is a rat race, and there’s a lot of stress associated with it,” says Michael Le Monier. “But what we deal with here in Evolve is a different kind of stress that has more to do with purpose and the meaning of life. What happened with Hugh really drove home to me the importance of discovering our larger purpose. That’s hard. Until you sell the business, you don’t have the privilege or responsibility of choice. You’re supporting a family, or whatever. It’s much harder to choose your purpose than to have life’s realities choose you.” BACK ON DAVE Jackson’s porch, the group is putting together a list of potential discussion topics based on issues that have surfaced during the check-ins. The retired family business owner, Joel Altschul, remarks that, for the first time in more than two years, Evolve co-founder Bruce Leech has checked in without once mentioning his former business. He talked about his new apartment in Chicago, the activities of his three children, some developments with Evolve, and the decision to put his father with Alzheimer’s in hospice care. But he said not a word about Cross-

Com National, which he founded in 1981, ran for 20 years, sold in 2004, and still owns 20 per cent of. The company installs and services in-store voice and data systems for large retailers such as Walmart and Walgreens. “It’s just not on the top of my mind right now,” Leech says. “Not that I’m at peace with it. I’m just exhausted being torn up about it.” Leech feels, in retrospect, that he was railroaded into the sale. He was in bad shape at the time—recently divorced, disconnected from his children, financially strapped, burned out on the business, and tired, dog-tired. Then CrossCom lost a major customer, and selling seemed like a way out. There were prospective buyers in the wings. His advisory board thought it was a good idea. So did Greg Miller, his successor as CEO. They called in the private equity people, and the deal took on a life of its own. “I just wish I’d had six months to cool out,” Leech says. “If I’d had some time to effectively transition out of the day to day, there might have been another interim or hybrid role that would have been more satisfying than leaving. But once the deal guys get involved, you get marched down that road, and the next thing you know, you’re sitting on the outside.” The deal was a typical leveraged buyout. Leech had given his DECEMBER 2010

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senior managers 20 per cent of the equity, and he kept 20. A prilost for a while is very common, and so is the search for fulfillvate equity firm bought the other 60 per cent and put up a portion ment—and meaning. Leech’s Evolve partner, Dave Jackson, says of the debt. The rest of it came from a bank. The new owners his search began right around the time he sold his business, thanks planned to expand the business, pay down the debt, and have a in part to a book he had read called Halftime, by Bob Buford, who second, bigger “liquidity event” in the next four to six years. So writes about going “from professional success to significance.” Leech would have two paydays as well as a seat on the board, but Jackson had the success part pretty well covered by then. His comwould no longer be involved in operations. pany, FirstChoice Health Care, which he had started in 1989, had “The night before the close, I was in the office at 2am,” he says. “I grown to about $10 million in sales, with 150 employees and gross remember it like yesterday. I sat there surrounded by stacks of paper margins of 30 per cent to 35 per cent. On paper, at least, it was representing 25 years of my life, wondering if this truly was the best worth $4 million to $5 million. thing for me. I never felt more alone in my life. It was terrible. Then Jackson had had enough, though. The business wasn’t fun the flash of the obvious hit me: Everybody who was saying this was anymore. He was having to focus more and more on operations, best for me was getting a piece of the deal. While I consider many of which he didn’t enjoy. “Everything felt like work,” he says. Meanthem friends, a little voice inside me was while, changes to Medicare reimburseasking, ‘Did any of them look out for my ment formulas were about to tilt the best interests?’ But I thought, ‘I can’t pull competitive landscape in favour of larger out now. Everyone is counting on me.’ I companies. Jackson decided it was the signed all the papers.” right moment to sell, and in July 1998 He was all right for the first few FirstChoice was acquired by Baltimoremonths. He took a vacation, spent time based Integrated Health Services, then a with his children, flew his airplane—he Fortune 500 company. There he was, 38 had recently earned his pilot’s license— years old, with a modest amount of and worked on his investments. After a wealth for the first time in his life, trying failed attempt to work from home, he to figure out what comes next, and the rented an office on Michigan Avenue, challenge of moving from success to sigoverlooking the lake. That’s when it hit nificance resonated. him: “I got real alone. My friends were First, however, he had to pass through still working. My kids were in school. his own private purgatory, of which he got There was no one to hang out with. I had his initial taste not long after he had comnothing to do. People did the obligatory pleted his exit. He and his wife had ‘How’re you doing? Must be nice to be decided to go away for a long weekend in retired.’ I hate that word. I was in my midWisconsin. On the drive north, it sud40s. It wasn’t time to hang things up. I felt denly occurred to him that, for the first totally insignificant.” time in years, he didn’t have to worry —Dave Hale co-founder of Scale-Tronix, So began his journey to figure out about being reachable. Nobody wanted to a maker of medical scales who he was. At some point along the reach him. Nobody cared where he was. way, he began to understand what he “It felt weird,” he says. “I hadn’t realised up had lost. He has come to miss it more and more over time, as the to then how important it was for me to feel needed.” other Evolve members are aware. “I’ve heard you say you miss the The worst part was that he had no clue what to do about it. fun,” says Jack Altschuler, who sold his industrial water treatment He knew that, for his sanity’s sake, he had to find some kind of company in 1998. meaningful work, but he searched for it in vain over the next “I really miss it,” says Leech. “I went to visit Tasty Catering”—a year. “I would get up at 6 o’clock, shower, get dressed, and go to Chicago-area business recently honored by Inc. as a top small com- the basement,” Jackson says. “Then I would sit down and rearpany workplace. “I saw their culture, and it reminded me how sperange the pencils all day. It was like playing business.” Even his cial ours used to be. I took it for granted back then. I can appreciate church turned him away when he showed up to volunteer: There it now because I can see what’s gone.” weren’t any openings. Finally, out of sheer desperation, he took “You could go out and do it again,” says Le Monier, the serial out a pad of paper and drew a T on it. On one side, he wrote entrepreneur. down what he was willing to do; on the other, what he wasn’t “Well, yes, and I’m trying to get that back with Evolve,” says willing to do. “The not-willing-to-do list turned out to be really, Leech. really helpful,” Jackson says. “I had things on it like not giving up control over my time, and not putting more than a certain RELATIVELY FEW recovering entrepreneurs have such strong amount of money at risk, and not forgoing vacations and other feelings of remorse over the decision to sell, but the sense of being family things. That list really brought clarity to me.” More to the

“The idea of ending what I do is just a terrible thought. Exiting seems like dying to me. Maybe I’m weird, but to me, exit is a four-letter word.”

