JULY 2010
REDUCE YOUR ENERGY BILLS
HOW VINOD KAPUR BUILT KEGG FARMS PAGE 52
BEST
MEETING JOINTS IN
FOUR CITIES PAGE 23
TURNING AROUND A
TOXIC
HOW TIME MINTS MONEY FOR THIS MAN
WORKPLACE PAGE 51
The Magazine for Growing Companies
THE TOUGHEST LAPTOPS PAGE 21
The Way I Work Ranjan Chopra Team Computers PAGE 64
The MAGAZINE for GROWING COMPANIES
Why Jason Fried does not want you to read another resume PAGE 10
Best Practices from America’s Best-Run Companies PAGE 42 July 2010 | Rs.150 | Volume 01 | Issue 06 A 9.9 Media Publication
HOW
TIME MINTS MONEY FOR THIS
MAN
YASHOVARDHAN SABOO
built India’s top watch components company. Now, he wants a piece of retail action with his 22-store chain selling luxury watches. PAGE 26
July 2010
COVER PAGE: WARDROBE COURTESY RAJESH PRATAP SINGH. LOCATION COURTESY THE IMPERIAL HOTEL, DELHI
34 Why I Sold Zappos
Tony Hsieh built his online shoe company into an e-commerce powerhouse. Why selling it is the only way to save it. by tony hsieh
42 Special Report Learning From the Best
Want happier, more productive employees? Here are some strategies from the 2010 Top Small Company Workplaces, including the best perks and smart hiring practices.
26 Timing it Right
Born into a business family, Yashovardhan Saboo charted his own path— creating India’s leading watch components firm in the process. Now, he’s eyeing the retail pie with his 22-store chain of luxury watches. by pooja kothari
CONTENTS
52 How I Did It Vinod Kapur It took Vinod Kapur 40 years to sell his first ‘K’eggs. In the interim, he built Kegg Farms into a Rs 40-crore company that feeds both the top and the bottom of the pyramid. by jacob cherian
by leigh buchanan
38 Case Study Oil’s Well That Ends Well
Shreenarayan Agrawal ran a successful contract manufacturing business for lubricants; then, his pipeline of orders dried up. Can launching his own brand save his company? by pooja kothari
THIS EDITION OF INC. MAGAZINE is published under license from Mansueto Ventures LLC, New York, New York. Editorial items appearing on pages 7-11, 18-19, 21-23, 34-37, 42-51 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
Yashorvardhan Saboo, founder, KDDL and Kamla Retail; photographed by Subhojit Paul at at the Imperial Hotel in Delhi. Cover design by Binesh Sreedharan JULY 2010
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CONTENTS
July 2010
18
12 22 59
03 Editor’s Letter
04 Behind the Scenes
Audio tours and zip service: just some of the things that make Mehrangarh Fort in Jodhpur an exciting destination.
07 Launch
Ten ideas for launching your start-ups right now Riding the 3G wave The Ticker A Skimmer’s Guide to The 2020 Workplace: How Innovative Companies Attract, Develop and Keep Tomorrow’s Employees Todays
10 Get Real
By Jason Fried The right way to hire. Step one: Ignore resumes. (They are full of lies.)
12 Passions
Rifle shooting is to Milin Pandia what golf is to most CEOs—an excuse to take time off work.
14 Guest Column
By Raj Bhatia Delegation is important for the survival of your company—as much as it is for your wellbeing.
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How to reduce your energy bills. Find the Guidebook following page 28.
16 Innovation
An energy unit that’s lighting up lives in rural India.
18 Balancing Acts
By Meg Cadoux Hirshberg Brother, can you spare me a dime. When your family members are investors.
21 The Goods
Roughing up rugged laptops Killer iPad apps Desk phones, re-imagined Dragon: Speech recognition software Portable laptop charger A 150-country travel adapter Last minute meetings made easier Things that Rakesh M Goyal cannot live without
56 Start-up Diaries
An update on how RideInSync and My Sunny Balcony have fared in the past two months.
2
Guidebook
68 I Wish I Knew Then...
Vinay Deshpande The founder of Simputer wishes he had set out with more finances for his low-cost, handheld device.
STRATEGY 59 TALENT From fire walking to lessons on Carnatic music—the things companies are doing to motivate employees. 62 ELEVATOR PITCH Lara Biotech is looking for Rs 90 lakh to expand its production facility for animals, for laboratory tests. 61 SALES & MARKETING The Home Safe service helps people get home safely after an evening of merry making. Four entrepreneurs figure out how it can market itself.
64 The Way I Work
Ranjan Chopra of Team Computers believes in overcommunication among his team, and it seems to be working. The company now generates Rs 300 crore in revenue. by jacob cherian
EDITOR’S LETTER
MANAGING DIRECTOR: DR PRAMATH RAJ SINHA PRINTER & PUBLISHER: ANURADHA DAS MATHUR EDITORIAL MANAGING EDITOR: POOJA KOTHARI ASSISTANT EDITOR: JACOB CHERIAN ASSISTANT FEATURES EDITOR: ROHINI BANERJEE CONSULTANT FEATURES EDITOR: PAYEL MUKHERJEE FEATURE WRITER: SUNAINA SEHGAL DESIGN SR CREATIVE DIRECTOR: JAYAN K NARAYANAN ART DIRECTOR: BINESH SREEDHARAN ASSOCIATE ART DIRECTOR: ANIL VK MANAGER DESIGN: CHANDER SHEKHAR SR VISUALISERS: PC ANOOP, SANTOSH KUSHWAHA SR DESIGNERS: PRASANTH TR, ANIL T & SURESH KUMAR DESIGNER: SRISTI MAURYA CHIEF PHOTOGRAPHER: SUBHOJIT PAUL COMMUNITY TEAM PRODUCT MANAGER: MAHESH RAVI MANAGER: SHREYA PILANI ASSOCIATE: DEEPIKA SHARMA SALES & MARKETING VICE PRESIDENT: NAVEEN CHAND SINGH NATIONAL MANAGER (ONLINE SALES): NITIN WALIA NATIONAL MANAGER (EVENTS AND SPECIAL PROJECTS): MAHANTESH GODI REGIONAL MANAGER (SOUTH) VINODH K (+ 91 97407 14817) REGIONAL MANAGER (NORTH) PRANAV SARAN (+ 91 93126 85289) REGIONAL MANAGER (WEST) SACHIN MHASHILKAR (+91 99203 48755) MANAGER (KOLKATA) JAYANTA BHATTACHARYA (+91 93318 29284) PRODUCTION & LOGISTICS SR GENERAL MANAGER (OPERATIONS) SHIVSHANKAR M HIREMATH PRODUCTION EXECUTIVE VILAS MHATRE LOGISTICS MP SINGH, MOHD. ANSARI, SHASHI SHEKHAR SINGH OFFICE ADDRESS 9.9 MEDIAWORX PVT LTD A-262, DEFENCE COLONY, NEW DELHI–110 024 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
Learning from the best Ever since I can remember, I have been fascinated by watches— rectangular watch dials, to be precise.
I sought them out every time I bought a watch, though I haven’t done so in more than a decade. In fact, I even stopped wearing one for many years, till recently I came across an old one that was a gift from my sisters. It seems I am not the only one. When I spoke to Yashovardhan Saboo for our cover story this month, he too mentioned that people have started wearing watches again—as evident, rather superficially—in the growing sales at his Ethos chain of stores. It’s quite interesting how we go back to things a few years or decades later. I remember reading recently that fashion trends from the seventies are back as well. I wonder if it’s the same with management fads and business trends. It would be worth checking with someone like Kegg Farms’ Vinod Kapur, who, at 76, has seen corporate India grow out of nothing. His How I Did It on page 52 should give a feel of what starting up a business 40 years ago was like. Speaking of which, we’ve brought you a few ideas from the US in the Launch section. Inc. magazine has dug out 10 new business ideas for its readers, and we thought some of them may interest you as well. We’ve also brought you some exciting best practices from the Top Small Company Workplaces in the US. From educational assistance to open-book management, there are quite a few gems for you to experiment with, as you go about building the future leaders of corporate India. Hope you enjoy our picks.
Pooja Kothari pooja.kothari@9dot9.in
JULY 2010
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BEHIND THE SCENES
Companies at the heart of everyday life
Audio guide Built in the 15th century, the Mehrangarh Fort is steeped in the history of the Rathores who ruled over Jodhpur. Fortunately, snippets of its royal past are now available to visitors through an audio tour, complete with a player and a headset, thanks to the services of Narrowcasters—an Australian company. Founded in 1988 by Penny Street, the firm started its Indian operation in 2001 and has an office in New Delhi. Eight of its 60 employees work at the Mehrangarh Fort. Narrowcasters offers its audio services in multiple languages at 20 venues in the country, including the National Museum of India in Delhi, the Prince of Wales Museum in Mumbai, and the Hawa Mahal in Jaipur.
Restaurants Among its many offerings are the two restaurants at Mehrangarh, called Café Mehran and Mehran Terrace. Run by Jodhana Heritage Resorts, these restaurants are as much a gastronomical delight as a visual one, offering one of the best views of the blue city. The company is a joint venture between Maharaja Gaj Singh II of Jodhpur and Apodis, a hospitality company. Since opening in 2009, the company manages seven sites with approximately 300 employees. It is also known for their Royal Camp services, that is available at Pushkar, Jaisalmer and Mount Abu.
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Mehrangarh Fort, Jodhpur
Museum shop Visitors to the fort get transported to another world, as they wander through its numerous museum galleries, exhibiting turbans, palanquins, weapons and paintings. They also get to take home some memories. The Mehrangarh museum shop, considered the only professional museum store in India, has been compared with the one at the Museum of Modern Art in New York. Started in 1998, the store is run by Muse India, which is co-owned by Maureen Liebl and Amrita Singh. The company also runs a boutique shop at the Umaid Bhawan Palace, another palace owned by the royal family of Jodhpur, and undertakes refurbishing projects for their other properties. With a modest turnover of under Rs 1 crore, Muse India has a small team of 32 working in Jodhpur.
Aerial tour Adding a dash of adventure to the royal hospitality is the zip-lining service started in February this year. Run under the brand name Flying Fox by Zip Adventure Tours, the service allows visitors to glide down a series of steel zip wires, securely attached by a harness and pulley, to get an aerial view of the fort. The company was founded in September 2007 by Jonathan Walter and Richard McCallum—both British nationals living in Delhi. Its first zip-line course was set up at the Neemrana Fort Palace near the capital. The company has a total of 20 employees and operates mostly in Rajasthan.
PHOTOGRAPH COURTESY COMPANY
REPORTED BY INC. INDIA
News, Ideas & Trends in Brief
LAUNCH
Storage Nation Everyone needs a place for his or her stuff. Oldies But Goodies Selling vintage clothes online VIDESCREEN.COM
Riding the 3G horse
Sweet Success The high-margin cupcake Smart Energy The business of going green
Ten Ideas for Launching Your Start-Up Right Now Old shoes, new apps, and ferryboats
PHOTOS.COM
Congratulations; you have survived the
recession. Now what? If you have ever had the urge to start your own business, now may be a good time to make a move. To help identify the most promising industries for start-ups, a team of Inc. reporters in the Unites States hit the phones and scoured the data—from the Bureau of Labor Statistics and from private research groups such as Sageworks, IBISWorld, and AnythingResearch.com. Some of the industries we have identified may surprise you. Start-ups that provide a measure of reassuring comfort in our newly cost-conscious era are doing particularly well. Call it the cupcake factor. In addition to bakeries, these sectors
include hobby and craft shops, businesses that sell musical instruments, and vintage clothing boutiques. Then there are the ever-expanding storage businesses that supply the space where a lot of that stuff tends to end up. Or, if you are in the mood for more adventure, how about launching a passenger ferry service? Following are 10 of the best industries in which to start a business in 2010. ENVIRONMENTAL CONSULTING
Helping homes and businesses go green is a US$17.75 billion-and-growing industry. Environmental consulting is expected to grow 9 per cent a year over the next five continued on the next page
In anticipation of a boom in the 3G industry, this company set up shop about three months ago. They offer a range of videos that are free for viewing and can be accessed across different screens—mobile, PC and directto-home television. A businessto-business venture, its clients include internet service providers (ISPs) and telecom operators. However, any one with an internet connection can visit their website and watch what they like. Says Sunil Nair, one of the three founding partners: “Telecom operators will have to think about entertainment on the mobile phone, just as a TV or radio channel thinks about programming.” Therefore, content acquisition constitutes a large part of the firm’s operations. Funded by the founders, and their network of family and friends, VideScreen expects its business model and content to be its engine of growth, more than any unique intellectual property. It will offer a variety of revenue-share models, customised to the requirements of its clients. In terms of technology, it uses the H.264 standard used for video compression, and is HTML 5 ready. — Jacob Cherian JULY 2010
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LAUNCH
All Aboard Give them sea and sky—they will never miss the interstate.
years, according to IBISWorld, a publisher of US industry research. The industry is wellsuited for independent contractors with skills to install environmentally-friendly gear such as wind turbines, solar panels, and green roofs. MOBILE APPLICATION DESIGN
Sure, iPhones have been around for a while. But with the advent of the iPad, Android phones, and a growing market for mobile apps that work on any webenabled phone, there is plenty of fresh territory for programmers, developers, and designers. A particularly hot area for new companies is location-based apps (Loopt and Foursquare are the big ones right now) that work with smartphones’ GPS capabilities. This sector has the potential to grow at the same scorching rate at which social media websites, such as Twitter and Facebook, have grown in recent years. FERRYBOATS
As highways in and around urban centers become more congested, the old-fashioned ferryboat is making a comeback. Privatelyrun ferry services, as well as tour8
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ist excursions, are thriving along the Pacific Northwest coast and on the Great Lakes. Given that new federal spending for building ferryboats and terminals is part of the 2009 economic recovery act, opportunities are expanding. The industry grew 17 per cent last year, according to AnythingResearch.com. Barriers to entry, though, are steep. A new Coast Guard–certified ferryboat that carries 150 passengers costs about US$6 million. FUN AND GAMES
Craft and hobby supply shops, as well as stores that sell toys and games, have been outperforming the overall retail industry, growing at an annual rate of 9 per cent, according to AnythingResearch.com. Musical instruments and sporting goods are also selling briskly. BAKERIES
Bakeries, pastry shops, and bagel stores are growing at 5 per cent a year, according to AnythingResearch.com.. Small indulgences, it seems, are picking up, whereas big purchases such as vacations are not. People are also continued on the next page
The affair between investors and education companies has turned into a full-blown one. About seven private equity deals have taken place in education till now. In the past month, the IB World bhatia School based in Gurgaon attracted Rs 100 crore from Reliance Equity Advisors. Rajesh Bhatia’s Treehouse Education, which operates around 135 pre-schools and manages primary schools nationally, attracted Rs 31 crore from Foundation Capital and Rs 9 crore from Matrix Partners India. And, Centum Learning, a Bharti Group company operating in the higher education domain, got Rs 40 crore from Mayfield India Fund.…Tirumala Milk Products, a leading brand in south India, attracted Rs 110 crore from Carlyle. Not surprising, given that sales have grown almost a new mould 50 per cent in the past two years… Hindusthan National Glass and Industries signed a joint venture with OMCO-Worlds, a leading glass mould manufacturer, to set up a mould manufacturing plant at Puducherry…GM Rao’s GMR Energy raised Rs 350 crore from IDFC and nearly four times as much from Temasek to expand its power generation capabilities over the next few years…Dalmia Cement, one of the oldest cement producers in India, is exploring a diversification into sugar production, power and refractory. The company recently sold a 15 per cent stake to Kohlberg Kravis Roberts for Rs 750 crore….Incofin, a Belgian micro finance investment company, invested Rs 4.5 crore in Fusion, an NBFC dedicated to the rural underprivileged weaker sex…Max Healthcare Institute, which needs US$50 million for singh hospi two new hospitals in Punjab, is likely to raise half of that from IFC. Analjit Singh rocks on… —Inc. India team
PHOTOS.COM
The Ticker
Best Industries continued
LAUNCH
willing to pay more for gourmet-baked goods, says blogger and baked-goods expert Nichelle Stephens. High-end bakeries are “focused on small batches, local suppliers, seasonal ingredients, and lots of creativity when it comes to flavours and combinations,” she says.