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LIFE AFTER BUSINESS

“I don’t want to sell now. Our people are growing, and the company is still making a difference in their lives.” —Jean Moran, whose father launched the family business, LMI Packaging Solutions, in 1967

point, it opened up a path he could begin to follow in his quest to move from success to significance. IT’S EVENING IN Inverness, and the group has moved to Jackson’s

dining room, where the discussion continues over dinner. The topic at the moment is money—specifically, how important is it to sell your business for as much money as possible? “I had quite a struggle with that,” says Ed Kaiser, who went to work at his father’s company, Polyline—a distributor of recording tape reels and other media packaging products—in 1976, became its sole owner in 1993, and sold it 12 years later. “Some of the potential acquirers might have moved the company and put all the employees out of work. Fortunately, I was able to find a buyer who met my minimum dollar amount and kept everyone employed.” “It’s a struggle for me because I haven’t sold yet,” says Jean Moran, whose company, LMI Packaging Solutions, also was started by her father. It makes heat-sealed lidding, such as the foil tops for yogurt containers. “I don’t want to sell now because I’m still growing, our people are growing, and the company is still making a difference in their lives. I can’t remember how much money we’ve made each year, but I can tell you every person who has left and later come back and said, ‘It changed my life.’ Selling something like that for the most money feels repulsive to me right now. But we’ll see. I may feel differently when the time for selling gets here.” “I don’t think selling a company for the most money is a bad thing, provided you’re mindful of what you choose to accomplish in the sale,” says Le Monier, the serial entrepreneur. “You have to ask yourself, What are my priorities and goals? When I sell my company, my first goal will be to economically and publicly thank my leadership team for what they’ve done. I’m going to maximise the dollars, but that’s in order to take care of the team. I want to send them on in the best possible way.” “The question is: What’s a successful exit?” says Kathy Houde, who worked her way up from office manager to president of Calumet Photographic—a supplier of professional photo equipment— and participated in the leveraged buyout of the company in 1987. She cashed out in 1996 but stayed on until 2001. “I think it has to do with getting through the transition to a new life. I’m probably 80 per cent of the way through it.”

Dave Hale has been sitting across the table, listening intently but with a look of mild distaste on his face. At 73, he is the oldest member of the group. His company, Scale-Tronix, is a designer and manufacturer of medical scales, which he and his business partner founded in 1975. “I don’t know,” he says. “The idea of ending what I do is just a terrible thought. Exiting seems like dying to me. Maybe I’m weird, but to me, exit is a four-letter word.” “I’m not saying you shouldn’t enjoy what you do,” says Le Monier. “I do, but I’ve always separated my passions and investments. My wife and kids, my community, my church—those are my passions. My business is an investment.” “My business is my passion,” says Hale. “Yes, but the frightening part for you and me is, ‘What am I, if not my business?’ ” “I can’t help thinking about your friend who committed suicide,” says Jack Altschuler, the former water treatment company owner. “I don’t think we humans exist very well without a clear sense of purpose. If my only purpose is my business and I leave my business, I have no purpose.” “Yes, can I be more than my business purpose?” says Le Monier. “I believe I was put on the planet to do more than make a buck. But making a buck frees me to discover my purpose more deeply and more personally.” “Look at the age of this group,” says Altschuler. “Yeah, you have to make a buck to live, but is that the primary driver for any of us anymore?” THERE ARE TWO people whose membership in the group I find a little baffling. One, of course, is Dave Hale, who hates the idea of selling and leaving the business that his life has centred on for the past 35 years. The other is Joel Altschul (not to be confused with Jack Altschuler), who sold his company seven years ago and has, to all appearances, successfully made the transition to a new, and very full, life of travel and leisure. If Hale’s reasons for joining are somewhat mysterious, his resistance to exiting is not. He has a great life. His product innovations have had a huge impact on the quality of patient care in hospitals and medical centres, and he keeps coming up with new ones. That hasn’t stopped him from having adventures outside the business. He and his wife of 49 years sail all over the world aboard the expedition ship National Geographic Explorer. He owns an airplane, DECEMBER 2010

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although he hasn’t been able to fly it since the FAA grounded him following a heart attack in 2007. He owns condos in Breckinridge, Colorado, where he skis during the winter and is a major investor in a company that turns scrap plastic into floor mats, carpet runners, and the like. Then there’s Scale-Tronix, which is built around an unusual partnership. His business partner handles sales and marketing from White Plains, New York, while he handles design and manufacturing in Carol Stream, Illinois. The two of them, Hale says, speak to each other once every few months. “She sends in the orders, and we make the scales,” he says. “We don’t need to talk on a routine basis.” He adds that they meet in person once every few years. So why exactly is Hale a member of Evolve? “Because of Bruce and Dave,” he says. “They convinced me I should think about getting out before I die. That was a rude awakening. It had never occurred to me that someday I won’t be able to do this. I guess I must be thick in the head. But I’ve learned it’s easier to start a business than to exit one.” And does his partner have as much trouble with the idea of selling as Hale has? “No,” he admits. “So we’re considering all the possibilities. The group helps me think about it. They force me to focus on things I find extremely distasteful and would rather not have to deal with.” ALTSCHUL IS ANOTHER story alto-

gether. Whereas Hale doesn’t want to think about exiting, Altschul doesn’t need to. He has already had about as good an exit as you can imagine. These days, he plays golf, advises not-forprofits, practices the flute, attends writing workshops, hikes and exercises, writes essays and poetry, watches movies, and hangs out with his grandchildren—when he is not travelling, that is. He has just returned from his annual weeklong sail with his three brothers, this one around the San Juan Islands, north of Puget Sound. His main problem at the moment is that he and his wife have found their three homes to be one too many. So they have put their condo in Evanston, just north of Chicago, up for sale and will henceforth spend most of their time in Santa Barbara and at the family vacation home in southern Michigan. Even more important from an exit standpoint: Altschul can look back with pride on his career as a business

INC. | DECEMBER 2010

owner. His company produced educational audio-visual materials, which it distributed to schools. It had been started by his father, Gilbert, in 1954; it was known as the Altschul Group and later changed its name to United Learning. Joel, the second of four sons, went to work for the company in 1973 and is the only one of the four who stayed. He took the helm in 1990 and steered the company for the next 13 years, during which time it won numerous awards and annual revenue increased from about $6 million to $14 million. Altschul admits that the decision to sell was not an easy one. He had hoped that his management team—including his son and brother-in-law—could someday run the company without him. “That way, we wouldn’t have to sell,” he says. He realised, however, that he needed help to think through his options, and so in 2000 he became a member of TEC International (later renamed Vistage International), joining a peer group that included, among others, Bruce Leech, Jack Altschuler, Michael Le Monier, and Jean Moran. There his plan to keep the business in the family was met with considerable scepticism. Altschul agonised over the decision for a couple of years and finally concluded that he would indeed have to sell to a third party. In early 2003, he contacted five potential strategic acquirers. One of them, Discovery Communications, came back with an offer he couldn’t refuse. Not only was the price right, but Altschul was able to make sure that the management team would be well taken care of. The only negative, from his perspective, was that he had to stay on for a year. But by the fall of 2004, he was out for good and didn’t look back, though he did go through a period he describes as “drifting.” He admits that he felt lost at times. “Our mantra in the business was, Doing well by doing good,” he says. “It’s hard to move from something as gratifying as that to something else.” It was even harder because he didn’t know what the something else might be. Months went by, and he was no closer to an answer. He tried consulting and didn’t like it. No other opportunity interested him. So he filled his time with hobbies, travel, and family—and continued to drift. To some extent, he is still drifting. He has just grown more accustomed to it and comfortable with it. He says he doesn’t regret selling and never —Joel Altschul, former CEO of United Learning, has. On the contrary, he takes satisan educational video company founded faction in seeing how well his former by his father in 1954

“ I enjoy golf, writing, hiking. But none of them are as consuming as the business was, nor am I as good at any of them as I was at business. That’s the part I haven’t come to terms with.”

“Once the deal guys get involved, you get marched down that road, and the next thing you know, you’re sitting on the outside.”

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—Bruce Leech, founder of CrossCom National, a communications company he ran for 20 years; he sold in 2004.

managers and the company have done since he left. He is also happy to have shed the cloak he wore for many years as the head of a family business, particularly because that business was his mother’s sole means of support. The sale ensured she would be taken care of for life. “It was a heavy burden,” he says. “I didn’t know how heavy it was until I took it off. I’d say things have turned out well for me, although it’s still a work in progress. What’s unfinished? I haven’t found anything I’m as passionate about as I was about the company. I enjoy golf, writing, hiking. But none of them are as consuming as the business was, nor am I as good at any of them as I was at business. That’s the part I haven’t come to terms with. Maybe the next thing is out there, and I just haven’t found it.” He shrugs. “But, you know,” he continues, “I’m 62, financially secure, and in good health. In the end, I’ve been blessed. I stayed with the business and was rewarded for it. If we’d waited, we would have sold for a lot less. So more people have benefited from the sale than would otherwise have been the case. I’m sure my dad would have been pleased.” I still don’t understand, however, why Altschul stays in

Evolve. Granted, he wants to support his friends Bruce Leech and Dave Jackson. But that doesn’t explain why he has gone out of his way to be at every meeting. What exactly is in it for him? The other members can’t offer him much guidance in his situation. He, on the other hand, has learned a lot that can be of use to them. Is this his way of filling the need to be needed that so many entrepreneurs seem to miss when they leave their businesses? “That’s a good point,” he says. “I would say that’s accurate. But there’s another piece that I think is more important. Remember, most of those people have been with me since I joined TEC in 2000. There’s a certain bond between us that I don’t have with anyone else. Unlike my family or my friends, they’ve seen me through this whole roller coaster. They alone really know what I’ve gone through, and I know what they’ve gone through. When you’re lucky enough to have something like that, you don’t ever want to give it up.” So that’s it: the opportunity to be understood by people who have shared a type of experience most others will never have. No wonder they all keep coming back. Inc. editor-at-large Bo Burlingham is working on a book about the challenges entrepreneurs face in selling and leaving their companies.

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A Proud Moment Dr Shetty has brought down the price of heart surgery from 1.25 lakh in the 1980s to 65,000 today.

HOW I DID IT

DR DEVI P SHETTY A HEART OF GOLD

Renowned cardiac surgeon Dr Devi Prasad Shetty is on a mission to “Walmart-ise” the healthcare industry. His heart sees no dichotomy in bringing economies of scale to something as cutting-edge as cardiac care. Narayana Hrudayalaya Institute of Cardiac Sciences, his 1,000bed hospital in Bengaluru, performs the highest number of surgeries in the world at a fraction of the cost elsewhere, and without compromising on world-class medical attention. Its morbidity average of 1.4 per cent is lower than the US average of 1.9 per cent. What’s more, it’s made profits from the first year. He now wants to create mega ‘health cities’. If there is such a thing as the hand of God, Dr Shetty has undoubtedly been blessed with it.

AS TOLD TO SHREYASI SINGH PHOTOGRAPH BY S RADHAKRISHNA

I am the eighth of nine children. I was born in Mangalore in 1953. When you are brought up in a family with so many siblings and cousins, it’s like being in primary school. The good thing is you pick up survival skills real fast. You learn to adjust and compromise. That’s a crucial life lesson. Though my father was a businessman, he wanted his children to

grow up and become professionals—doctors and engineers. He didn’t want us to be raised thinking only about business.

My parents were old even in my formative years, and fell sick

often. I would see them go in and out of hospitals. In my eyes, the doctors were like God, because they were the only people who could save my parent’s lives. I knew from then, that I wanted to be a doctor.

I was in Class V when my teacher told us about Dr Christian Bar-

nard. He had performed the world’s first heart transplant in South Africa. I was fascinated. I knew then that I had to be not only a doctor, but a heart surgeon. The ambition never wavered.

I completed my MBBS from the Kasturba Medical College in Manipal in 1982. All doctors were required to train in a government hospital, where you came across people you wouldn’t otherwise. Often, their problems were not complicated diseases. Their wounds wouldn’t heal after a surgery because they were malnourished. I would boil eggs and take them to the hospital to distribDECEMBER 2010

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HOW I DID IT

ute. I developed affection for such people right then. It made me realise that healthcare was as much about cost as science. I did my basic training in cardiac surgery

at the West Midlands Cardiothoracic Rotation Programme. Right after that, in 1983, I started working at London’s Guy’s Hospital. I worked there for six years. My colleagues used to call me an “operating machine” because I loved doing heart surgeries. When you try to do different things, you

encounter scepticism all the time. My guide, Dr Alan Yates, was a well-known doctor and an influential figure in UK’s National Health Service. He was very keen that I settle in the UK. When I told him I wanted to go back to India, he was surprised, and told me that as a heart surgeon, I should be working in a big, sophisticated hospital. I remained firm and convinced myself that it was for good. I’d never come back.