Set ’Em Up Teas and healthy juices are fastgrowth beverages.
The book: The 2020 Workplace: How Innovative Companies Attract, Develop, and Keep Tomorrow’s Employees Today, by Jeanne C. Meister and Karie Willyerd; HarperBusiness; May 2010.
TEA AND HEALTHY BEVERAGES
The top four teamakers control 88 per cent of industry revenue, according to IBISWorld. But the remaining 12 per cent represents a US$264-million market for small, independent manufacturers. The industry averaged an annual growth of about 5 per cent over the past five years. Healthy beverages with promising growth prospects include antioxidant-rich juices and vitamin-enhanced waters. TRANSLATION SERVICES
Small indulgences, it seems, are picking up, whereas big purchases are not. CRAFTS AND VINTAGE CLOTHES ONLINE
Anyone with something to sell—especially in the thriving areas of handmade jewellry and vintage clothing—and a PayPal account can break into this business. Online sales of independent merchants—mostly via Etsy, eBay, Ruby Lane, and Supermarket—grew at an annual 6.6 per cent over the past five years, according to IBISWorld. EXAM PREP AND TUTORING
Parents always want their kids to do better on tests. A large number of adults returning to school are also looking for an edge. Given the low barrier to entry, this field is competitive. But if you carve out the right niche, it could be lucrative. The industry, which includes tutoring in such subjects as special education, language, and music, grew about 7 per cent last year, according to AnythingResearch.com.
A skimmer’s guide to the latest business books
The US military, the health care system and businesses that are expanding overseas are the industry’s best customers. Overall, the market grew some 18 per cent last year. There are also related tech opportunities in the burgeoning market for mobile on-demand translation via SMS. SELF-STORAGE LEASING
There are already 2.2 billion square feet of self-storage in the US, according to the Self Storage Association. That translates to more than seven square feet of storage per US resident. But the industry is far from saturated, thanks to the insatiable appetite of American families for acquiring stuff. The US$22 billion industry also has low barriers to entry, which helps explain why independent business people own 90 per cent of self-storage companies. —Christine Lagorio, Tamara Schweitzer, and Josh Spiro
To read more about the best industries for starting and expanding a business, go to www.inc.com/best-industries-2010.
The big idea: In 2020, employees from five generations, with formative experiences ranging from World War II to World of Warcraft, will be sharing the workplace. Companies must prepare to manage their different needs, expectations, and attitudes. Mostly, though, employers need to master social technologies and offer the personalised experiences prized by younger generations. The backstory: The authors have backgrounds in corporate learning, Meister with Accenture and Willyerd at Sun Microsystems. Sometimes you gawp: Amazon.com has conducted job interviews on Second Life. Sometimes you groan: Deloitte is encouraging 12-year-olds to pursue careers in accounting or consulting. If you read nothing else: The chapter on “social learning” argues that “How have you helped me learn lately?” will become the most important question for future workers. Some of the predictions that close the book are provocative (for example, employees will elect their leaders). Rigour Rating: 9 (1=Who Moved My Cheese?; 10=Good to Great). The authors surveyed 2,200 professionals and 300 employers, developed 50 case studies, and generally put their backs into it. —Leigh Buchanan JULY 2010
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PHOTOS.COM
Best Industries continued
GET REAL BY JASON FRIED
Never Read Another Resumé
And more rules about how to guarantee that you don’t blow it when it is time to add new faces to your workforce Hiring people is like making friends.
Pick good ones, and they’ll enrich your life. Make bad choices, and they’ll bring you down. Who you work with is even more important than who you hang out with, because you spend a lot more time with your workmates than your friends. Wait, why am I talking about hiring? Isn’t unemployment stubbornly high? Aren’t tons of folks unable to find new work? That’s certainly the case for many industries, but not ours. In fact, our company’s job board— which lists positions for programmers and designers across our industry— has more help-wanted postings than ever. We recently hired two new people. Something is going on. I’d like to share a bit about how we Some Wisdom Do not invent a position for go about hiring at 37signals. Hiring is someone great. Hiring people when you don’t something we rarely do—we’re intentionally I’ve run into a lot of companies that have real work for them is insulting to them small at 20 people—but we’ve developed a invent positions for great people just and hurtful to you. method that has worked very well for us. It so they don’t get away. But hiring allows us to find the right people and keep people when you don’t have real work them happy. In 11 years, only two people have left the comfor them is insulting to them and hurtful to you. Great people pany—and one recently returned after working elsewhere for want to work on things that matter. Inevitably, a great person seven years. (Welcome back, Scott!) working on imaginary work will turn into an unsatisfied person. So, what do we do? First, we hire late. We hire after it hurts. Then he’ll leave. We hire to alleviate pain, not for pleasure. Who hires for pleaIt’s easy to say, “There’s gotta be stuff you’d like to do if you had sure? Any company that hires people before it needs them is hirmore people.” And, of course, there is stuff I’d like to do. But I ing for pleasure. It’s an indulgence we’ve never allowed ourselves. believe it’s good to operate at the limits of your organisation. We’re happy to skip over the perfect catch if we don’t have the Limits force you to come up with creative, elegant solutions. perfect job for the person to do. Right now I know there are some Being forced to get more done with fewer resources is the right great designers and programmers available, and I’d love to have kind of pressure. them on our team. But we don’t have any openings. A smaller team keeps you focused. It crowds out all the things
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ILLUSTRATION BY SURESH KUMAR
GET REAL
you’d like to do and replaces them with the things you have to do. It forces you to prioritise and focus on the next most important thing instead of the next “wouldn’t it be cool if…” thing. There are always plenty of those. How do you know if you really need someone? A good rule of thumb is this: Have you already tried to do the job yourself? If you haven’t done the job, you don’t really understand the job. Without that fundamental understanding, it’s hard to judge what constitutes a job well done. For example, a few years back, we decided it would be a good idea to bring on a business-development person, someone who could follow up on partnership inquiries and other new business opportunities we were being pitched. Up to that point, we’d pretty much been ignoring those e-mails. We were just too busy doing other things. So we began interviewing people. Some were very qualified and had great references. But because we hadn’t actually followed up on these new business opportunities before, it was hard to know exactly how to proceed with a candidate. In the course of conducting job interviews, we quickly learned that because none of us had even tried to pursue unsolicited partnership requests, none of us could evaluate a candidate’s skills appropriately. Would the candidate be good at doing something we know nothing about? How would we even know? So after meeting with a variety of people, we stopped the search and began looking into these inquiries ourselves. It quickly became obvious that most of these deals weren’t worth pursuing anyway. If we hadn’t taken that extra step, we might have hired someone to spend time on something we didn’t even want. That’s definitely not good for us—and it’s not good for a biz-dev person’s career, either. We’ve learned this lesson with other positions, too. Before we hired our first customer service person (Sarah), I did all the customer service, about two years of answering e-mails. David, my business partner, and Jamis, one of our programmers, did all of our system administration before we hired our first system administrator (Mark). We found great people because we thoroughly understood the jobs. Once we begin vetting candidates, we also behave a little differently. For one thing, we ignore resumés. In my experience, they’re full of exaggerations, half-truths, embellishments—and even outright lies. They’re made of action verbs that don’t really mean anything. Even when people aren’t intentionally trying to trick you, they often stretch the truth. And what does “five years’ experience” mean, anyway? Resumés reduce people to bullet points, and most people look pretty good as bullet points. What we do look at are cover letters. Cover letters say it all. They immediately tell you if someone wants this job or just any job. And cover letters make something else very clear: They tell you who can and who can’t write. Spell checkers can spell, but they can’t
write. Wordsmiths rise to the top quickly. Another rule of thumb: When in doubt, always hire the better writer. We look for effort, too. How badly does this person want the job? Pestering is not the same as effort, though. We hired a designer named Jason Zimdars because: 1. He was good, and 2. He made more effort to get the job than anyone else. He built a special website pitching his skills just for us. So few people make the extra effort like Jason did. (Check it out to see what I mean: jasonzimdars.com/svn.) During interviews, we love when potential hires ask questions. But all questions aren’t equal. A red flag goes up when someone asks how. “How do I do that?” “How can I find out this or that?” You want people who ask why, not how. Why is good–it’s a sign of deep interest in a subject. It signals a healthy dose of curiosity. How is a sign that someone isn’t used to figuring things out for him- or herself. How is a sign that this person is going to be a drain on others. Avoid hows. We also try to test-drive people before hiring them full time. We give designers a one-week design project to see how they approach the problem. We pay them US$1,500 for their work. Sometimes, we’ll hire someone on a contract basis for a month to see how we feel about the person and how the person feels about us. Sometimes that project is just a few hours a week because the candidate already has a day job. But that’s often enough to check out the person’s work,
Cover letters say it all. They immediately tell you if someone wants this job or just any job. how the person communicates, and how the person works under pressure. These real-work tests have saved us a few mismatched hires and confirmed a bunch of great people. Finally, we never let geography get in the way. We hire the best we can no matter where they are. We’re based in Chicago, but we have programmers in Idaho and California, system administrators in North Carolina and downstate Illinois, designers in Oklahoma and Colorado, a writer in New York City, and others in Europe. This obviously wouldn’t work for customer-facing folks, but for most everyone else, it does. The best are everywhere. It’s up to you to find them.
Jason Fried is co-founder of 37signals, a Chicago-based software firm, and co-author of the book Rework. JULY 2010
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PASSIONS
Life Outside the Office
Aspires to Own an Anschutz rifle Participate in the double trap category Compete at The Maharashtra Rifle Shooting Association, Pune Standard shooting gear Shoes, jackets, gloves, eye gear.
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Status check Owns a Diana 35 rifle and a Walter pistol Participates in the 10-metre air rifle open site, and the 10-metre air pistol open site categories. Shoots at the Karnataka Rifle Shooting Association, in Bangalore University
Milin Pandia
Peart Health Care
He didn’t grow up dreaming about guns. Nor does he belong to a family that went hunting for leisure. Yet, Milin Pandia took a shine to shooting while schooling at the Good Shepherd International School in Ooty. He made it to the rifle shooting team and even represented his school at the Nilgiri district level competition in 2001. However, he forgot all about his passion as he founded two manufacturing companies: Pavlin, a manufacturer of pharmaceutical products, and Peart Healthcare, which makes products such as hair oil and deodorants. Then, about a year ago, he pulled out his Diana 35 rifle and rediscovered his hobby all over again. Within a year, he’s worked up his average score to more than 30 points out of 50. “At 45 points, a shooter can represent the country,” says Pandia, whose best performance so far has been 40 points. Just as many corporate chieftains sneak a round of golf during the week, Pandia, too, gets this urge to take time off and fire a few rounds. The weekend just cannot arrive soon enough for this marksman.
“Shooting has taught me to focus more, and be really calm and relaxed to get a better score.”
PHOTOGRAPH BY GIREESH GV
REPORTED BY JACOB CHERIAN
GUEST COLUMN BY RAJ BHATIA
A tale of three CEOs
You have to learn to delegate. It’s probably the most important thing that you can do to ensure the survival of your company. week. It was late in the evening, around 11pm, and he had come directly from work. It took us 40 minutes to finish dinner, during which time, he was disturbed at least five times by an incessant caller. From what I could hear, he was trying to explain the way to his factory in Faridabad—getting a little irritated in the process. “It’s the truck driver. He’s brought some raw material,” he said, by way of explanation. It seemed that Inder’s vendors were used to sharing his contact number with their truck drivers. I found it surprising, to say the least, especially since Inder owned a Rs 60-crore company, manufacturing and selling consumer prodThe Bigger Picture Create a ucts. Ironically, while Inder was accessible to the truck drivers, Wrong. business that can run without you. it is usually difficult to get him on the phone because it’s busy Despite his hectic schedule, It will become bigger and stronger. from the moment he switches it on in the morning. Rajesh finds time to answer Another friend, Rajesh, runs a group of three companies. most e-mails he’s copied He has four manufacturing units, one in three different states of India, and the onto, and responds promptly to the ones directly fourth outside India. Between them, the companies contribute close to Rs 200 addressed to him. While I find that an extremely admicrore in sales and employ more than 600 people. Add to that his frequent travels rable quality—he must be a superb manager of his to the Middle East and Europe, and various parts of India, and you would prob- time—it does perplex me when I find him heartily parably conclude that the man has hardly any time for anything. ticipating in mail chains involving payment of a few
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PHOTOS.COM
A friend and I went to dinner last
GUEST COLUMN
lakh rupees to us! This happens so frequently that we’ve got into the habit of almost unconsciously roping him into every mail involving our payments to him, howsoever little the amount. He hasn’t complained—at least not as yet! The CEO number three, Suresh, runs a Rs 800-crore consumer product group, comprising several companies. He has interests in several categories: FMCG, wellness, food, dairy and restaurants. Besides running these companies, he finds time to buy a couple of new companies every year. He is also passionately involved in philanthropy, which extends to sponsoring and chairing several events. It didn’t surprise me when he was awarded the prestigious “Entrepreneur of the Year” title by a leading newspaper a few years ago. Two of his companies are my clients, one for more than two years now. Interestingly, I’ve never met him. We have never sent each other e-mails either. I only interact with his colleagues, who are, for most part, gentle,
Between the three, Rajesh is the best qualified; an alumnus of a premier management institute, he has spent several years in the corporate world before turning into an entrepreneur. They are all between 45 and 52 years of age, with Suresh being the youngest. However, their managing styles are diametrically different, evident from the way they handle their vendors. The current size and scale of their respective businesses too brings out the same contrast. Their lives are a big lesson in the art of delegation. Suresh excels at delegation— which probably explains how he manages to find time for the rest of the stuff mentioned above. It’s evident that the more one delegates, the more time one has, and the bigger ones’ business is likely to get. It seems that success and delegation go hand-in-hand. Simple lesson, but difficult to follow. Why? Because delegation requires qualities that most entrepreneurs lack: trusting
For most entrepreneurs, trusting others is actually more difficult than starting the business itself. honest and action-oriented. I have great deal of admiration for both his team and his company, which seems to be well-organised, with systems and processes in place at every step. What I probably like the most is that I receive our money without a single reminder, delivered to our office via courier around the due date. Despite the different businesses they run and the different people they are, there are several similarities between these three CEOs. For starters, they are entrepreneurs and CEOs of the companies they founded. They have been at it for approximately the same number of years—around 25-28 years.
others, believing that others can actually do a better job, and staying focused on the bigger picture. Let’s dig a little deeper into these points. Trusting others For most entrepreneurs, this is more difficult than starting a new business! Of course, it’s not easy, given the several occasions, during their entrepreneurial journeys, they must have felt cheated or let down by people. It’s one of life’s valuable lessons for every entrepreneur that there are very few who can be trusted to keep their word—or, delivery schedules. And yet, this becomes
an important catalyst in propelling them to success. Says Suresh, “My secret of success: I trust people I work with.” Not surprising that he’s far more successful than others, despite being the youngest. Believing that others can actually do a better job. It’s not difficult to figure out why this is difficult for entrepreneurs. Most build their ventures from scratch, passionately jumping into each and every aspect of their company, from the most insignificant to the most strategic. Not only do they understand their own business a whole lot better than anyone would, they also fall in love with it. It’s almost like a parent bringing up a child—and frankly, which parent would believe that another can bring up the child better! In my view, they must learn to accept a compromise—“Okay, I’ll let you handle this, despite knowing that it will not be perfect!” Bigger picture You make this compromise because you have a bigger goal in mind— creating a company that can run without you. People who have achieved this simple goal—Narayana Murthy and Bill Gates come to mind immediately—also enjoy the benefits of sharing their wealth and knowledge with the world. Meanwhile, their businesses continue to grow bigger and stronger. No one says it is easy to master these qualities. After all, it’s hardly easy to trust another person to take care of your child. And, as any parent would only be happy to tell, it’s risky and makes one fearful. But if you do tread this path, your business is likely to go a long way in achieving the end goal of thriving even without you. So, start now. Father your business, don’t smother it.
(The names have been changed.) Raj Bhatia is the founder of Up Close & Personal (UCP), a CRM and loyalty marketing consultancy. He can be reached at rajb@ucpdirect.com. JULY 2010
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INNOVATION
Companies on the Cutting Edge
Lighting up the world
Modern life grinds to a halt without electricity. Once the sun goes down, urban India depends on power to continue life almost seamlessly. That is not so in the many villages still neglected by the electricity grid. However, thanks to Dr Sudhindra Tatti and his company, Pegasus Semiconductor, rural India now has a shot at life beyond the sunset. Founded in 2005, the firm came up with Suryadeep, which is often mistaken for a solar lamp, but is way beyond that. It contains two lamps, one night lamp, a mobile charger, a car battery and a solar panel, along with a manual dimming control and sockets. Unlike conventional solar solutions, which are based on crystalline silicon material, Suryadeep is based on LED (light-emitting diode) technology, which enables it to provide longer lasting and cost efficient electricity. Each LED bulb can light up an entire 10 by 10 feet room, thereby providing four more hours to people beyond sunset to finish things— whether day-to-day chores or studying.
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Sliver of Hope Suryadeep has sold 2,500 units in the Barmer District of Rajasthan so far. It is priced at Rs 2,500 for not-for-profit organisations and at Rs 3,200 for others.
Suryadeep
Pegasus Semiconductor
“I was driven to find affordable lighting solutions to improve the quality and dignity of life for the underprivileged people in rural India.” —Dr Sudhindra Tatti, founder and MD, Pegasus Semiconductor.
PHOTOGRAPH COURTESY COMPANY
REPORTED BY AKHIL BERY
BALANCING ACTS BY MEG CADOUX HIRSHBERG
Brother, Can You Spare a Dime?
During the 1980s, our first years in business, I felt great relief each
November as we left behind the ruts of our New Hampshire dirt road, glided onto the interstate, and headed south to Mom’s New York home for Thanksgiving. But around Hartford, my anxiety meter would start ticking up. My mother and three brothers had invested heavily in our company, Stonyfield Yogurt. And I knew that soon after our arrival, the conversation would turn to the fate of their cash. Their questions were sheathed in a kindness that barely covered the sharp blade of concern within. Profits? Not even close. Margins? Come on. Cash burn? Lots of that. I would sympathise with the turkey as slivers of explanations and excuses were sliced from our tender hides. In those early days, our carcass of a business felt cooked, too. Fortunately, those discussions were for the most part supportive. My
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brothers (two physicians and a lawyer) were entertained and challenged by entrepreneurial problem solving. They enjoyed offering advice. My husband, Gary, profited from talking things out and getting some fresh thinking. At the very least, it was a break from making yogurt. But there was a lack of ease in the air, as our Thanksgiving reunion morphed into a literal kitchen-cabinet meeting. At times, I wished we could just hold a shareholders’ Q&A beforehand and enjoy the pumpkin pie in peace. Building a business requires sacrifices. When the business is funded by relatives, those sacrifices may include the carefree family gathering, the casual lunch
PHOTOS.COM
Thanksgiving dinner or meeting of the board? When your family members are investors in your business, the lines get blurry.
BALANCING ACTS
with a sibling, and the lighthearted phone chat with Mom and Dad. Anxious and exhausted, entrepreneurs yearn for the solace and support usually provided by families: a sheltered place to lay their weary heads. But relationships change whenever money enters the picture. After all, the adjectives traditionally paired with cash are cold and hard. If business problems also endanger the family treasure, the entrepreneur may find her weary head resting on cold, hard stone. Of course, you have to get money from somewhere, and founders naturally balk at the constraints and pressures imposed by institutional investors. Yet relying on the kindness of intimates can be even more fraught. Recently, I heard from an Inc. reader whose husband, unbeknownst to her, had borrowed money from his sister to cover payroll. She was furious when she
sonal than that? Entrepreneurs strive to keep people believing in them. But when things go wrong, losing the confidence of venture capitalists is far less painful than losing the faith of one’s family. Some stress fractures are so severe, they
bring down the whole familial structure. Around the same time we were building Stonyfield, a friend of mine and her husband started what became a hugely successful consumer goods company. They were desperate for money, so early on, her parents bought 20 per cent of the business. She tried persuading them to sign a minority shareholder agreement, but they were offended at the mere suggestion. Then, a few years later, her parents tried to force a sale or an IPO. My friend’s voice still shakes when she tells the tale. “That was probably the most painful
If you must take money from relatives, get them in and out quickly, with short-term debt
found out. “I don’t want people looking at me funny because we owe them money,” she told me. “Debt erodes healthy relationships. I would have preferred a loan from a bank.” The people who love and believe in us are also those whose fortunes we least want to imperil, and whose positive regard it hurts most to squander. Venture capitalists understand this, which is why they often prefer that friends and families invest before they consider a deal. As one CEO said to me, “Venture people know you don’t care about them, but that you’ll work hard to make sure not to lose the money of loved ones.” The decision to invest is about the business, but it’s personal, too. After all, businesses reflect the passion, dreams, energy, and vision of their founders. What could be more per-
thing I’ve been through,” she says. “You look at it as a child being supported by loving parents. They look at it as a calculation. What¬money is more important than me?” My friend, who had been close to her parents, eventually saw them only in the presence of both sides’ attorneys. She didn’t speak to them directly for years. “It was horrible for me. Resentment is like swallowing poison and expecting the other person to die,” she says. “The bottom line is that this was my life, and to them, the business was nothing more than an asset.” My friend’s advice: If you must take money from relatives, get them in and out quickly, with short-term debt. And whenever possible, structure the transaction as a loan rather than equity, so valuation does not
become an issue. If you do give up equity, press for a shareholder agreement. Our situation was different. My torment stemmed not from what my relatives were doing to me but from what I feared I was doing to my relatives. My mother, Doris, in particular, had invested far beyond what she could comfortably lose. I was terrified of the risks she was taking: how our potential failure might affect her retirement, her relationship with Gary and me, and our bond with my brothers. At one point, I begged her to stop. Each time Gary phoned her asking for another cash infusion, usually to meet payroll, I would call on the other line and urge her to say no. My mother¬an angel in more ways than one¬didn’t stop lending and investing, though eventually she and Gary agreed to stop telling me about it. She continued to invest because, more than believing in Gary’s endlessly evolving business plans, she believed in Gary. I saw her and my brothers as financial innocents¬whom Gary and I were leading to slaughter. “It’s gonna work, Meggy,” she would reassure me. “I’m a big girl.” But from my perspective, she may as well have been shoving quarters into a slot machine. Our personal story had a happy ending. My mother is at ease in her retirement. Her risky investment in Stonyfield secured college educations for all her grandchildren. Our family is as close as ever and feels great collective satisfaction at having been part of building a successful business. And Gary’s success has spawned entrepreneurial dreams in other members of the clan. Some of what our family made on Stonyfield stock has been invested in my nephew Jon Cadoux’s start-up. Mercifully, this Thanksgiving it will be Jon’s hide on the carving plate instead. But Jon has an unfair product advantage. His business is the Peak Organic Brewing Company. As we spend the evening sampling new flavors of Jon’s beer in my mother’s living room, I expect that his quarterly financials¬no matter what they are¬will start to look just fine. Meg Cadoux Hirshberg is married to Gary Hirshberg, president and CEO of Stonyfield Yogurt. JULY 2010
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Your Business Toolbox
THE GOODS DOWNLOADS
So many iPad apps, so little time
The iPad is only a couple of months old, but there are already hundreds of apps designed for the tablet. Below are our top picks for business users. —J.B.
Do Not Try This at Home Are rugged notebooks really as tough as advertised? How much of a beating can a so-called rugged laptop actually take? We put four models
through the paces. We subjected them to spills and tosses; we even drove over two of them with a 700-pound ATV. Here are the results. —John Brandon FULLY RUGGED
BUSINESS RUGGED
OMNIGRAFFLE
Looking for new ways to organise ideas? This app lets you create freehand drawings with your fingertips and build diagrams by dragging and dropping elements. cost: US$49.99 FLIGHTTRACK PRO
COURTESY COMPANY (5)
DELL LATITUDE E6400 XFR
The shell of this fully rugged 8.5pound laptop is made from PR-481, a composite used in military equipment. It still worked after we drove the ATV over it and doused it with muddy water, but the touchpad did get a bit sticky. One drawback: The battery lasted just five hours. cost: US$4,473
PANASONIC TOUGHBOOK 31
This new 8.2-pound magnesium alloy laptop barely winced during our ATV rollover test and survived being thrown into a pile of mud and ice. The Toughbook’s 13.1-inch screen is an inch smaller than the Latitude’s, but the battery lasted twice as long, about 10 hours. cost: US$3,799
ILLUSTRATION BY SANTOSH KUSHWAHA
HP ELITEBOOK 8440P
A less-durable business rugged laptop, the 4.7pound EliteBook has a 14-inch screen and an alloy chassis. When we threw it in the air, a light came on indicating that the hard disk had locked to prevent data loss. We used two upgraded batteries at once for 20 hours of juice. cost: US$979
LENOVO THINKPAD T410
The ThinkPad, also business rugged, survived our spill test, but it needed 15 minutes to dry out. The 5-pound laptop has a 14.1inch screen and an interior “roll cage.” Like the EliteBook, its hard drive locked when we threw it in the air. Its upgraded battery lasted just six hours. cost: US$1,115
Tracking flights is easy with this app, which has a zoomable route map, real-time flight updates, and the ability to show multiple flights on a screen. cost: US$9.99 LOGMEIN IGNITION
LogMeIn’s remote-access app allows you to tap into your main computer and access programmes, edit documents, and send e-mail, all from the road. cost: US$29.99 APPLE KEYNOTE
This presentation app lets you create slide shows with photos, texts, and graphics. You can connect the iPad to a projector or TV to display your presentations; you flick through slides with your fingers. cost: US$9.99 JULY 2010
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THE GOODS
Products + Services
A Smarter Breed of Desk Phones Not just for voice mail Smartphones may get all
Dragon Naturally Speaking Preferred 10 Futuristic movies almost always feature a computer that uses human voice, and a microphone as an input device. Dragon Naturally Speaking does just that— in 2010. It saves users from the time-consuming and boring task of transcribing long voice recordings. Using voice recognition, the software can open folders, search items on Google or look up videos on YouTube—a feature that sets it apart from other voice recognition software. It can be used with Microsoft Word and e-mails, as well. Commands and menus from MS Word can be used for formatting text and selecting menus, among other things. Also, it can transcribe text from an .mp3 or .wav file. Dragon Pad opens up a word file wherein you can start dictating text. There is an option to transcribe text from an audio file, via the sound menu. It is recommended for businesses that deal with a lot of text, and for professionals, who have to type out long documents quite often. Users can even choose between a variety of accents, such as Australian, Indian, American and British. The vocabulary level can be set to suit a particular need. Installation is simple. Training the software takes around 10 minutes that involves reading text off the screen. This is the initial training which, upon completion, generates user files that adapt to your voice. At Rs 11,995 this software may seem a bit expensive, but it’s competitively priced.
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the attention these days, but many of us still rely on desk phones for workaday calls. These new models are packed with useful features, and they probably look much sleeker than the one on your desk. —J.B. ALCATEL-LUCENT OMNITOUCH 8082 MY IC
The OmniTouch (shown here) has a 7-inch color touchscreen with apps for playing music, checking e-mail, and setting up conference calls. You can watch streaming security footage on it and even use it to buzz in visitors. The cordless Bluetooth handset works up to 30 feet away from the base. The phone is due out this fall, along with a new back-end system. cost: US$800, plus US $1,325 for a basic gateway
CISCO SPA 525G IP
This internet phone works well with a hosted VoIP service. It has a bright 3.2-inch colour screen and comes loaded with an RSS news-feed app and a music app. As with the OmniTouch, you can watch streaming security footage on the phone’s screen. The back-end system, a Cisco UC500 gateway, supports up to 104 extensions and requires professional installation. cost: US$430, plus US $3,099 for each gateway
AT&T SYNAPSE SB67030
The more traditional Synapse has a 5.1-inch monochromatic screen that is crisp and easy to read. It does not have apps, but the display features handy directions for complex tasks like setting up conference calls. The back-end system, the SB67010 gateway, is easy to install and supports up to 16 outside lines and 50 extensions. cost: US$279 for the phone, plus US$199 for each gateway
IGO ANYWHERE
Laptop Charger The portable charger by iGo is meant for people on the move. Designed to power a laptop, or a netbook easily, its solar design ensures that the device is never overcharged—and that it delivers only as much electricity as is necessary. Since the charger works independently of a grid, it can be used wherever the sun shines—around the world—without the user having to carry additional plugs, or voltage converters. There are no visible solar elements on the surface, which makes the design attractive. Priced at US$125 (Rs 5,550), it is quite a steal!
COURTESY COMPANY (2)
SPEECH-RECOGNITION
Powered by:
Work + Play
Not-so-pricey Meeting Rooms Small conference halls
THE GOODS
FIRST PERSON
It happens often enough. You are in one of the metros and a meeting springs up suddenly. You don’t want to meet the person in the coffee shop, and you definitely cannot use your hotel room. Perhaps, you might even need a white board, or a projector to put across your point. Keeping all this in mind, we have rounded up less-than-exorbitant business centres in four cities to make the decision easier for you. Almost all provide whiteboard, basic stationery and bottled water free of charge. — Jacob Cherian BOMBAY: THE ORCHID
distance from the airport:
less than 1km capacity: up to 12 people projector facility: Rs 5,500 per day tariff
9am to 6pm: Rs 10,000 (plus taxes, includes two servings of tea/coffee) 9am to 1pm and 2pm to 6pm: Rs 8,000 (includes one serving of tea/coffee) BANGALORE: CHANCERY PAVILION
distance from the airport:
35km
capacity:
up to six people projector facility: Rs 3,500 per day tariff
9am to 6pm: Rs 7,000 (plus taxes, includes one serving of tea/coffee)
CHENNAI: THE PARK
distance from the airport:
18km
capacity:
12 people projector facility: Rs 6,000 per day tariff
Rs 1,500 per hour (plus taxes, includes one serving of tea/coffee)
DELHI: THE CLARIDGES
distance from the airport:
18km
capacity:
up to 15 people free
projector facility: tariff
4 hours: Rs 8,000 (includes a single round of tea / coffee) 2 hours: Rs 5,000 (does not include tea/coffee)
EVER PREPARED
TOP LEFT: PHOTOS.COM
The 150-country travel adapter Now that you are trotting around the globe, have you packed the adapters that will be needed for each of the countries that you plan to visit? What if the hotel room has just one plug point—will you charge the laptop, or the handset, first? This is where this little fellow can chuck all the worries out. The adapter can charge and power devices in up to 150 countries. It also offers two USB outlets that can power and charge most of the portable devices in today’s world. There is also a standard AC power outlet. The tiny giant comes with a built-in surge protector that helps save all precious gadgets from power grid hiccups. COST: US$35 (Rs 1,610)
How I use RescueTime to boost productivity
Matt Everson, Founder Astuted Madison, Wisconsin
As a Web designer, I’ve always tracked the time I spend on projects. About a year ago, I started using RescueTime to track everyday activities in order to be more productive. The best part about the program is that I don’t have to use it proactively. If my mouse hasn’t moved for more than two minutes, a window pops up and asks me what I’ve been doing, then gives me the option to check off one of several activities -- meeting, phone call, offline work, or break. The program also tracks the computer programs I use and the websites I visit. You can use it to create custom categories as well. I manage a fantasy football team, so I made a list of sports websites related to that. Each week, I receive an e-mail with a detailed daily productivity chart that I use to pinpoint areas of poorly timed work and budget my time accordingly. For example, if I see that my fourth highest activity of the week was fantasy football, I cut back. If I realise that I spent time cleaning my office one morning instead of focusing on client work, I remind myself to tidy up after hours.For the past year, I’ve been able to count 75 percent of my time as billable hours, which is great for a designer. RescueTime certainly played a role in that.