It’s important in life to sever ties. If you

maintain bonds, you want to run back when things don’t go well, you become indecisive. I remember watching Lion of the Desert, a movie about Omar Mukhtar, an Arab Muslim rebel who fought against the Italian conquest of Libya in WWII. Libyan soldiers would tie their legs to the back of the horses so they couldn’t get off. Go ahead and fight. It’s

okay if you die. But, never run away. That is an important lesson. In 1989, I came back to India to help set up a 140-bed cardiac research institute at the BM Birla Hospital in Kolkata. I still share an emotional bond with that city. It was there that I became the doctor to Mother Teresa. She has had a huge impact on me. I got to know God in flesh and blood. She wasn’t made like us, she was different. She had such simple solutions to complex problems. All my children were born in Kolkata. I thought I’d always live there. But, I would see 100 children a day at our institute and only a few would be able to afford the heart surgery they needed. When I would tell people they needed surgery, the first question always was how much it would cost. I knew I had to address the affordability issue. There was no choice. I had to go out on my own. I had a lot of encouragement and support in Kolkata. Jyoti Basu gave me land to start a hospital there. Krishna Kumar, who headed Tata Tea, was also keen that I start up in that city. But, my family wanted me to start my own hospital in Karnataka. We had roots here. I reluctantly came back to Bengaluru in 1997 and set up the Manipal Heart Foundation at Manipal Hospital. My father-in-law, who was in the con-

“We are not car manufacturers. Their customers don’t die, if they are not able to afford the latest model. Ours do.” 56

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struction business, gave me money to set up Narayana Hrudayalaya. We began in 2001. Around the same time, we started Rabindranath Tagore Institute of Cardiac Sciences in Kolkata as well. Together, these two hospitals do more than 12 per cent of all cardiac surgeries in India. Setting up a heart hospital is a very capital

intensive business. Arranging money was the biggest problem. Plus, you get patients who can’t afford the treatment. When you are dealing with human lives and operating on bread-winners of the family, there is a tremendous pressure in terms of zeroerror professional performance. And, there are business interests. If you aren’t able to meet those, the management isn’t happy. We are always torn between business objectives and social obligations.

We make our facilities work 18 hours a day to bring down the costs. The main idea is to leverage scale, so that you can drag down input costs. Our vendors give us competitive pricing because we order in huge volumes. Scale helps shave off the costs on in-patient services. We pay our doctors a fixed monthly salary, not on every surgery done. We also continuously work on “process innovation” to prune costs and make our services more affordable. It gives me pride that I have been able to push down prices instead of letting them hit the roof. When I began my career, I used to charge 1.2 lakh for a heart surgery. Now, we charge 65,000. I remember attending a cardiac surgeons’ conference in Pune in 1990. You could see the younger surgeons thinking that in a few years they’d be able to charge 2.5 lakh for an operation. We have reversed that ambition. I have been lucky with my team. We have barely seen attrition. As they say, birds of a feather flock together. Our doctors are compensated sufficiently to meet their needs. Anything beyond that is greed. We don’t address those.

HOW I DID IT

We launched Yeshasvini in

2003 with the Karnataka government. It was a pioneering micro health insurance scheme. Poor people couldn’t give 1,000 a month for insurance. But, they could all give 5. Now we have 4 million members. The scheme has been launched in Andhra Pradesh, too. Several other states are trying to do it as well. One poor person can’t do anything. But, put together, the poor also have immense power. Only 1 per cent of patients

need surgical intervention. So, with the help of Indian Space Research Organisation we started telemedicine facilities for remote locations. We have consulted with 53,000 heart patients already. We are now in seven cities. Our group has nearly 1,000 doctors. In the next five years, we want to expand to over 30,000 beds. We want to be in 50 cities and build low-cost heart hospitals. I don’t understand why we ape western models in India, and build marble-floored, air-conditioned hospitals. Even government hospitals are becoming like that. It’s unfair to push that cost to patients. Our low-cost models will require 15-18 crore against the standard 70-80 crore. We are starting with Mysore. My primary duty as a doctor is to save lives.

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When you look at the business part of what we are doing, it does not make sense. We have accomplished phenomenal success rates. Our doctors can always monetise that experience and make loads of money. But, we are not car manufacturers. Their customers don’t die if they are not able to afford the latest model. Ours do. Charity is not scalable. You may build one

or two hospitals with that. But, India requires 2.5 million heart surgeries a year.

Genuine Concern Dr Shetty saw 100 children a day, but only a few could afford the heart surgery they needed. That prompted him to address the affordability issue.

All our doctors put together do only 90,000. We need a few thousand heart hospitals. Even Bill Gates can’t build that. We have to make it affordable with sheer economy of scale. Our target is to do major heart surgeries for less than $1,000.

human tragedy. It is a human rights violation. How have we been given the right to price life? This is a man-made problem. Nature never gives a problem that doesn’t have a solution.

have a good head for business. I understand it. But, that’s not why my team respects me. They respect me because I am a good surgeon. Professionals will never respect you for just your business acumen.

I am confident that India will become the first country in the world, which disassociates poverty from healthcare. We might not have super motorways or glitzy skylines but we will be able to afford, for those living in slums, healthcare services that are offered in the developed countries.

I always work on gut instinct. Even if you

I have no desire to be a billionaire. Being on

Motivation isn’t a problem. You should come sit in my office. Even 60 years after independence, a woman, whose baby needs an open heart surgery to survive, cannot afford it. We have put a price tag on the child’s life. This is the greatest

I want to be a heart surgeon for my next hundred lives. After every surgery on a baby, the mother makes you feel like a real life hero. That’s a very gratifying experience.

Because I come from a business family, I

go for logical conclusions, can you be sure of success? There are so many uncertainties that no software or person can forecast. I am simple minded. I know the problem with healthcare in this country is money. So, I need to address that.

a Forbes list is not my aspiration. If God was to come today and ask me to name a material wish, I’d have nothing to say. God has given me a wonderful wife and four lovely children. When you are not thirsty, nobody can make you drink water. Of course, wealth is an individual requirement.

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Social Networking Keeping an eye on what people are saying about you online. this page Sales & Marketing Four entrepreneurs ponder on ways an adventure sports company can pump up flyers adrenalin. page 61 Leadership Traits that are common to owners of small businesses? page 62 Elevator Pitch Can a rural BPO tempt investors to open up their purses? page 63

The Way I Work

Model-turned-trainer Pria Warrick on her daily workload. page 64

STRATEGY All Ears It's time to 'listen' to your customers online.

Social Networking Are you listening hard enough? Monitoring your online reputation “Rechargeitnow.com is cheating people...they are a

bunch of crooks!” That was a customer venting his ire on iComplaints, an online grievance forum. His gripe, targeted at the provider of an online payment service, involved a top-up that he was charged for, but which never made it to his account. Given that the contact details of the company were not listed on its website, the frustrated consumer had no option but to use the only channel available to him—an online forum. Thankfully, the RechargeitNow team responded quickly to his complaint, providing a number for the consumer to call, and managed to salvage its reputation. This was but one of the many instances in which a customer resorted to an online portal to seek justice. Social networking sites, such as Flickr, Facebook and Twitter, have added new channels of communication between a brand and its consumers. They’re cheap and accessible, and the level of interactivity ensures that others are quick to pick up on a thread, thereby making the brand highly visible. The empowered consumer now makes sure that a grievance ILLUSTRATION BY PC ANOOP

finds its way to the internet—and, to prospective buyers. Therefore, it’s imperative for a company to track its reputation online. “By listening and responding, a brand can take responsibility for bad service, and leverage great feedback to build credibility. This, in turn, helps generate more visibility, leads and sales,” says Pradeep Chopra, co-founder and CEO, Digital Vidya, a digital marketing training company. Called online reputation management, or ORM, this involves keeping track of what’s being said about you in the virtual world, DECEMBER 2010

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STRATEGY

and responding to queries, grievances and opinions. And it isn’t just about a response. “The key lies in responding in time and appropriately,” adds Chopra. Ask Ajaay Gupta, CEO and managing director, Capital Foods, which sells the Ching’s Secret brand of Chinese ingredients. “A regular consumer from the US pinged us on our Facebook, mentioning that the product was not available in a particular store. Ten minutes later, we had contacted her. Within two hours, the sales head had alerted the distributor in California, who delivered the product to her house,” relates Gupta. Such is the power of the internet. Having decided to monitor its reputation online, where does a company start? Using Google Alerts is the basic way of keeping track of what’s being said about you. All you need to do is select keywords that need to be tracked, and you will receive an email update every time it appears on the web. Other options include Lithium, SocialOomph and Social Mention, or tools, such as TweetDeck, Sendible and Seesmic, that can be used to keep track of what netizens think about your company.

“Paid tools are useful when the amount of conversation is huge. One needs sophisticated, analytical platforms that can be used by team members in collaboration,” explains Chopra. That’s where software, such as VeristLabs and Informm, come in. They provide what can be called “listening on the net” services—trawling the internet and collecting content that matches the keywords. The data is analysed before being presented to the company. For those who aren’t happy with merely collecting data, there are extra services offered by portals such as VeristLabs. It can manage online conversations, queries, or complaints, and even post entries on blogs to promote one’s brand or product—all for a fee. “The benefit of directing customers to a common site is that complaints and grievances do not spread all over the web. It becomes easier for a firm to monitor complaints,” says Arjun Anand, creator of VeristLabs. ValuePitch, too, works in a similar fashion. It shares quantitative (graphs, charts, etc.) as well as qualitative feedback (customer happiness, dissatisfaction, and so on) . It not only manages reputation, but also senses the pulse of the market. It is commonly accepted that fast moving consumer goods companies are separated from the end consumers by five to six layers. This includes stockists, distributors, The internet is the new encyclopaedia. No matter what you seek, you shall sub-distributors, retailers and media. definitely find it online. Now, thanks to social networking sites, micro“Through social media, we have cut across blogs and such other information sharing platforms, people can find information about new products and services, experiences with brands, and reached out to our consumers directly. and so on. Companies, therefore, need to keep an eye on what’s being We track popular flavours that can be said about them. While checking out Facebook, Twitter and Flickr is obvilaunched, thereby transferring the ownerous, you have to widen the net. Here are a few sites that will help you keep ship to end consumers,” adds Gupta, who an eye on your brands. runs the 300-crore Capital Foods. That’s not applicable to every company, Answers, Answer Bag, and many MouthShut: A review site for anythough. “ORM is more useful for an estabother such sites. thing and everything under the sky. Customers share their experiences lished brand with a secure market. For a LinkedIn: Largest professional with a particular product, or seryoung company, which is still finding its networking site in the world. Helps vice—everything from cars to niche, it may be a futile effort,” explains you keep track of what people are books. Praval Singh, co-founder, Media Redesaying about either the company’s fined, a social media agency. profile or the person heading it. Epinions: It is an online customer review platform. People share their Many B2B businesses, too, do not conXing: Another professional netfeedback on varied things—from sider ORM as a feasible option, since they working site, which helps people to electronics to tourist guides. do not deal with customers directly. But either make new contacts or follow companies, which have a widespread custhe trail of colleagues and experts. ConsumerComplaints: Many contomer base, should monitor their reputasumers express their unhappiness Social Mention: A search and analon such sites. Other sites include tion online. It also makes sense for internet ysis platform. It collates all inforConsumerCourtForum and Combusinesses to deploy resources for online mation about a company, person or plaintsBoard, among others. monitoring. Companies that have a relaa product, from across the internet tively urban or semi-urban market in India and streams it to a common platYouTube: World’s largest video should also give ORM a shot. form. publishing and sharing network operating round the clock. With this single tool, one can underBurrp: People share reviews on stand customer needs and buying habits, myriad subjects—restaurants, Q&A sites: Question and answer and keep an eye on the competition. Go gyms, movies—almost everything sites reflect on consumer buying on, plug into the virtual world and find out trends and give ideas for prospec- that a customer may have used or who’s saying what about you. experienced. tive products and services. Yahoo Answers, Answers.com, Wiki —Sunaina Sehgal

Where should you look?

INC. | DECEMBER 2010

STRATEGY

Sales & Marketing Motorised paragliding Can it tailwind its way to success? How would you sell that?