— As told to J.J McCorvey
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THE GOODS
Work + Play
Things I Cannot Live Without A book a week High-end desktop
Reading Discovering Universal Reality by Paramahamsa Tewari. Last week it was Atoms For War by Ashley J Tellis.
I have a Dell Studio XPS, with 6GB RAM, AMD Processor 2.6 GHz, flat 21-inch monitor and a 2MBps MTNL broadband connection.
My handset I carry a Nokia 7230 for voice calls, as a time piece, and as a reminder. I don’t wear a watch, and I don’t need a high-end phone.
FOUNDER, SYSMAN COMPUTERS
Rakesh M Goyal
Digital camera I use a Canon Powershot G10. I enjoy photography. My favourite subjects are local topography and flowers.
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He is a cyber sleuth tracking down the bad boys of the virtual world. He started what is probably India’s first company specialising in tracking down cyber crime way back in 1991. Today though, this tech-savvy entrepreneur is trying hard to get in touch with his non-techie side. “I am gradually renouncing my slavery to gadgets to live in harmony with nature,” adds the IIMBangalore alumnus. He has even given up his watch and wears no form of jewellery, such as rings or bracelets. As a private joke, he even calls himself the “anti-thesis of Bappi Lahiri”. Along with his wife, he goes on a pilgrimage every year. Earlier this year, the couple visited the Ganga belt. Last year, they spent 10 days in Spain and visited the Black Madonna while they were there. — Jacob Cherian
...and What I Covet Detachment I am gradually detaching myself from material things. I want to retire and settle in the Himalayas. I might even give up electricity.
PHOTOGRAPHS BY JITEN GANDHI
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Timing it Right Yashovardhan Saboo built KDDL into India’s leading watch components firm. Now, he’s set his sights on the growing retail pie with Ethos, his 22-store chain selling branded luxury watches.
BY POOJA KOTHARI PHOTOGRAPHS BY SUBHOJIT PAUL PHOTOGRAPHED AT THE IMPERIAL HOTEL, DELHI
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TIMING IT RIGHT
“I was intent on not getting into business,” says Yashovardhan Saboo.
Given that the ‘I’ in question is the 52-year-old founder and chairman of KDDL, a Rs 130-crore group that manufactures and exports watch components, the statement is a little surprising. Saboo probably understands that and dishes out an explanation. Being a child of the seventies, he grew up on a diet of anti-American slogans and over-hyped communism. No one thought of entrepreneurship as a possible career path. The popular ones were medicine or engineering—or civil service, if you went to St Stephen’s College in Delhi, the way Saboo did. An MBA degree wasn’t considered a ticket to nirvana, as it is today. 28
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TIMING IT RIGHT
started. I couldn’t shift. So, we didn’t shift and they didn’t buy,” Saboo had little interest in such seemingly obvious careers. The he adds. idea of becoming a professional photographer had lingered on in The decision left him without a letter of intent from his client, his head for quite some time and he wanted to make good of the at a time when he had no collaborator, and had been hit by an plan. However, that fizzled out soon enough, but mostly, as Saboo exchange rate that adversely affected his business plan. The Swiss explains today, because there were no good training institutions franc shot up from Rs 2 to Rs 5.5, doubling his costs. Left with no around in those days. Of course, his dad’s reservations regarding money to invest, no client, and no knowhow, he came very close his unlikely career choice hardly encouraged him. to giving up. So, after hard negotiations with his father, Saboo applied to “Those 3-4 years were critical. I have never been so close to IIM, Ahmedabad, to get a degree in management. Much to his throwing in the towel,” he recalls. own surprise, and his father’s relief, he got in. Luckily for him, the winds of opportunity were starting blowSaboo’s father had a successful business manufacturing needles ing his way. Saboo bought technology from a young, Taiwanese in Chandigarh. As the senior Saboo’s interest tilted more towards company and there was a new competitor to HMT on the horizon. Rotary club activities, the responsibility of running the business “Then Titan came along. So, we had an alternative client who landed on the son. But, Yasho, as he likes to be called, soon grew bored of the needle business. “Our German partners gave very few wanted a good quality product.” By 1987, things started to change, such that within two years, degrees of freedom,” recalls Saboo. So, after a few years of running Kamla Dials wiped out its losses and became the biggest supplier the needle factory, he was out scouting for new business ideas, of dials to Titan. It even started a second factory in Bangalore in something that would involve an investment of Rs 25-50 lakh and 1990 to be closer to its biggest customer. “It taught me how to run would give him a definite kick. things at a distance, and the importance of trusting people. We put “I found a lot of business opportunities, but the only way you systems in place and managed things remotely,” says Saboo. could earn a profit in most of these was by fudging taxes or stanAnd then, liberalisation swept across the Indian landscape, dards for certification. And I didn’t want to do that,” he says. suddenly yanking open the doors to the outer world. As global And then, the time came for the watches. Someone, he knew brands started flooding the domestic market, several Indian busiwas making watch cases for HMT, then a leading watchmaker in nesses had to shut shop. Although profitable, Kamla Dials was the country. That person was looking for manufacturers of watch dials. “There was an element of design and aesthetics involved in this business, which I liked.” All of 25, Saboo took his first steps into entrepreneurship. This was the License Raj era, where manufacturing anything required a license from the government. He eventually found someone who had a license for making watch dials, bought When I look back, I must say that I am a little disappointed with the way we have grown. Not for me, but for some of the people who it and started Kamla Dials in 1983. The license also have been with us all through—they deserved a higher growth. gave him access to the knowhow of a Swiss watch There are two big mistakes I made in my journey. One, I did not company. The deal, however, didn’t work out, with understand the importance of people early enough. I was a fairly the latter backing out of the commitment. quantitative-kind of a guy. I believed that with the right logic and Eager to move on, Saboo didn’t want to waste processes, my business did not need to suffer the idiosyncrasies of people. It’s only later that I realised that no process works without time taking the Swiss company to court. Instead, good people; once you have a good set of people, you can actually he figured it might serve him better if the comdo well with pretty basic processes. pany put him on to another manufacturer. “I The second mistake, which I realise now, was my belief in the requested the Swiss gentleman to help me find German values of “sticking to the knitting”. I do not think that the someone who would share the knowhow. I met logic of doing one thing and doing it well can work in a dynamic and growing business environment like India. In a place where there is many manufacturers, each of whom advised me to explosive growth happening, it does not matter even if you are the forget it,” laughs Saboo. Finally, he managed to second-best; you can still manage to grow and add a lot of value. home in on a manufacturer, who was shutting That is a learning I took home in the last eight years. shop. He bought the machines as well as the I think both these things stopped us from growing to our full knowhow. However, a year after training Saboo’s potential. Retail is a correction of sorts for me. Since it is very people-centric, I am getting a chance to make amends for my earlier team, the person shot himself. And Saboo was left mistake. I follow an open style of working. For example, no one’s without a collaborator a second time. salary, including that of the top management in the company, is His woes weren’t limited to that. Just as the confidential. We believe in a lot of feedback. There is a lot of work on his plant was finishing, HMT asked him screaming and shouting, but in the end, people stay with us. And, to move it to Ranibagh in UP, where it had set up that is because they trust us. —By Yashovardhan Saboo its own production facility. “I was 26. We had just
I, Me, Myself
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hardly anywhere near the big league. Saboo knew he needed a plan to beat off international competition. “I decided to go out and fight. There was no better place to fell the giant than where it was born,” he says. So, he went to Switzerland, the hub of watch manufacturing. He knew that penetrating into the country’s watch-making domain was not going to be easy. Since India didn’t allow the import of Swiss watches, the European country did not think it wise to let Indian companies sell their products on its shores. But challenges were nothing new to Saboo. Through sheer persistence, Kamla Dials managed to establish a presence in Switzerland in the next few years, found some clients and started supplying dials. That’s where it also got introduced to the manufacturing of watch hands, in the late nineties. Saboo knew that if he had to make them on his own, he would need to source the knowledge from the Swiss. He tried partnering with a local company, but was discouraged from even trying to make watch hands in India. “We were told that no one in India could produce the kind of precision manufacturing needed for Swiss watches,” recalls Saboo. Only, this man was not in the habit of hearing a no. He decided to take the challenge head on. “Instead of approaching any other Swiss company, we decided we would do it ourselves. Today, 60 per cent to 70 per cent of our products are exported to Switzerland,” says he, rather proudly. As the wheels of fortune spun around, the same company that had earlier declined to share its resources with Saboo, was offered to him for sale. “I went and saw it recently. We sat in the same room that I had been kicked out of. But my team asked me not to buy a dying company, so we let it go.” early 15 years since its debut on the Bombay Stock Exchange, Kamla Dials, now known as KDDL, still retains its hold on the industry. It makes watch components—including dials and hands—as well as precision engineering tools, which include high-precision tooling and stamping used in aeronautical instruments, mobile phones, white goods and so on. It has four manufacturing units across the country. KDDL also holds an 80 per cent share in Kamla Retail, India’s first nation-wide chain of stores selling multi-brand premium and luxury watches. Together, the two entities did business worth Rs 130 crore last fiscal, a year that spelt bad news for most businesses. “After 22 years of straight profit and dividend paying, we turned out a loss last year. This year, we should be back in profit,” says Saboo, hopeful of doing Rs 110 crore in Kamla Retail alone. With 22 outlets across the country, and plans to expand to 30
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50 in future, Kamla Retail is set to ride the boom in luxury consumption in India. Nagarajan Subramaniam, managing partner of Mumbai-based Entheos Consulting, a consultant to lifestyle retail businesses, confirms the favourable economics of the luxury market. “The economy is set to grow at 7 per cent to 8 per cent, but consumption of luxury goods and services is set to grow at 15 per cent or more in India,” he says. Saboo’s journey with Ethos, the brand under which the stores are run, is a testimony to that. In 2003, when Kamla Retail started its first Ethos store in Chandigarh, a city it knew well, people scoffed at Saboo for trying to sell imported watches legally. “The most expensive watch sold was for Rs 50,000 to Rs 80,000,” says Saboo. Over the next few years, the price point inched upwards of Rs 1 lakh for a watch. “Until three years ago, people, who had the propensity to spend money on a nice watch, didn’t do so. The same guys are buying today. There’s a qualitative shift happening because people are
TIMING IT RIGHT
Upon Closer Inspection Where do you see yourself a few years from now? Within five years, I want to do something else. I once read somewhere that an entrepreneur has about 40 years of working. You usually begin in your twenties and cannot stop before you are 60. I believe that you should do at least three completely different things. I did manufacturing, and right now, I am almost 80 per cent involved in retail, so I guess, in another threefour years, I will be ready to do something else. Do you know what that is? I want to do something with vocational training. It bothers me that kids go from Class X to Class XII to MBA, without knowing why they are doing it. In my opinion, post Class X, they should be going into streams that develop their skills. I want to work towards setting up institutes that impart real working skills. In the next 20 years, we need to employ millions of kids and we
need to employ them meaningfully and we need to give them self respect. People pursue a degree as much for self respect as for earning a living. Today, the degrees are giving them neither. I want to change that. So, have you started working on a succession plan? For any entrepreneur, the ultimate test is to be able to leave things. One of the reasons I admire the Tata group is that even after so many decades of its founding, in a group as diverse in interests and reach, without anyone from the owner’s family being there, there is still a certain kernel of values, ethics and belongingness. To be able to achieve that is something outstanding. You go to a Tata company now and you actually believe that JRD is still around—not JRD the person, but his way of infusing enthusiasm and a sense of belonging to the group. That is extremely difficult to achieve. We have seen what can happen
ready to splurge. I am convinced that as far as retail of premium and luxury watches, we are at a tipping point,” adds Saboo. Adds Subramaniam: “The landed gentry and the aristocratic wealthy had always bought these watches. But, in the past few years, there’s been a perceptible shift in the consumer profile. Now, there are many professionals who like to splurge on international watches and luxury items. These new wealth creators constitute 40 per cent to 50 per cent of this luxury brand market, and this percentage is likely to touch 80 in the next few years.” It’s a trend that Kamla Retail is set to piggyback on. The watch segment can be divided into four broad categories. The first, functional watches, is dominated by Titan, India’s largest chain of watch stores. The second, watches that go up to Rs 10,000, is targeted at the fashion-conscious consumer and is dominated by brands, such as Fossil and Espirit. It’s the next “elite” category— where watches are worn to make a statement about one’s arrival on the social scene—that’s being targeted by Kamla Retail. These watches cost anywhere from Rs 10,000 to Rs 2 lakh and sport
without a mentor, say, Satyam Computers, for instance. So, I have not really thought about my succession, but I know it will take another four-five years. Moving on from KDDL, what do you do when you are not working? I run. I have this thing about halfmarathons—I have run seven of them, steadily improving my timing to less than two hours. I feel I am ready to run a full marathon, but I need to convince myself, and, more importantly, my wife, because she says no one can pound the ground for 42km. I also like to write once in a while, and then, there are other phases. For example, right now, I am working on a presentation on the history of western art. This, I believe, will help young people understand the concepts of abstract art better. Sometimes, we get together to read poetry. I also hope to get back to photography. That’s a passion that has been bottled up for long.
brands such as Rado and Tag Heur. Beyond this category, at the top end, are luxury watches such as Cartier and Omega, which are mostly bought on trips abroad. “The opportunity in this segment is 100 stores in the top 30-40 towns,” explains Subramaniam, who went to IIM, Ahmedabad with Saboo, and now consults Ethos on strategic issues. Although Titan has many more stores than Kamla Retail, it only sells in-house brands. Moreover, it does not operate in the premium or luxury segments that the latter works on. That is why Ethos is considered the largest chain of stores in India for multibrand premium watches. Ask Saboo if he’s worried about competition, and he’s almost surprised at the thought. “The watch business does not work like that. Maybe, at lower price brackets, it may, but at the price bands at which we operate, there’s no competition,” he reasons. According to him, selling an expensive watch requires building a relationship with the client. The salespeople have to know the product and the brand well, and they need to have the power to JULY 2010
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“When someone says that this cannot be done in India, or that the Indian quality is rubbish, despite knowing that it is the truth, we want to prove them wrong.”
negotiate with the buyer. “In a large organisation, you cannot do that,” he says, “because it is difficult to educate people about the product, or build relationships with customers”. A look at Saboo’s competitors—if they may be called that— bears this observation out. Look at a Johnson Watch Company in Delhi, or a Vincent in Bangalore. These are family-owned watch stores with presence in a city or region. Every store is managed by a member of the extended family, who has built relationships with customers over decades. Given Saboo’s national ambitions, these stores do not really figure as competitors on his business horizon. However, their success and survival are testimony to the importance of relationships in this business. “Our future customers will come from the rising professional class, which is making money now. It will buy its first Omega or Rolex, and then, a Rs 10-lakh watch a few years later from us,” says Saboo. But to create that loyalty, Saboo has to manage the challenge of staying small enough to build relationships, and yet, grow large enough to get the volumes. “That’s a challenge we are facing as well. We need to create each store like an owner-managed store, yet, we need to connect them all at the back-end. We need personalities who will build relationships with people,” he concurs. It’s no wonder then that Saboo spends all his time on the retail business, trying to “infuse a core-culture”. Happy with what he’s managed to do with the manufacturing side of his business, he wants to replicate that in the younger company. “It’s a huge challenge to try to bind people to the culture. My solution is to make my store-managers—and not the salesmen—a part of our culture, make them believe in it, and let them spread it down the line,” he adds. hat’s not the only challenge at hand, though. The past few months have been rough on exports, given the slowdown in the international watch business, which is spread across the United States, Europe, China, and Japan and the Middle East. Although the US and the Middle East are recovering, Europe’s bad news is making the business 32
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community nervous in general. Saboo’s also worried about the impact of a “volatile” exchange rate on his business, but those are operational issues. His bigger headache is turning around the small dial manufacturing company he bought in Switzerland in 2007. What looked like a good decision then has become a noose around his neck ever since the economy tanked in 2008. Now called Pylania—derived from Pilani, a village in Rajasthan from where Saboo’s ancestors hailed from—Saboo bought the factory to give KDDL access to the high-end market of luxury watches. His rationale was that since watches above a certain price did not include components manufactured in Asia, it made sense to have a manufacturing presence in Switzerland. Saboo and his team had begun well there. “Within four months, we cleaned it up and became profitable,” he says. But given the downward trek of the Swiss watch industry in recent times, Pylania is facing some tough choices. “Salaries are very high, but people are highly skilled. We can’t let them go, and yet, we cannot employ them forever,” he elaborates. It’s also given Saboo a taste of cultural forces at play when small Indian companies go global. Theirs is a small set-up with 18 employees—three Indians and 15 Swiss of various ethnicities— yet, the cultural differences are evident. “I am filled with admiration for multinational firms; for them to manage large businesses amidst these cultural differences, it must have taken a huge struggle to become successful,” he says, in deep admiration for the big brother. As with most businesses the size of his, people and culture issues remain top concerns. There is no doubt that KDDL is set to regain lost ground. “Retail and precision-engineering division are set to grow fast because I see a lot of demand there,” he says. While they wait for the watch to show a different time, Saboo and his team are happy looking back at the journey. “We are proud of our clean image and of being Indians. When someone says that this cannot be done in India, or that the Indian quality is rubbish, despite knowing that it is the truth, we want to prove them wrong,” he says. As they have done—time and again.
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Why I Sold Zappos Tony Hsieh built his online shoe retailer into an e-commerce powerhouse. But with credit tightening and investors eyeing the exits, Hsieh was forced to ask: Was selling Zappos really the only way to save it? BY TONY HSIEH
PHOTOGRAPH BY JAKE CHESSUM
The first time Amazon.com tried to buy Zappos, we said no without even thinking. It was the summer of 2005, and Zappos, the start-up into which I’d poured the past five years of my life (and almost all of my money), finally seemed to be on the right track. Zappos sells shoes and apparel online, but what distinguished us from our competitors was that we’d put our company culture above all else. We’d bet that by being good to our employees—for instance, by paying for 100 per cent of healthcare premiums, spending heavily on personal development, and giving customer service reps more freedom than at a typical call centre—we would be able to offer better service than our competitors. Better service would translate into lots of repeat customers, which would mean low marketing expenses, long-term profits, and fast growth. Amazingly, it all seemed to be working. By 2005, gross merchanJULY 2010
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Cultural Capital Hsieh’s biggest concern was that Zappos would lose its unique—and uniquely wacky—corporate culture.
Four years later, Amazon came calling again—and again my impulse was to say no. Our sales had grown steadily since 2005; by 2008 we were doing more than US$1 billion in gross merchandise sales annually—two years ahead of our original plan. We were now profitable, and our culture was even stronger. As before, our plan was to stay independent and eventually go public. But our board of directors had other ideas. Though I’d financed much of Zappos myself during its early days, we’d eventually raised tens of millions of dollars from outside investors, including US$48 million from Sequoia Capital, a Silicon Valley venture capital firm. As with all VCs, Sequoia expected a substantial return on its investment—most likely through an IPO. It might have been happy to wait a few more years if the economy had been thriving, but the recession and the credit crisis had put Zappos—and our investors—in a very precarious position. At the time, Zappos relied on a revolving line of credit of US$100 million to buy inventory. But our lending agreements required us to hit projected revenue and profitability targets each month. If we missed our numbers even by a small amount, the banks had the right to walk away from the loans, creating a possible cash-flow crisis which might theoretically bankrupt us. In early 2009, there weren’t a lot of banks eager to give out US$100 million to a business in our situation. That wasn’t our only potential cash-flow problem. Our line of credit was “asset backed”, meaning that we could borrow between 50 per cent and 60 per cent of the value of our inventory. But the value of our inventory wasn’t based on what we’d paid. It was based on the amount of money we could reasonably collect if the company were liquidated. As the economy deteriorated, the appraised 36
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value of our inventory began to fall, which meant that even if we hit our numbers, we might eventually find ourselves without enough cash to buy inventory. These issues had nothing to do with the underlying performance of our business, but they increased tensions on our board of directors. Some board members had always viewed our company culture as a pet project—“Tony’s social experiments”, they called it. I disagreed. I believe that getting the culture right is the most important thing a company can do. But the board took the conventional view—namely, that a business should focus on profitability first and then use the profits to do nice things for its employees. The board’s attitude was that my “social experiments” might make for good PR, but that they didn’t move the overall business forward. The board wanted me, or whoever was CEO, to spend less time on worrying about employee happiness and more time selling shoes. On some level, I was sympathetic to the board’s position. The truth was that if we pulled back on the culture stuff, the immediate effect on our financials would probably have been positive. It would have reduced our expenses in the short term, and I don’t think our sales would have suffered much at first. But I was pretty sure that in the long term, it would have ruined everything we had created. By early 2009, we were at a stalemate. Because of a complicated legal structure, I effectively controlled the majority of the common shares, so that the board couldn’t force a sale of the company. But on the five-person board, only two of us—Alfred Lin, our CFO and COO, and I—were completely committed to Zappos’s culture. This made it likely that if the economy didn’t improve, the board would fire me and hire a new CEO who was concerned only with
COURTESY COMPANY
dise sales were US$370 million, and we made the Inc. 500. We weren’t profitable yet, but we were close to breaking even, and our revenue was growing quickly. At the time, we made almost all our money selling shoes, but our hope was that we’d eventually go into all sorts of other businesses. We saw Zappos as a global brand like Virgin—except whereas Virgin was about being “hip and cool”, Zappos was about offering the best service. The plan was to grow sales to US$1 billion by 2010 and eventually go public. These ideas about the power of our company culture had yet to be proved. As I talked to Amazon founder and CEO Jeff Bezos in 2005, I realised that to Amazon, we were just a leading shoe company. If we sold, we’d probably be folded into their operations, and our brand and culture would be at risk of disappearing.That was why we told Jeff that we weren’t interested in selling at any price.
WHY I SOLD ZAPPOS
maximising profits. The threat was never made overtly, but I could tell that was the direction things were going. It was a stressful time for me and Alfred. We began brainstorming ways that we could get out from under the board. We certainly didn’t want to sell the company and move on to something else. To us, Zappos wasn’t just a job—it was a calling. So, we came up with a plan: We would buy out our board of directors. We figured to do so would cost about US$200 million. As we were talking to potential investors, Amazon approached Alfred about buying Zappos outright. Though that still didn’t seem like the best option to me, Alfred sensed that Amazon would be more open than last time to the idea of letting Zappos continue to operate as an independent entity. And we felt that the price Amazon was talking about was too large for us to ignore without potentially violating our fiduciary duty to our shareholders. In April, I flew to Seattle for an hour-long meeting with Jeff Bezos. I gave him my standard presentation on Zappos, which is mostly about our culture. It seemed clear that Amazon had come to appreciate our company culture, as well as our strong sales. Still, I had plenty of concerns. Jeff ’s approach to business had been very different from my own. One of the ways that Amazon tries to deliver a great customer experience is by offering low prices, whereas at Zappos we don’t try to compete on price. If Amazon gets a lot of customer service calls, it will try to figure out why—maybe there’s something confusing about the product description—and then it will try to fix the problem so that it can reduce the number of phone calls, which keeps prices low. But at Zappos, we want people to call us. We believe that forming personal, emotional connections with our customers is the best way to provide great service. But as I talked to Jeff, I realised that there were similarities between our companies, too. Amazon wants to do what is best for its customers—even, it seemed to me, at the expense of short-term financial performance. Zappos has the same goal. We just have a different philosophy about how to do it. I left Seattle pretty sure that Amazon would be a better partner for Zappos than our current board of directors, or any other outside investor. Our board wanted an immediate exit; we wanted to build an enduring company that would spread happiness. With Amazon, it seemed that Zappos could continue to build its culture, brand, and business. We would be free to be ourselves.
ees and explained what we were doing. At first, everyone in the room was anxious—some had assumed I was leaving the company; others didn’t know what to think—but as I spoke, I could see the relief come over people’s faces. They went back to their desks, gathered their staffs, and told them what was happening. Within a couple of hours, everyone had gone back to work. In the hallways, I overheard employees talking about how excited they were about having access to Amazon’s resources. Two days later, I gathered our Las Vegas team—roughly 700 employees at the time—in a conference centre to address any additional questions. Party music filled the room, and employees threw beach balls around into the crowd. The energy was amazing. It felt like the beginning of the next leg of our journey. The acquisition closed on November 1, at a valuation of US$1.2 billion (based on Amazon’s stock price on the day of closing). Our investors at Sequoia made US$248 million. Our board was replaced by a management committee that included me, Jeff, two Amazon executives, and two Zappos executives. As the CEO, I report to the committee every quarter, and Zappos is responsible for hitting revenue and profitability numbers. However, unlike our
“Our board wanted an immediate exit; we wanted to build an enduring company.”
Negotiations with Amazon began shortly afterward. Amazon initially offered to buy Zappos in cash, but that didn’ t sit well with us. We proposed an all-stock transaction. Zappos shareholders would simply trade their stock for Amazon stock. In June, Jeff sent a formal proposal to buy Zappos in stock, which our board voted to accept on July 20. We persuaded Amazon to let us break the news to our managers. So at around noon on July 22, I stood in front of about 50 of our most senior employ-
former board of directors, our new management committee seems to understand the importance of our culture—the “social experiments”—to our long-term success. In fact, one Amazon distribution centre recently began experimenting with its own version of Zappos’s policy of paying new employees US$2,000 to quit if they’re unhappy with their jobs. Otherwise, Zappos continues to operate independently. Our relationship is governed by a document that formally recognises the uniqueness of Zappos’s culture and Amazon’s duty to protect it. We think of Amazon as a giant consulting company that we can hire if we want—for instance, if we need help redesigning our warehouse systems. In the first quarter of 2010, net sales at Zappos were up almost 50 per cent, and we added several hundred new employees. We have close to 1,800 employees now, and I think we’re proof that a company doesn’t have to lose itself as it grows bigger—or even after it gets acquired.
This article is adapted from Hsieh’s new book, Delivering Happiness: A Path to Profits, Passion, and Purpose. Inc. senior writer Max Chafkin contributed additional reporting. This article has been edited to fit space. To read the entire article, log on to http:// www.inc.com/magazine/20100601/why-i-sold-zappos.html.
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CASE STUDY
A contract manufacturer’s pipeline of orders dries up. Can launching his brand of lubricants save his business?
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BY POOJA KOTHARI PHOTOGRAPHS BY JITEN GANDHI
hreenarayan Agrawal had grown up watching his father go to work at the Indian Oil
Corporation, a huge player in the oil industry. Over the years, the dream of running a business in the oil industry had simmered at the back of his mind. So, when it came to deciding his future, it was but natural that Agrawal chose the same industry. In 1987-88, post his graduation, the young Agrawal made a humble beginning with Nandan Impex. His small plant, at Vashi in Maharashtra, would re-pack bulk lubricants into small packs for companies in the public sector. The entrepreneur in him spotted a glimpse of opportunity in the plastic containers that were used to re-pack the oil. The statistics at play intrigued him and before long, Agrawal had started manufacturing the containers for the lubricants industry. The packaging contracts taught him the nuts and bolts of the industry and gave an insider’s view of the dynamics that were at play. By 1992, all grown up, he was ready to open his own manufacturing plant for lubricants, Nandan Petrochem (NPL). As luck would have it, the commissioning of the plant in Taloja coincided with an offer from the
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Seeking Opportunity From four plants producing lubricants for multiple clients, SN Agrawal was left with one contract and no brand to market. It took him time, but he bounced back to grow sales to Rs 80 crore last fiscal.
CASE STUDY
The Experts Weigh In Hinduja-owned Gulf Oil to manufacture lubricants for EVALUATE MARKET CONDITIONS AND PLAN FOR THE LONG TERM Shreenarayan Agrawal’s entry into packaging and subsequent growth them. Agrawal saw a new business opportunity in coninto plastic container manufacturing, followed by lubricants manufactract manufacturing and started doing “job work” for turing plant, was riding on the back of outsourcing requirements of other brands. Moreover, it assured revenue for NPL, his clients. His investment decisions and growth plans revolved which suited Agrawal. The arrangement continued till around growth in demand for outsourcing. Public sectors lacked packaging capacity, so Nandan started with packaging business. On 1995, when Gulf Oil shifted to its own manufacturing deregulation of lubricants market in 1992, new entrants came in to facility in Silvassa. play, who wanted to limit their exposure to the risks of the market, The exit of Gulf Oil was made up by the appearance of and outsourced manufacturing, packaging, transportation and distria number of other oil companies on the business horizon. bution. Nandan assumed this to be the natural, long-term route to A slew of contract manufacturing orders followed. The the business growth. Agrawal, it would appear, did not closely follow the lubricants market, particularly the responses from the existing next few years saw NPL scale up, working with companies public sector companies and the progress of new players. As events such as Indo-Mobil, Chevron, IBP Caltex, Total Petroleum, evolved, neither public sector players lost the ground (except to an and Tata-BP Lubricants. At one point in time, he had four existing player Castrol), nor the new entrants could penetrate the plants producing lubricants for clients, both public sector market in a significant manner. Nandan could not have sustained enterprises and multinational ones. “I was making more growth on the back of new players. Nandan has done well to tie-up with Escorts and Bharat Earth Movers for the OEM business. Howthan 1 lakh metric tonne in job work,” recalls Agrawal. ever, dependence on a few OEM buyers has its risks, as was the case Given the long-term nature of his contracts, he pumped with a few outsourcing clients. Only now we observe that Nandan has money into capacity expansion, in the belief that returns ambitious plans to grow more than six-fold in five years. This is prowere assured. During the same time, he started a transport posed to be achieved through the increase in retail sales volumes. It company, Nandan Roadlines, for bulk transportation of is unclear, though, what would be the strategy for this level of growth for a product/market, which has shown very limited growth in volbase oils and finished lubricants. Soon, he had became a umes historically, without resorting to credit sales, which is risky, as single window solution for his clients by providing raw experienced by Nandan in the past. Agrawal will need special brandmaterial transportation, supply of packing materials, building strategies and changes in distribution channels to extend the manufacturing and packing of finished lubricants. market reach, which require major investments. He has not exhibited And then in the mid-nineties, the volatile spirit of the that his decisions are based on an evaluation of market conditions and aligned to a long term vision, strategy and plan for Nandan. global oil industry expressed itself. Like a shifting desert, R Yagnik | INDUSTRY LEADER, CHEMICAL AND PETROLEUM | Global Business the pattern of the industry’s landscape changed completely Services, Global Delivery, IBM India, Pune. as a series of mergers and acquisitions took place. It started with the end of the marriage between IBP and Caltex, the SOME IMPORTANT LESSONS impact of which hit NPL in full force. The company had to This example underlines an entrepreneur’s ability to steer through an unexpected turn of events and convert a problem into an opportunity. stop manufacturing operations much before the expiry of There are many management lessons to be learnt from this case its contract. A few years later, in 2001-02, Tata BP Lubristudy. One, given the competitive environment we operate in, it’s cants India, a joint venture of Tata and British Petroleum important for SMEs to constantly evaluate their distribution network. (BP), separated into individual identities. Later, Castrol When NPL launched its own brand of lubricants, it reduced the extra merged with BP, accommodating the latter’s business layer in the distribution network to make it price competitive. Two, it’s important to have more than just one segment of customers to cater requirements within its existing plants in India. Another to. NPL could nicely juggle around from marketing branded oils to of Agrawal’s blue-chip clients, Total Petroleum India, took contract manufacturing and OEM marketing based on the internal its business to Elf Lubricants India, after a merger took and external challenges. This is one of the important strategies that place between the two parent organisations. could help them overcome the tough times. Three, the importance of a Agrawal, of course, could foresee what was coming his clear credit policy cannot be emphasized enough. Motivating distributors to pay early by providing high incentives helped NPL come way. “I realised that the company could not sustain itself out of the red. Last, but not the least, is the attitude. From a humble only through contract manufacturing,” he recalls. beginning to a dream of Rs 500 crore in the next five years speaks There was only one thing left to do—launch his brand highly about NPL’s attitude and self belief. To overcome the challenges of lubricants. But Agrawal had played in the industry long that business throws up, this attitude is a must. enough to know that Indian customers were inherently S Ramu | CENTRE FOR FAMILY MANAGED BUSINESS | S P Jain Institute of attracted to foreign brands. “Foreign companies exerted a Management & Research, Mumbai. powerful attraction on the Indian customer. The industry mindset is such that they would naturally associate better quality with a foreign brand,” says Agrawal. So he decided to get a Slowly and steadily, sales volumes increased. The long odd before foreign stamp on his products. The search ended with a technical NPL, however, was turning around the credit-ruled nature of the collaboration with Meguin, one of the largest independent lubricant Indian lubricant market. Even though the sales-clock was ticking manufacturers in Germany. NPL would manufacture and market good, revenue collection remained poor. This led to working capital their branded lubricants in India. problems for Agrawal and soon the company had large amountsout40
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CASE STUDY
standing in the marketplace. That was not an end to the problems. Differences arose between Agrawal and Meguin over payment of royalty due to the German firm. According to the agreement, NPL had to pay royalty only on Meguin sales and not on sales made to OEM clients, such as Kirloskar and Greaves Cotton. However, due to some ambiguous clauses in the agreement, Meguin sued NPL in 2004 and Agrawal had to stop marketing its products. “It was the lowest point in the history of my company,” says he. “We had only one contract manufacturing client and two OEM customers.” NPL suddenly had no brand to market, and the fixed revenues that used to trickle in through the contract manufacturing channel had almost gotten to be negligible.