Varun Suhag always dreamt of taking the experience of “flying” to new heights. So, he

sourced paramotors—a flying contraption complete with a motor, propeller, harness, seat and a parachute—from Italy, and decided to try a new stunt in aero-adventure sports. Called motorised paragliding, a customer and a trained pilot fly a paramotor together. Safety regulations demand that a customer is necessarily accompanied by a pilot. Operating on the outskirts of Delhi, Flyboy Aviation targets adventure sports lovers, tourists and the dare devils. Its service starts from March and continues till September in north India, and from October to March in the south. A three minute flight costs 1,100 while 10-minutes costs 3,000. We asked four entrepreneurs to weigh in on how he can best attract customers. —Sunaina Sehgal

COURTESY COMPANY

PITCH NO. 1: Target right Azaz Motiwala, founder of IKON Marketing Consultants, a Rajkot-based marketing consulting firm To expand, he should try targeting sky advertisers and aerial photographers. Also, the service should be positioned as fun and safe, with due emphasis given to the latter aspect. His pricing seems affordable for the well-do-do segment, and foreign tourists. Since his service is so daring, it needs persuasion; therefore, he should follow a push strategy. He should use social media, like Facebook and Twitter, to target a specific audience. He can also think of a distribution strategy comprising channel partners, such as hotels, travel agents and advertising agencies.

PITCH NO. 2: Justify pricing Richard McCallum, founder of FlyingFox, an adventure sports firm Safety should be the key message that jumps out of the page when you first click flyboy.in. Compliance with international safety standards and norms isn't just an operational necessity, it's a fantastic marketing opportunity. International standards and equipment will go a long way to differentiate Flyboy from other operators. In addition to CRM also consider making a “Flying Club”. This will help enthusiasts to obtain annual membership and justify the " 3,000 for 10-minutes" pricing.

Taking Off Will Flyboy Aviation's unique offering appeal to the adrenalin addicts in India?

FEEDBACK ON THE FEEDBACK: The variables are too many for us to go out in the market and shout out “Flyboy”. We do intend to get into some heavy branding and marketing, but we feel there is still time. We have to research more. Our aerial photography and sky ads projects get restricted due to clearances from the government. Our expansion and growth is slower than we had anticipated, as we have to insure all levels of safety. Our operations spell safety from the moment you sit in our paramotors. We would love to organise events and gatherings, but we are limited by weather and high winds. And, we are going to open a para-motor flying club in the coming summer on the outskirts of Gurgaon. We may set up sites in Goa, Jaipur and Manali.

PITCH NO. 3: State health risks Captain Audrey Maben, founder of Bangalore Aerosports, a microlight flight training centre Enjoying para-gliding comes with a risk. As the para-motor is strapped to one's back, injuries to the spine are worth a mention. I also recommend that this be a licenced sport with approved instructors. Getting airborne and landing safely on terra firma requires skill. Negotiating winds and taking decisions in an emergency, too, needs experience. Appropriate qualification of the tour-guides, or pilots, is essential, when sports aviation becomes a business. One freak incident or accident can change the course of the business.

PITCH NO. 4: Be visible Amit Singh, founder of Katabatic Adventures, a Gurgaon-based adventure sports company You need to reach out to your prospective customers fast. Word of mouth is a wonderful thing but unfortunately is slow. Para-motor is not a new concept. But it is certainly new to India. If you are introducing such a thing here, you need to tell people about it. I would suggest you organise workshops for the like-minded adventure companies, introduce them to the sport and they will further promote it among their existing clients. DECEMBER 2010

INC.

STRATEGY

Leadership Six traits of a successful small business owner A new report attempts to identify a winning formula price on the fulfilment their companies provide them, relish being their own boss, and enjoy being in control of their personal income. They value “doing something for a living that I love to do”, “being able to decide how much money I make” and “being able to have the satisfaction of creating something of value”.

INC. | DECEMBER 2010

PHOTOS.COM

Future-focused.

Small business owners who thrive are good at both short- and long-term planning. They’re as likely to have a well thought-out plan for the day-to-day running of the business as The Winning Combination The best There is no magic formula for small busia road map for how to run business owners rely a great deal on ness success, but most owners who do well the business for years. technology and are proactive. share the same six personality traits, Curious. Good entrepreneurs are according to a report. always reading and asking questions. They The Guardian Life Small Business Research Institute report want to learn everything from why a particular business failed to hopes to explain why only one in two small businesses will surhow to find, motivate, and keep good employees. vive more than five years, according to Small Business AdminisTech-savvy. Perhaps not surprisingly, the best small busitration figures. The study—called Six Dimensions That ness owners invest time and money on their company’s website Characterize Success-Oriented Small Business Owners—is based and are likely to “rely a great deal on technology to help make our on analysis of a survey of 1,100 small businesses with between two business more effective and efficient”. and 99 employees. (The Institute is run by the Guardian Life Action oriented. Successful founders are proactive and Insurance Company of America, and it conducts ongoing always “differentiating ourselves from our competitors”, survey research on what it calls “the Index of What Matters Most” to respondents said. They were less worried than other small busismall businesses.) ness owners about the state of the economy, and more likely to Top of the list for successful entrepreneurs is the ability to collook at adversity as “a kick in the rear to help you move forward”. laborate. Those who can delegate, build strong relationships with Said Mark D Wolf, the institute’s director: “Success-oriented their management teams, employees, and others are more likely small business owners are a special breed of highly motivated, to click with customers. caring and curious individuals. They effectively balance their The other five traits frequently found in flourishing small personal and business goals, take advantage of others’ expertise business owners: and continually seek to learn the best practices exhibited by Being self-fulfilled. Good small business owners put a high peer companies.” — By Courtney Rubin

STRATEGY

Elevator Pitch DesiCrew creates jobs in rural areas. Can it tempt investors to work up 5cr? The Experts Weigh In CONVINCE CUSTOMERS

Given its rural base, it will be able to recruit talent at reasonable costs, and have higher retention rates. It can use this to win new clients. The key challenge will be to convince global customers to outsource work to unknown destinations within India. It can overcome this by serving the price-sensitive domestic customers, who are more tolerant of which geography you service them from.