“Foreign brands exerted a powerful attraction—the Indian customer naturally associated better quality with them.”
Together, this swung around the working capital situation. However, coupled with the switch-over from a German brand to a local brand, they also reduced volumes. Agrawal sought solace in the fact that, at least, the company recovered 100 per cent of its outstanding from the market. He then shifted his focus to the OEM segment—both by increasing the sales made to existing OEM clients and getting in new ones. “Since lubricant sales are not core to the aftermarket operations of OEMs, it made sense to try and work with them,” reasons Agrawal. Finally, in 2006, his efforts paid off when Escorts, one of the largest tractor manufacturing companies in India, came on board. NPL was asked to supply lubricants for its factory fill and service fill requirements. It had an almost immediate effect on the volumes. As the numbers started getting hit, the company’s position
The Decision Agrawal knew he had to act fast Never Say Die SN Agrawal offered discounts on cash to save his company. He decided payments to turn around his working capital situation. to build the company from scratch, a second time. The process started with a change in the profile of the entire management improved considerably. team. A much younger group made its way into the office chambers. Thereafter, NPL added another OEM customer, Bharat Earth Next, he got rid of his cash-eating Silvassa plant and moved opera- Movers, a public sector enterprise manufacturing earth moving tions to a smaller one. That helped in the repayment of loans to the equipment. For both Escorts and Bharat, NPL tailor- made banks, to a great extent. products, which resulted in commercial and technical benefits to On the marketing front, he leveraged the distribution channel these companies. developed for Meguin and kicked off his own brand, Nandan. “We Meanwhile, Meguin was taken over by Liqui Moly, another Geralso realised that our earlier distribution strategy was one of the man company, which had a direct impact on the litigation process. reasons for our downfall,” says he. NPL earlier sold through a CFA- The new management requested an out-of-court settlement to the cum-distributor, who provided carry and forward services to the dispute. Finally, after multiple rounds of negotiations, a compromise company for distributors under his area, and also acted as a was reached and a new agreement signed in April 2008. distributor for the company. (CFA stands for carry-and forward Since then, NPL has been focusing on retail sale of lubricants agent). With the Nandan brand, Agrawal stopped this arrangement under Meguin brand, while the Nandan brand continues as a and terminated all CFAs and depots, and started supplying less-premium option. “We are in the process of replacing Nandan directly to distributor locations from the manufacturing plant. with a more international brand, both in terms of name and feel,” Under the new arrangement, CFAs can stock the company’s says Agrawal. products, but cannot sell them; they can only supply according to Meanwhile, it’s full speed ahead at NPL. Having propelled the the company’s instructions. This has created a clear distinction organisation back towards growth, with sales of Rs 80 crore in the between a CFA and a distributor. last financial year, Agrawal and his team have set their eyes on more He also became tight-fisted with his credit policy, starting to ambitious numbers. They want to reach Rs 500 crore in turnover in offer credit within limits through the head office. To end the ugly the next five years. Given how well-oiled his machinery has become, habit, those who paid in cash upfront were given huge discounts. Agrawal is unlikely to let this hum get lost again. JULY 2010
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TOP SMALL COMPANY WORKPLACES
First, People No entrepreneur starts out intending to build a lousy culture, or even an average one. All leaders want workforces whose productivity is born of passion, whose loyalty springs from the perception of beneficence and fair play. Yet, in the mad crush of business, many fail to invest in their employees: to develop their potential, reward their labours, and respect their personal lives. So, in the following pages, we bring to you the best practices from the American companies, which have been honoured by Inc. magazine as 2010 Top Small Company Workplaces. They lavish on their staffs the care and consideration other companies reserve for their best customers. As a result, these honorees have proved uncommonly resilient during the recession and are reliable talent magnets in economies fair and foul. Here are a few learnings that will help you score high marks in employee satisfaction—from some of the best in class.
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ILLUSTRATIONS BY ANIL T
BEST
PRACTICES
Smart strategies from the Top Small Company Workplaces winners and finalists
LEARNING FROM THE
BEST By Leigh Buchanan
OPEN-BOOK MANAGEMENT
SNAPSHOT
It Adds Up
What makes employees eager to come to work on Monday mornings? The 2010 Top Small Company Workplaces nurture a congenial environment, provide opportunities to learn and advance professionally, and recognise that employees have lives outside the office. Here are some statistics about the winners and finalists that make up the top 40 workplaces:
75
US$15,000
83
30
US$0
95
The percentage of companies that offer educational assistance
The percentage of companies that practice open-book management What employees pay for health insurance at 28 per cent of companies
The highest average tuition reimbursement per employee (New York Jets)
The largest number of paid vacation days per employee (The Booksource) The percentage of companies that offer flexible work arrangements
Mi Number, Su Number
Sharing company financials brings out the best in employees.
CEOs of top workplaces cherish transparency. These companies aren’t just practitioners of open-book management. They are true believers. Open-book management, of course, is the practice of supplying employees with financial data and critical information, teaching them what it means, and turning them loose to influence and share in the company’s success. Although a tiny fraction of US companies open their books to employees, 83 per cent of the 2010 Top Small Company Workplaces do. Many base their practices on the open-book management bible, The Great Game of Business, by Jack Stack, though some introduce their own twists. Several homegrown elements are detectable at Pool Covers, a US$6.3 million company in Fairfield, California. Employees must complete a training programme to qualify for the company’s employee stock ownership programme—or ESOP—committee, which runs company meetings and participates in decision making. After learning how the ESOP works, new hires spend four or five days digging into the company’s financials. The new employees then collaborate on an idea for improving the company’s bottom line. Pool Covers has implemented many of the suggestions, JULY 2010
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PRACTICES including the use of GPS devices in company trucks. CEO Claire King marvels at her new hires’ ingenuity. “We do a lot of driving, so one team had a plan for installing a gas station behind our building,” she says. “They demonstrated quite clearly how it would save us money. How wonderful and out of the box is that?” Laura Ortmann encounters eye rolling when she preaches open-book management to her industry peers, but that hasn’t stopped her crusade. In 2008, Ortmann and her husband, Jeffrey Evenson, bought Ginger Bay Salon and Spa in Kirkwood, Missouri. They trained hairstylists, massage therapists, and even folks who change the towels to understand various aspects of the company’s performance and their own roles in it. Then they challenged staff to make those numbers soar. At Ginger Bay, financials are reported prominently on a scoreboard in the break room. The board announces each employee’s daily sales results and whether she met her goals. “Behaviour changed overnight,” says Ortmann. “No one wants their name next to a low number.” Last year, Ortmann introduced an economic readiness plan, which is a kind of Homeland Security Advisory System for the hair-and-nail set. As financial results drop below certain levels, the alert level ratchets up from 1 (normal business activity) to 5 (we are closing our doors), and expense cuts and other measures kick in. “It was scary for them, but right away they went into whatcan-I-do mode,” says Ortmann. “They came up with amazing ideas for generating revenue and cutting costs.” Not only has Ginger Bay avoided a flirtation with Level 5, but it has continued to grow and been profitable enough to offer medical insurance and a 401(k) plan with company matches—not typical in the industry. “I love numbers, and I love knowing how I’m doing,” says nail technician Terri Kavanaugh. “Laura uses the term financial fitness, and she’s right: It’s just like working out. Once you get your muscles toned, you can perform at a higher level.” 44
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EDUCATION
Company Campus
Remember chortling when you found out McDonald’s had its own Hamburger University? Like large corporations before them, top small workplaces are adopting the university metaphor for their education efforts, which often cover not just business and technology but also non-work subjects: ceramics, wine tasting and more. Last year, SnagAJob.com, a US$21.8 million job-search site in Virginia, offered employees 62 classes through its eclectic programme, Snagger U. Classes, which are taught by in-house experts, take place during the workday and last for an hour or two. Eight to 12 employees typically show up for each class. Here’s how employees described some of the recent courses they offered to their co-workers.
Finance Fundamentals 101
Poker Playin’!
HTML
Setting Goals for Work and Life
At company meetings, have you ever wondered, What exactly do those finance terms and numbers mean, anyway? This class will cover sales bookings and how they translate to revenue, how renewals affect our business model, advertising terms, and more. This class will cover HTML basics. The agenda is subject to change at my whim, but topics are likely to include: tags, working with text, attributes, best practices, tables (maybe), and browsers/tools.
Peer Coaching
Do you dread the 360-degree-review process because you know constructive feedback will help your colleagues with their careers, but you’re not sure how to provide it? This class will help you give and receive helpful feedback, foster an environment of trust, create a sense of continuous improvement, and strengthen the SnagAJob.com culture.
An introduction to Texas Hold ’Em. I’ll teach you the basics of the game with a step-by-step explanation of dealing and betting. I will also provide helpful information on winning hands, the best starting hands, and poker lingo, as well as tips to increase your odds of winning.
Creating powerful, meaningful goals can mean the difference between just getting by and experiencing true success and happiness. Success, both personal and professional, depends on your ability to turn your dreams and aspirations into tangible milestones and goals.
Women’s Self Defense
Increase your confidence by learning techniques to improve awareness of your surroundings, basic moves to get out of different attacks (multiple chokes, arm grabs, bear hugs, etc.), and safety tips. Be a victor, not a victim. Please wear comfortable clothing.
BEST
PRACTICES
MANAGING
A Company of “Level 5” Leaders Tasty Catering lets employees decide how to take the company from good to great
Thomas Walter had the same reaction as many leaders have had upon encountering Jim Collins’s seminal Good to Great for the first time. First came the surge of enthusiasm. Then the question: How can my business be more like these? In 2005, Walter, who is CEO of Tasty Catering, a US$5.3 million company in Elk Grove Village, Illinois, bought copies of Collins’s book for the whole staff, about 50 employees. Everyone completed the work sheets for identifying core values, hedgehog concepts (the activity that, if done steadily and well, will produce success), and big hairy audacious goals. Collins, famously, also talks about getting the right people on the bus. The Tasty Catering bus was already filled with the right people; many employees had worked at the company since high school. Walter decided it was time to let his workers drive. Tasty Catering formed two Good to Great councils, which make all strategic decisions for the company. Each council has
eight charter members drawn from across the company—culinary workers, clerical staff and drivers. One council conducts business in English, the other in Spanish, which is the first language for about a third of the work force. At least one of the three owners—Walter and his two brothers—sits in with each group. The councils hold meetings a few days apart, and an outside translator produces copies of the combined minutes in both languages. Each month, two random employees are chosen to join the councils for the month. “It puts us all on an even playing field,” says Anna Wollin, an account executive who joined one of the councils when they were formed. “I had been with the company less than a year, and my opinion was as important as an owner’s opinion.” Virtually every major companywide initiative for the past five years was born in the Good to Great councils, whose members fre-
HIRING
The Written Exam To nurture a congenial environment, top workplaces are cautious about whom they hire. Attitude and personality are as important as experience and skills. That’s why at All4, a US$3.4 million environmental-consulting company in Kimberton, Pennsylvania, all candidates who pass a prescreening are e-mailed a set of hypothetical questions. Some questions assess problem-solving skills. (You have 16 hours to get up to speed on a subject that requires 24 hours of research. What do you do?) Others assess collegiality. (You made a promise to a co-worker to complete an assignment, but were unable to keep it. What do you do?) Here are two candidates’ responses to one of All4’s questions:
Question You are in the office at 9pm on a Friday finishing up a project for a client and the phone rings. On the other end of the line is a different client who is irate about not receiving a deliverable for a different project being worked on by a co-worker that was due by 5pm What do you do? Good answer “In this situation, it is important not to make any judgments or conclusions before listening to and understanding the situation from the client’s perspective. The client should be aware that you are listening to all their concerns. Clearly identify the issues as you understand them and communicate them to the client. Based on your understanding, present a series of steps that initiate a resolution. Give the client assurance that any agreed-upon plan will be carried out and work with the coworker to implement the solution.”
Not so great “It should be clear to any sane individual that you have put in more than your fair share of time. The only thing to do is to let the customer know that we know about the issue and will approach the co-worker first thing in the morning. From there, it is up to the co-worker and the client. If they both appear to be defective, then it may be appropriate to jump in and try to remedy the situation.”
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“Good to Great is like the US Constitution for us.”
quently reference Collins’s ideas. The councils redrew the organisational chart from a traditional departmental structure to a collection of five- or six-person teams arranged in a circle around the customer. During one meeting, the owners asked council members how much health care coverage the company should provide. Because the majority of staff receives health insurance through spouses, the councils opted to cover a smaller portion of insurance premiums and apply the savings to health-club memberships, which would benefit a larger number of employees. Last year, when the recession pummeled the catering industry, Walter charged the councils with preparing a disaster plan. “They said, ‘We think the first thing is that the owners should take a 30 per cent pay cut,’ ” says Walter. “I thought, That’s a good idea. Leaders go first, right?” The councils also created an employee assistance programme to help workers in serious financial straits and The Club, an in-house store at which employees can buy food and other staples used in the business at cost plus 5 per cent for handling and taxes.