FOUNDER:

Saloni Malhotra LOCATION:

Chennai, Tamil Nadu NUMBER OF CENTRES:

5 (in Tamil Nadu and Karnataka) LAUNCHED:

SANJEEV AGGARWAL, managing director, Helion Advisors, New Delhi

2007

EMPLOYEES:

PROVE IT CAN SCALE

250 plus

2009 REVENUE:

1.8 crore

2010 PROJECTED REVENUE:

3 crore

FUNDING SOUGHT:

5 crore

PRICING:

Customised to the client’s requirements BACKGROUND:

Incubated by IIT Madras—Rural Technology Business Incubator. Received a soft loan from Villgro and angel investment from Rajiv Kuchhal

PHOTOGRAPH BY AAHANA MAHTANI

The Pitch “DesiCrew creates jobs in rural

and semi-urban areas. We employ educated but under-employed youth in our centres, which provide back-end support services to global clients. One of our centres is in a town with a population of barely 20,000 people. People can find jobs nearer home, and don’t have to go to a metro to make a living. They can save more money, since they don’t have to pay the establishment costs of a city. We have also created an employment opportunity for professionals who yearn to come back to their home towns. Companies availing our BPO services, in turn, enjoy competitive prices and save on training costs.”—As told to Sunaina Sehgal

This is a promising business model, but it faces challenges of scalability, cost arbitrage and client acquisition. Risks include a smaller talent pool and dispersion over multiple centres with varying infrastructure, connectivity and quality. The pitch should focus on cost savings and competitive pricing, besides social impact. ATREYA RAYAPROLU, vice president, Intellecap, Mumbai

SATISFY THE GREED

The concept is good, but the pitch needs rework. It talks about advantages related to people. But how does an investor know that the lower cost of people is not eaten up by higher costs of infrastructure, or technology? It doesn’t talk about scalability either. It needs to show an investor how much money there is to be made in this business. And, it needs to make him fearful of having missed the bus! RAMAN ROY, founder and CEO, Quatrro, New Delhi DECEMBER 2010

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STRATEGY

THE WAY I WORK | Pria Warrick, Pria Warrick Finishing School

“It is not only etiquette that I teach; it’s life skills.” Pria Warrick has a thing for perfection. This probably explains why her life and business rotates around timetables. There is one ready for every scenario: what is to be done at office, which days to go out for family dinners, whom to call when there is an emergency at home, what to do while travelling, and so on. Her obsession with fixing every detail of her life and business in advance is as strong as her determination to understand the inner recesses of her clients’ minds—the origin of all character traits—and add a patina of polish and classy grace on them. No wonder that the Pria Warrick Finishing School has among its clientele corporate honchos, celebrities and even school students. The first Indian face to be featured in Vogue, this former Miss India America believes in Feng Shui and spends 30 minutes every day reading the Bhagvad Gita. When not travelling for work, she can be found conducting training sessions for CEOs, teaching would-be brides the necessary life skills, getting to know her employees better, or simply chalking out another timetable.

AS TOLD TO SUNAINA SEHGAL | PHOTOGRAPH BY VIJAY KUTTY

I work out seven days a week. It’s almost as natural as brushing my teeth. Even on days when I am awake by 3am, which typically happens if I have to take an early morning flight, I still get my daily fix of exercise. On Saturdays, my family joins me, and working out together becomes an excuse to spend time with each other. I like variety in my exercise schedule. Depending on my mood, I choose between power yoga, cardio training, resistance training and so forth. My trainer has helped me perfect the techniques, so I can do these on my own. A mantra recitation and two-

INC. | DECEMBER 2010

Adding a Touch of Gloss A certified psychologist, Pria Warrick believes inner conditioning is as important as the external.

STRATEGY

glasses-of-water later, I am ready to kick-start my day. Normally, I am up by 5am. I love the silence and stillness of early morning hours. I try to use this time to clear my mind, but more often than not, I end up planning the day ahead. By the time I am through exercising and juggling my thoughts, my husband and kids want my complete attention. I have two daughters. One is four years old and the other 11. My husband is an entrepreneur, like me. The mornings get really chaotic. I simply scurry around the house getting the kids ready for school—making sure they have packed their bags, eaten a healthy breakfast, finished their homework, and other such mom stuff. I love packing their lunchboxes. Sometimes, I will put a few knick-knacks—chocolates, toffee, dry fruits, biscuits—to surprise them. They love that. I have this deal with my daughters that I will drop them to school for one week in the month. Rest of the days, they are chauffeur-driven to school. Then, it’s my turn to head to office, which is just downstairs on the ground floor of our residence. We moved out from our farm house and into our office premises in New Friends Colony a few years ago. With kids, their schooling and extracurricular activities, it made life easier. The first thing I do when I reach office is check my mailbox. I do not touch my mails before that. I answer some of the mails that require immediate attention, such as requests for meetings, and those from clients, who are corporate honchos. I forward the rest to the respective department heads. I get about six mails everyday requesting franchisees. All these end up in my junk box. I am not interested in franchising the Pria Warrick brand. Franchisees will never be able to retain the quality and I do not want to be responsible for not delivering. After all, Harvard is only in Boston. At the same time, it’s not that I do not want to expand my business. It’s just that I don’t believe that going the franchisee way is the right answer to growth. I am taking my time to build loyal partnerships and clientele. I want to grow slowly—and steadily. So far, this strategy has provided me with the dal and roti, and a bit of pate de fois gras on the side. I run a finishing school. By definition, that’s for young girls—to teach them the art of presenting themselves in public, dining etiquette, and so on. But we work with a wide spectrum of clients—corporate houses, brides, and even schoolchildren. India’s vibrant economy has made it a commercial hub and attracted several international corporate houses to set up base here. That has made it important for our businessmen to learn the codes of conduct that are followed

internationally. Even brides-to-be fit easily into our services, since “well-mannered” wives have always been in demand. But the inclusion of schools on our list of clientele was purely accidental. At a social gathering, the head of the DPS Society requested me to conduct classes at one of his branches. Thereafter, we have never looked back. I have to admit, though, that training 25,000 students every week requires tonnes of planning and preparation. Thankfully, I have always liked to plan ahead. I am not a spontaneous person, so I do not like leaving anything to chance. My days begin and end with timetables. I like to have everything worked out ahead of schedule. My daily roster is planned weeks in advance, if not months. Both my calendars, official and personal, are drawn up and revised three times every year. To make these plans absolutely foolproof, I even make back-up plans. Say, if the assigned chauffeur falls ill, I already have a Plan B that springs into action. When I am travelling, a different routine kicks in. I like to take early flights. That way I can avoid traffic, finish my work and fly back to Delhi as quickly as possible. I do not like leaving my children alone at home. I travel about 10 to 12 times in a month, though I prefer calling the clients to Delhi for workshops. Outside Delhi, I mostly use business centres to conduct my training. For corporate clients, business etiquette workshops include subjects like the art of networking; the art of being friendly and approachable, and yet firm; tactics that help in closing favourable deals, and so on. Once my workshop is over, I just head straight for the airport. Sometimes, trainings are held for an entire day and it’s impossible to get back. During such rare occasions, I make sure that the elders in the family pitch in to look after the kids.

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owadays, most of my work gets divided between administration and training. When I am in office, I delegate responsibilities and follow up for the day. I hate anything that interferes with the smooth running of the organisation. In that way, I am very demanding. I like things to flow in a set pattern. The rest of the work is done over the phone. I discuss future agendas, from workin-progress to projects in the pipeline and other nitty gritty of the office. This is the administration part of my work. It is really not my cup of tea. What I enjoy doing most is training people. Training is not as simple as it sounds. It is multi-dimensional. I don’t stop at merely ironing the creases from the outside. I like to mend the tattered cloth. Understanding people requires patience and trust. The origin of one’s insecurities, stubbornness and other similar traits is analysed. Often, there is a misconception, especially with bridal cli-

STRATEGY

“I do not like leaving anything to chance. My days begin and end with timetables.” ents, that I add a Western sheen to people. That’s not true. I am not in the business of changing anyone’s beliefs, culture or traditions. We believe in honing the existing combination, if not adding a few more traits. I also hold counselling sessions, usually in the evenings and on weekends. I like to pour over the problems: people with depressive behaviour; suffering from guilt; couples with marital disorder; people with pent-up emotions; anger management; career choices and other such core issues. I grew up alone in Switzerland, living in boarding schools and hostels all my life. The environment was such that I was left to fend for myself. I never really had any emotional support. Sometimes, when I look back, I wonder if that could be the reason why I took up clinical psychology as a major in Cornell University. In my profession, it’s important to stay on top of things. I deal with a host of people, from young kids to celebrities. If I am not aware of the current fashion trends and general knowledge, I won’t be taken seriously. So, I am constantly gleaning as much information as I can from magazines, books, and so on. It’s amazing how much information and ideas you can grab just by going shopping. Training also requires a great deal of research because a large part of my job is to also understand the inner strengths and weaknesses of my clients. Research is always followed with a one-onone discussion with the CEOs or CFOs. I train them in networking skills, body language and its interpretation, negotiating ways, and other small yet crucial details, like greetings, etc. It is not only etiquette that I teach; it’s life skills. I believe that inner conditioning is equally important as the external. I am a hard taskmaster, even with my clients. I like them to be open and upfront with me about the workshops, courses, the method of teaching and such other things. Criticism is the only way one can improve and develop. I generally tend to lunch outside. That’s because I am always running on a hectic schedule. If I am in office, I quickly run up,

check on the kids and grab a quick bite of soup and salad. This is also the time when I catch up with my daughters’ school life— friends, homework, jokes, discussions, school fights, if they liked the packed lunch, tiffin preferences for the next day and other small but important things. I have to be in the loop. Since life is usually very hectic—from attending calls, interviews with the press, organising etiquette sessions in the school to even going on a shopping spree on behalf of a client—I always ensure that we enjoy ourselves at the training school. We like to pamper ourselves on September 5th of every year. Since we teach our clients life skills, we take the liberty of considering ourselves teachers and celebrate Teachers’ Day together. All the members of the school lunch together. We also lunch outside if we are celebrating an employee’s birthday, my husband’s or mine. On festivals like Diwali and Christmas, we distribute gifts. I encourage my staff to talk to me about their personal lives. It helps me understand where they come from and know them better. I advise them if they need it and aim to be a better friend. My personal life too is pretty much chalked out. It just makes life simpler and saner. Every Wednesday, we go to our favourite haunt—our club—with the kids. Saturday evenings are spent eating out. Once a week, we go for theatre or any other recreational activity. We have family dinners on most nights, usually by 7pm. I make it a point to always come home before dinner time and add some final touches to the food prepared. A mother’s touch always adds a different flavour to any dish cooked. It makes me happy doing that, besides the fact that I love cooking. The kids are usually tucked in by 8pm. On really busy days, I go back to the office after dinner. The latest I have worked is till 9pm. Afterwards, I catch up with my husband, talk about the day and my business. Though he runs his own business, he also handles the school’s finances. We talk about the pitfalls, the challenges and how we are going to face it. Then slowly as the day approaches its last hour, I sink into sleep. DECEMBER 2010

INC.

I WISH I KNEW THEN...

Santosh Choubey, chairman and founder, AISECT

Not many people would chuck a cushy government job to help empower youths in rural and semi-urban areas. But Santosh Choubey did just that. For the past two decades, he has used information and computer technology to start 8,000 training centres across India that have empowered 25,000 young adults and given them jobs. Despite all the success, Choubey can’t help but wish that he had shaped his ‘idealistic dreams’ sooner. I gave up my government job to join a non-governmental organisation (NGO), much to the dismay of my parents-in-law. I wanted to get a taste of rural life. My final aim was to introduce science and technology-related training to rural India. Though my family went through a period of financial and emotional insecurity, I stuck to my decision. I lived in villages, observing habits, work cultures and lifestyles. I learnt who the villagers trusted and depended upon. I understood the structure of agencies that worked at the grassroots. And, most importantly, I got a close look at my potential customers—their likes, dislikes, habits, backgrounds and other such small, but significant, things. All this helped me fine tune my business model to the needs of the rural audience. When I finally established AISECT in 1985, I approached the same institutions and converted them into carriers of IT into rural areas. Within a year, we were able to achieve 100 per cent return on our investment. At this time, I also learnt that one cannot rely solely on the government. When we approached the Madhya Pradesh government with our model, it showed interest. Unfortunately, it took five years to expedite the matter. In that period, we went ahead

INC. | DECEMBER 2010

agendas. That makes one best at what they are doing and keeps things simple. I wish I had applied this rule of simplicity earlier. In the rush of growing, we neglected to certify our training. Many of our students were unable to get jobs. Realising our mistake, we signed memoranda of understanding with universities, but those fell through. Finally, we opened our own university and college. Luckily, the students who were affected understood the problem and supported us. I learnt that creating confidence in people The Idealist Santosh Choubey is living his dream helps in the long run. of empowering youth in rural India. I should also have been proactive in creating a brand. That would have helped us create mass with our plans and approached the masses appeal and confidence, and grow. on our own. That taught me how imporI also wish I had started my entrepretant it is to be a leader in one’s thoughts. neurial journey earlier. I would have been Once we became known as a “social able to enjoy greater expansion. Our 2012 enterprise”, the government expected us to goal is to have 15,000 centres—not an easy maintain and build roads, establish codream to fulfill. But, I have learnt that if one operative shops, and so forth. If it had is passionate about their dream, one will asked us to use our knowledge of IT in difalways live it. —As told to Sunaina Sehgal ferent sectors, we would have considered it. But, it wanted us to start a business where we enjoyed neither experience nor expertise. It is important to grow on one’s related