Day-to-day leadership decisions remain the province of the owners. The councils have no say on promotions or capital expenditures—whether the company should purchase a new truck, for example. The councils did, however, weigh in on a recent decision to acquire a competitive business. The councils read and discuss a variety of other management books, but they keep coming back to Jim Collins. “Good to Great is like the US Constitution for us,” says Walter. “It’s so interesting to see chefs and drivers talking about these issues. The charter members are wonderful people—ethical and smart, natural leaders. And when they get together, the ideas flow like water.”
ORIENTATION
A Warmer Welcome
New hires are jazzed at the prospect of joining Van Meter Industrial, says CEO Barry Boyer. The US$165 million distributor of electrical and automation products offers generous benefits. But a few years ago, Boyer noticed that fresh recruits at the headquarters in Cedar Rapids, Iowa, appeared underwhelmed. So he and Karen Schumacher, manager of learning and development, convened a group of 20 recent hires. “They told us that in the first 90 days, there wasn’t enough to connect them to the organisation,” says Boyer. “They felt alone and uncomfortable.” Drawing on the group’s suggestions, Boyer and Schumacher designed a programme to anchor new hires quickly and firmly in Van Meter’s culture. STEP 1: Meet an ambassador
Each fresh recruit is matched with an ambassador, who may hail from any part of the company. An ambassador spends at least 12 hours of the first week acclimating the new hire to all things Van Meter, which includes introducing the new person to every employee in the office.
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STEP 2: Shadow other employees The new hire shadows a veteran employee in her own department and as many as a dozen employees in other parts of the company. The goal is for everyone to understand what happens upstream and downstream from his or her own job.
STEP 3: Take classes
After three months, new employees gather for two days of “foundations” training. Taught by inhouse experts, the training covers personality styles, customer service skills, safety, an industry overview, health and wellness, and Van Meter’s values.
STEP 4: Debrief with the CEO
Boyer tops off the process by sitting down with each foundations class and taking questions. “Their questions are so detailed and thoughtful,” he says. “It’s obvious how much they’ve learned.”
WORK-LIFE BALANCE
Eternal Sunshine of the Unstressed Mind
Perhaps the most valuable benefit companies can provide employees is assistance in regaining space and sanity in their lives. Here are three perks that fill the bill.
Flexible hours
To accomodate employees’ personal lives, Gongos Research, a US$13.2 million custom marketresearch company in Auburn Hills, Michigan, offers its employees a choice of starting times. In her 11 years at Gongos, Anne Tully, the vice president of finance, has worked every imaginable schedule. She now comes in at about 9:30 am “I do my personal things in the morning, like working out and doing errands,” says Tully. Senior project specialist Emilio Ditrapani is at his desk by 7:30 am “My wife and I drive in together, and going early gets her to work on time,” he says. “We get an extra hour together every day, and it saves on gas. It’s a very nice perk.”
Telecommuting
Work-from-home arrangements are good for productivity, morale, and the environment. At Honest Tea, a US$47 million-beverage company based in Bethesda, Maryland, about 60 per cent of employees work from home. The rest are allowed to telecommute when the need arises. Sue Mounts, the company’s director of supplychain management, worked for nine months from Tulsa, while tending
to her 30-year-old son, who was recovering from a car accident. “I would have had to leave him with home health care,” says Mounts. “Instead, I was able to take him to doctors’ appointments myself. It was a blessing for me and my family.”
Parent assistance
Now that women outnumber men in the workplace, family friendliness is a critical differentiator among employers. Patagonia, a US$314.5 million maker of outdoor apparel, has a child development centre at its California, headquarters. It is licensed to care for the 105 junior Patagonians, aged eight weeks to nine years. Every afternoon, three vans pick up older children for the after-school programme. Jen Rapp, director of communications, met her husband, John, a clothing designer, at Patagonia in 2003. Since then, the couple has twice taken advantage of Patagonia’s maternity and paternity leave. Their children have attended the child development centre since infancy. “You can go cuddle your baby or nurse them,” says Rapp. “It made the decision to come back to work very easy.”
SOCIAL RESPONSIBILITY
Nurturing a Spirit of Giving Employees of Torch Technologies donate part of their paychecks to charity
For years, philanthropy at Torch Technologies meant a run for the cure here, a toy for a tot there. “There were so many charities in the community, so many people asking for help,” says William Roark, CEO of the US$40 million-aerospace and engineering company in Huntsville, Alabama. Then, in 2004, some employees sought substantial company support in raising money to fight Lou Gehrig’s disease, and the inadequacy of Torch’s ad hoc approach became apparent. Roark charged two employees with applying some method to the madness. The employees decided organisation wasn’t enough; they also wanted a philanthropic programme with ambition and vision. So they established Torch Helps, a non-profit organisation that’s funded by the work force. Most donations come through payroll deductions, and about 70 per cent of staff contributes. Employees nominate the charities, which are invited to submit detailed applications. A charity review committee then kicks each applicant’s tyres using the Better Business Bureau’s standards of accountability. Every quarter, Torch Helps posts summaries of qualifying applications on its website and encourages all employees who contributed time or money to vote for their favourite. The winning organisation receives a US$10,000 grant, presented at a JULY 2010
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PRACTICES formal luncheon. Recent recipients include a service that outfits homes with handrails and wheelchair ramps for the elderly and one that helps ease wounded soldiers back into the community. Torch Helps also doles out grants of US$500 or less throughout the year and co-ordinates employee volunteer opportunities, such as construction work for Habitat for Humanity and gift deliveries to the homebound at Christmas. Torch Helps isn’t only employee funded; it is also entirely employee administered. There is a president, vice president, secretary and treasurer, as well as a board of seven directors, who serve three-year terms. In addition to the charity review committee, there’s a promotion committee that manages the Torch Helps website and a hospitality committee that organises award luncheons and other events. (Torch Technologies pays for the food and the giant cardboard checks—100 per cent of donations go straight to the charities.) The nonprofit keeps its eyes on its own backyard, favouring north Alabama charities almost exclusively. It also enlists the help of other companies. For example, soon after Torch Helps’ founding, it led the charge among area businesses to replace a trailer and camping equipment stolen from a local Boy Scout troop. “You see first-hand all the need out there, and
“If a charity can survive the scrutiny of a bunch of engineers, you can feel real comfortable that it’s worthwhile.” the feedback comes directly from people you’ve helped,” says Daniel Pritchett, an engineer who serves as president of Torch Helps. “Being involved with this brings me closer to the community.” Torch Technologies makes donations, too, usually to causes that have been vetted by Torch Helps. “Most of our employees are technical,” says Scott Parker, COO of Torch Technologies. “If a charity can survive the scrutiny of a bunch of engineers, you can feel real comfortable that it’s worthwhile.” One of those engineers is Scott Hall, who has spent five years on the committee that reviews applications and is in his third year on the board. Six months ago, Hall was conducting interviews for an entry-level job in a group he manages. “I asked the applicants, ‘Why do you want to come to Torch?’ ” says Hall. “Three out of four cited Torch Helps. They said it made them think Torch was the kind of place for them. That pumped me up.”
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VALUES
Putting the Company on the Couch
Companies can take on a life of their own, and strengthening the culture sometimes requires examining the business’s collective preferences and quirks. At Dixon Schwabl, a US$21.6 million advertising firm in Victor, New York, employees assess their company’s culture by giving the firm an annual personality test, as if it were a human being. When CEO Lauren Dixon first conducted this exercise, which was created by the organisation Companies Are People, Too, her staff concluded that Dixon Schwabl was too deadline-driven. The company remade the culture to allow more time to achieve the highest-quality results; in the 14 years since, employees have made numerous small tweaks. Dixon says the exercise grounds everyone in the company’s values. Here are a few of the traits that employees ascribed to Dixon Schwabl’s collective personality in a recent assessment. Strengths
• Creates a harmonious workplace that draws the best from people • Can construct meaning and opportunity out of ambiguity and complexity • Projects a desirable image through showmanship, salesmanship, and contagious enthusiasm • Has good instincts about customer needs and motivators
Weaknesses
• Tendency to drop current projects in favour of exploring new opportunities • Occasionally will implement change for the sake of change, without sufficient rationale
• Could overly rely on intuition and fail to support it with critical analyses
Values
• Teamwork, fun, innovation, and integrity
Communication Style • Prefers face-to-face interaction • Thinks out loud, and patter is rapid • Flowing, exaggerated, and often redundant
Behaviour During Conflict
• Prefers to avoid conflict at all costs if possible, but will defend values tenaciously
Approaches to Managing Change
• Will get everyone involved and encourage extensive discussion, often centered on possibilities
$3,38
WELLNESS
5
The Price of a Healthy Staff
Top workplaces keep morale high and blood pressure low with robust wellness programmes. Eighty per cent of the top workplaces offer such programmes. Some companies splurge on in-house workout facilities and basketball courts. Others keep costs low by bartering for healthy snacks. Here are three companies’ annual wellness budgets.
$3,38
5
Dealer.com
Total cost per employee: US$3,385 Wellness seminars: US$26 These cover such topics as nutrition, exercise, posture, and stress management. Food: US$839 Includes subsidised meals, with organic and locally-grown food, at the in-house Dot Calm Café and a subsidised programme that delivers food from local farms to employees.
Exercise: US$1,285 Includes Ping-Pong tables, tennis and basketball courts, and an on-site fitness centre. Also covers costs for company sports teams (among them: softball, volleyball, soccer, bowling, flag football, and dragon-boat racing) and half-the-cost of corporate ski passes.
$881
$3,38
5 $881
Wellness perks: US$1,235 Includes chair massages, tennis clinics with local pros, bike rentals, discounted access to a certified trainer and wellness coach, and stainless-steel water bottles.
$881
Honest Tea
Total cost per employee: US$211
21
$2
Wellness intranet: US$5 An internal site with advice on exercise, nutrition, and staying healthy on the road. Health advocate: US$14 Helps employees and families choose the right health plan or doctor. Assists in insurance claim disputes. Biker/walker subsidy: US$16 Employees who bike or walk to work get an extra US$27 a month. Flu shots: US$26 Healthy snack packs: US$60 Distributed quarterly. These also contain sundries such as sunscreen and lip balm. Honest Tea keeps costs low by bartering with companies such
Dixon Schwabl
Total cost per employee: US$881 Flu clinic: US$2
as Clif Bar and Burt’s Bees.
21
Wellness coach: US$90 $2 Provides monthly and quarterly counselling on a variety of issues. Bicycles: US$0 Honest Tea is a promotional partner with Jamis Bicycles. As a part of that arrangement, Honest Tea employees can buy bikes at cost. Wellness awards: US$0 21 Employees volunteer $2to set goals for personal fitness. Those who meet or exceed those goals are honored at the annual meeting.
Company sports: US$46 Includes equipment for the company bocce, softball, and soccer leagues. Covers uniforms and postgame refreshments for the bowling league. Yoga: US$74 An on-site weekly class Charity walks: US$100 Sponsorship of employee charity walks and fun runs Healthy eating: US$227 Includes a weight-loss programme, Eat Well Live Well nutrition kits from Wegmans supermarkets, pedometers, wellness prizes, and fruit and other healthy snacks for the office. Ski passes: US$432 Unlimited guest passes to a ski resort JULY 2010
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BEST
1
PRACTICES FRINGE BENEFITS
10 Perks We Love
Swept off your feet
Akraya, an IT staffing company, sends professional cleaners to employees’ homes every two weeks.
With employee perks, as with personal gifts, it’s the thought that counts. We consider these benefits unusually thoughtful. Bonus prizes
Pressed for time
McGraw Wentworth, a provider of group benefits, offers on-site pickup and return of clothes that need laundering.
3
Van Meter Industrial, a distributor of automation and electrical products, awards points for activities such as participating in its Biggest Loser contest and walking campaigns. Employees redeem points for personal fitness items, such as running shoes, golf clubs, and jogging strollers.
Lunch is served
Dealer.com, which helps auto dealers with their online marketing, serves locally-grown organic treats in its on-site café. Employees can have their subsidised meals delivered deskside.
2
5
A free ride
Workers at Cooper Pest Solutions can use company vehicles for their commutes. Light trucks for service technicians; Toyota Scions for sales folks.
Do your own thing
6
Azavea, a maker of mapping software, follows the Googleesque practice of letting employees spend up to 10 per cent of their time on research projects of their own devising.
Dinner’s on us
After five years at NewAge Industries, a manufacturer of plastic tubing, each employee receives a yearly US$720 charge card to use in the restaurant of the William Penn Inn, a 296-year-old landmark near the company’s headquarters in Southampton, Pennsylvania.
7
Bring the kids
9
Bon voyage!
Helping you help out
8
Patagonia, the outdoor-apparel maker, gives employees two weeks of full-paid leave to work for the green non-profit of their choice.
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LoadSpring Solutions, an enterprise software company, believes people grow by experiencing other cultures. Employees who travel abroad for vacation receive up to US$5,000 and an extra week off to expand their horizons.
Fentress Architects invites employees’ relatives to participate in evening and weekend classes offered through its in-house education programme.
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4
LEADERSHIP
How to Turn Around a Toxic Workplace
Fixing a broken work environment starts with the parking lot.
Leaders of good companies aspire to create workplace heavens. Leaders of workplace hells face more daunting challenges, and many will be lucky to achieve purgatory. But how do you reform a bad culture? We asked Jeffrey Pfeffer, a professor of organisational behaviour at Stanford’s graduate business school and author of The Human Equation: Building Profits by Putting People First.
How do you know your culture is sick? Turnover is an obvious indicator. What else? If you have any sensitivity—and many bad leaders don’t—you can tell from the energy. How do you know the people at United Airlines are unhappy? They don’t smile. How do you know they’re having fun at Southwest? They smile. They laugh. There’s positive energy. You can tell a lot about culture just by reading facial expressions. Are people scowling? Avoiding each other? Avoiding you? If you have built a toxic company, and you want to reform, what changes must you make in how you lead? First, you need to decide why you want to reform. The reason should be that companies with engaged work forces actually do better. Companies with loyal customers outperform their competitors. And loyal customers come from having loyal employees, who want to provide a high level of service and creativity. When you understand that you really do achieve competitive advantage through people, the rest follows. Every time you make a decision, ask yourself a very simple question: Is this
decision consistent with the view that people are the most important differentiator in my organisation? If the answer is yes, you are doing the right thing. How do you demonstrate to your downtrodden and cynical staff that you are serious about change? You begin by giving them a credible story about why things are going to change. That’s why it’s so important to understand your own reasons for reforming. Tell them exactly how things will be different, and give them permission to hold you accountable for progress. I had a friend who turned around a big paper plant. It was a horrible workplace. My friend came in and said, “We’re going to work in a different way.” And everyone said, “Yeah, right.” But then the workers came to him and said, “The employee parking lot is crappy. It’s unpaved. When it rains, it gets muddy. Will you pave the parking lot?” My friend called headquarters and said, “I need money to pave the parking lot.” And corporate said, “We sent you down there to turn around the plant.” And he said, “I’ve
told them we’re working in a different way and that I care about them. I have to fix the parking lot.” So he did. And it was the first step to a real turnaround. If employees matter, should they be sloshing through a quagmire when it rains? No. Most companies have some version of an unpaved parking lot. Fix it and prove that you care about your work force. It takes time and effort to heal a sick work environment. Are there things you should do quickly to lay the groundwork? More-flexible schedules? Increased vacation days? What will make the biggest difference? I disagree that it necessarily takes a long time—not if you genuinely commit to doing it. That said, there are a bunch of practices that work in companies of all sizes. One is to let people make decisions. Two is to share the economic results with employees, through profit sharing or gains sharing. Three is to share information. Secrecy breeds fear. It also signals to people that you don’t trust them or that you think they are not competent enough to use the information. Give people data. They can’t make decisions without data. Four is to invest in people. Spending money on training is a great way to say, “You are important to me.” For example, the retail worker in the United States basically gets treated like shit. Nobody invests in training. Then there’s George Zimmer of Men’s Wearhouse, who puts his wardrobe consultants—notice the title—through four days of training at Suits University. I sat in on Suits University for a case study. There were about 35 people in the room. And by the end of the first morning, after they’d heard about the culture and how important they are and how they are consultants—they were sitting up in a different way. They were feeling better about themselves. By the end of four days, they were like the Marine Corps of suit sellers.
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HOW I DID IT
VINOD KAPUR KEGG FARMS FEEDING RICH AND POOR When I started building Kegg Farms in 1963, I practically knew
nothing more about chickens than the fact that they laid the eggs I loved to eat. I was 29 then, and working with Wimco, a multinational company that made matchsticks. To my own surprise, it took me 10 years to leave my job and start working full-time on poultry. We actually got into the business of eggs a good 40 years later. However, my wife and I would talk all the time about how we would say, “Don’t ask for eggs, ask for Keggs”.
I got into my teens before India got its Independence—maybe
that’s why I am so fiercely nationalistic. I had this deep belief in the Communist Party, was a member of the students’ union and got into trouble almost every day. I was a constant source of embarrassment for my father, who was an officer in the elite Indian Administrative Service. He soon decided that he had had enough of me and packed me off to the Loughborough College of Technology in the UK. That way, he figured, he could nix my fascination with politics. He, obviously, thought wrong—I went and became a student leader there, too.
I am the eldest of five brothers, and had always wanted to do something that no one had done in my family. No one in my family had ever started a business, and I decided to change that. However, my goal was never to make money, just to push the boundaries.
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The idea of Kegg Farms had struck roots in his heart 40 years before Vinod Kapur actually sold his first egg under the Keggs brand. In those intervening years, Kapur saw India lift her head out of colonisation, started a poultry business that helped in making the country independent of live-stock imports, and survived the wave of competition unleashed by liberalisation through a unique mass product. Today, his Rs 40-crore company touches 10 lakh rural households as well as numerous high net worth households across India. For 76-year-old Kapur, Kegg Farms is more a lifetime of commitment to stay independent. AS TOLD TO JACOB CHERIAN PHOTOGRAPH BY DIPANKAR GHOSAL
Playing Chicken Vinod Kapur took on liberalisation by focusing on the neglected rural sector. Today, Kegg Farms sells to 10 lakh rural households every month.
HOW I DID IT
I also knew that I wanted to start small and grow from there. In 1963, I heard
about poultry farming from my father; he told me how the industry worked. Of course, when I actually started out, no one disapproved more than my father. I also got my brother, Sashi, to join hands with me.
I read up whatever I could find on the topic, borrowed money, and rented land soon after, to produce eggs. And finally, I set out to find a man who could help me do this. That’s when Thakur Ram Avatar Singh entered our lives. He was 14 years older than me and owned a poultry farm in eastern Uttar Pradesh. He wasn’t a geneticist, or even a highly-educated person, but he had the knowledge that I couldn’t find in the books. I paid him out of my own salary, from Wimco, to work with us. I soon learned that this was more complex than simply buying chickens and waiting for them to lay eggs. Singh talked about much deeper stuff—about parent stocks, grandparent stocks and pure bloodlines. On understanding the industry better, I saw that selling eggs lay at the bottom of this chain. At the top was selling chicks to poultry farms itself. I wanted to start there. But for selling chicks, we needed to get our hands on the pure lines, or what is called “germplasm”. These were controlled by an American company. At that time, every chick being sold to a poultry farm came from some American company or the other. I knew that India could not continue
depending on imports for long. But for that to happen, we had to own the germplasm. Slowly, I saw my business ambition turn into a national-level objective.
In 1964, I approached the American com-
pany and asked for the germplasm. Naturally, it refused to sell that. I was heartbroken; and, the work on Kegg Farms went into hibernation. I recovered about a year later and realised where we had gone
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High on Ambition Vinod Kapur bought this 30-acre plot of land in Gurgaon in the seventies, hoping to ‘take over the world’.
wrong. We weren’t experienced poultry farmers, therefore, people weren’t taking us seriously. We had to build a reputation first. So, we bought our first chicks from a company based in Pune, which had links with another American company. For a while, we just sold chicks to poultry farms. Then in 1971, we revisited the idea of get-
ting our own germplasm. The big companies were clearly not going to give it to us, so we decided to directly contact small breeders in the US. We sent out letters to hundreds of American poultry farmers. One of them was Robert Parks of the Parks Poultry Farms, which was a 100-year-old poultry business. He responded first and then landed in India three months later.
We were, however, a little embarrassed to
take this Yank to government officials, to tell them that we would not need to depend on the Americans anymore since this guy was going to give us the germplasm. We had no idea what to do. To our surprise, Parks went to the officials himself and said exactly that. I call this divine intervention. Within a month, we
had our germplasm flown in—3,000 chicks from the Parks’ farms. Two years later, in 1973, someone at
Wimco double-crossed me. I quit as the general manager—after 17 years of service. I was 39. But I’m glad I quit. Today, I want to send that man a golden platter.
We then bought this plot of land in Gurgaon. It had a single tree and people used to
call it the mitti-wala farm. There we were on the 30-acre plot, with two sheds, one tree and billings of Rs 15 lakh and we wanted to take over the world. It couldn’t have been more absurd.
While I was at Wimco, we never had to worry about where the money was coming from; I just had to sign a cheque. And then, suddenly, I was the last to get paid, because I had to pay everyone else first. I got no salary for around two-and-half years, and yet, I had to pay the school fees for my two children, house rent and wages, and run a house. That was really tough. I had to fight a lot of inner battles over whether I should take up another job. This went on for about
HOW I DID IT
three months. Then, I asked myself if I had faith in Kegg Farms? If I didn’t believe in it, then what were my brother and Singh doing there?
breeding stock. I think that was our greatest contribution to India—to make the poultry industry independent enough to stop importing breeding stock. It felt great.
One afternoon, I watched this group of
A couple of years later, we started a com-
women labourers walking past my office on Siri Fort Road in Delhi. They worked at a nearby construction site and were going back home, laughing and singing some Hindi film songs together. I could not understand how could they be so happy and carefree when they had so little? That moment hit me really hard. I realised the importance of accepting what you have and striving for what you believe. Kegg
pany that sold chicken feed. We closed that down since it did not do very well. Venkateshwara had started their own vaccine company and we didn’t want to buy from them. So, in the late eighties, we set up Indo-Vax to develop vaccines for poultry.
Soon after that, we got hit badly. Ven-
kateshwara, the Goliath of our industry, at one point, decided to pump chickens into
“The thing about ambition is that it is like the horizon. It keeps moving backwards as you reach it.” Farms, at that point, couldn’t pay me. But if we succeeded, we would change the industry. I just had to remind myself about that.
the market at a much cheaper rate. We felt the impact of that move for many years afterwards.
So far, the breeding stock that was com-
Then, India decided to integrate with the global economy. Having grown up in a
ing into the country was raised in the US. We knew that for a really good breed that is suited to local conditions, the birds had to go through about four generations in the Indian environment. By 1976, we had stabilised our pure lines. We now did not need to depend on imports. Till then, all the big players were sceptical
about an Indian company owning their own pure lines. We were ridiculed for even trying. Then in 1978, our biggest competitor, Venkateshwara Hatcheries, stopped importing grandparent stock. Two years later, the government banned the import of
shuttered environment, we suddenly had to deal with what everyone liked to call “liberalisation”. It was great for some people, but we had to compete with the deep pockets of international companies.
I fielded a lot of offers for tie-ups from corporations across the world. That was never an option because it went against my personality. I wanted to be my own man. I didn’t see the sense in being a small company and working with a giant. It was hard to smile in those days.
I had to ask myself, “What do I do with Kegg Farms?” We wanted to survive because of our strengths and look at a market that others were ignoring. That’s when we decided to focus on the neglected rural sector. There were nearly three crore families
connected through poultry, in some way or the other, in rural India. It was already a household activity for many because there was hardly any cost in raising chickens, and yet, it gave back meat and eggs. The challenge was to create a dual-purpose bird that could produce meat and eggs, and survive in the Indian villages. So, we created the Kuroiler bird. We now touch 10 lakh rural homes and sell 16 lakh Kuroiler chicks every month. If someone wants to develop rural India,
they have to work with what people already know, and not introduce something new. Amul is a great example of this. All we did was give people better poultry—they didn’t need any subsidy; it was a straight-forward deal in cash. About five years ago, I decided to create
another revenue stream, something that would not be subjected to volatility—highquality eggs for people who don’t fuss too much over price. That’s Keggs—and not eggs—40 years after I first thought of selling them.
We plan to leverage the brand equity of
these eggs and build a whole new foods division that will cater to high-end retailers. Today, we are feeding the top, as well as the bottom of the pyramid, and that is what makes me feel so good about what we do.
The thing about ambition is that it is like the horizon. It keeps moving backwards as
you reach it. I can never imagine myself sitting back and doing nothing. I want God to take me away at this very desk, while I am working. Just like that.
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START-UP
DIARIES Tracking radical ideas from different cities
July 01-2010 Hyderabad. Still not able to find the first client for the corporate solution. Thinking of venturing outside the city of birth... Bengaluru. Plants, pots or profits are all on track, but where are the right people to help us do more? And, why won’t the website take off...
The past few months have been hard on almost every business enterprise, but more so, on companies that were born in the midst of the tough economic times. Business has been hard to come by, despite the revival in the economy. Finding the right people has also been an issue, now that jobs are back in the market. The only consolation has been that investors have begun loosening their purse strings. And yet, the brave founders persist—religiously making presentations to prospective clients. Here’s how two of the start-ups we have covered in this section have fared in the past two months.
Hyderabad: RideInSync Since we last reported on Deepesh Agarwal’s nine-monthold venture, it’s taken a few interesting twists and turns. His new solution, SyncToWork, which he spoke about in the last update, is yet to find any takers. While the earlier avatar, RideInSync, has found admirers outside of the country. Agarwal himself, of course, has begun to sound more like a battle-weary soldier. “Frankly, life is tough,” he admits. “Convincing people to buy a system for a task that is being done manually is a big challenge,” he says about his integrated transport solution, SyncToWork. What keeps him going is the shower of encouraging feedback from those who hear his start-up tale. “We have strongly pitched to six blue chip firms based in Hyderabad. Each time I have made a presentation, it has been received with great enthusiasm about the product. But, that eagerness seems to dry up soon after,” he explains, confessing his bafflement at how the pitch fizzles out. For now, Agarwal’s focusing on getting that first customer. Others, he thinks, will follow soon after. “Nobody wants to take that leap of faith. They get excited about the concept, even think it will work, but no one wants to be the first to try it out. Everyone is waiting for someone else to get on board,” he says, breaking into a laugh that seems more a way of channelling out the worries. Despite such roadblocks, Agarwal is not ready to throw in the towel. He is convinced—as typical of the archetypal start-up entrepreneur—that his model will work, even though the day might be a bit far away. “I think we are headed in the right direction. When I 56
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contact new companies, they show a lot of interest. I never have trouble getting appointments. I would be very disheartened if the next six companies did not show an interest,” adds Agarwal, in defence of his entrepreneurial instincts. It helps that he’s a “hopeless optimistic”. “It’s not that I don’t keep a check on reality. I knew companies take their own time and converting a sale wasn’t going to happen immediately,” he adds. Although focused on Hyderabad, he has begun talking to a company in Gurgaon, and another in Bangalore. And, he’s setting tangible milestones. “The next time we talk for an update, I am confident we will have three companies on board. I am sure I’ll make good of that plan,” says the IIT-ISB alum. Interestingly, SyncToWork, which now eats up most of Agarwal’s time and energy, emerged from the feedback on his initial idea, RideInSync. Targeted at individual users on the web platform (http://www.rideinsync.com/), it enables commuters to share cabs, spend less money and save the planet a few noxious fumes. Agarwal tried to market RideInSync as an “employee benefit” and in the process, chanced upon the integrated cab-pooling solution aimed at corporates. Over the last couple of months, he confesses, he had stopped looking at RideInSync as a possible revenue generator. But just as he left it to ride by itself, RideInSync stepped on the gas. It has roughly 900 users now, and in what could potentially become a moth-toflame attraction, a start-up in Singapore has approached Agarwal to
START-UP DIARIES
Bumpy Ride Deepesh Agarwal is still waiting for the first client for his integrated transport solution, but his cab-pooling service for individuals has found 900 users.
take the system to the Southeast Asian nation. “I didn’t visualise this. They came to visit us in Hyderabad. We are working out a revenue-sharing model with them. We don’t want to work on an outsourcing plan. We will be their technology partner,” explains Agarwal. He’s waiting for them to get approval from the Singapore government before beginning work on the system, adding that things should fall in place in a month or so. Venture funds have also been sniffing around. “They see a lot of promise in SyncToWork. They came to me after reading about RideInSync, but now they are interested in this corporate opportunity. See, concepts like SyncToWork are already established in the West. So the logic is, if it works in one part of the world, it should in the other, too. And, we offer a very local flavour of business,” he says. But, funding roadmaps aren’t on his short-term to-do list, although he says he has “burned” over Rs 10 lakh, collected from personal savings, educational loan top-ups and funds borrowed
from the family, ever since he launched RideInSync in September 2009. “I still don’t have definitive revenues. So, funding is a problem. And, if thing go as planned, I am assuming I can manage funding. It isn’t something that I am very concerned about. Getting clients remains the big concern,” he says. His family, though, isn’t as sure. In a world which paints every IIT grad making pot loads of money, it’s quite challenging for Agarwal to convince anxious parents and unimpressed relatives that he’s headed the right way. “I come from a middle-class family, which does not quite understand why a guy like me would struggle with a start-up. My wife’s supportive, of course, and together we tackle the parents, but it’s a hell of a job. They want me to work in a big corporate set up, and would be happier if I gave this up,” he adds. However, turning the wheels back isn’t something that this soldier, however tired of battle, is likely to do anytime soon. — Shreyasi Singh JULY 2010
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START-UP DIARIES
Bengaluru: My Sunny Balcony
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Beyond the Balcony Business is flourishing. The four founders are now working on land gardens and terrace landscaping projects.
larger land gardens and terrace landscaping projects. They have also begun sprucing up the lawns, moving away from just being the “balcony” people. “Seeing a large space transform into a lovely garden of flowers and plants is so great. It’s been really fulfilling,” confesses the team. On a typical day, MSB still gets nearly four to five inquiries. Their plans to open an online store, scheduled to go live by the end of May, have been delayed by a month. “Integrating the payment gateway was complex and thus the site launch has been delayed,” begins Deshpande. Technicalities aside, the team says a lot of deep-thinking has gone into the online story, especially in finalising the product line. Plants and pots have been categorised under themes like Indian, floral, Italian, and so on, to provide buyers suggestions and options that will make it simpler for them to understand the final product. Another solution the team needs to thrash out is on the delivery front. As of now, the company uses a van, loaned to them by a supporter, on test-basis. But,
sooner or later, they would have to find a more permanent solution. “We are open to exploring a professional agency for transport. But, how many courier companies know how to handle plants properly,” say the founders. For now, all energies are focused on the launch of the online store. The four have alos been toying with the idea of pitching to the corporate world. The plan is to feed the “green gift” theory to big corporate houses for occasions such as employee birthdays and team prizes. But, as all start-ups know, thinking up ideas is a completely different ballgame than executing them. Thankfully, however, the shower of ideas has not stopped. “One of our volunteers tried to do vermiculture in our office. We want people to take on these experiments. There are so many new frontiers to explore. The challenge is to get more and more ideas and be very creative,” says the team. Clearly, for these four friends, the balcony continues to be flooded with warm sunshine. —Shreyasi Singh
COURTESY COMPANY
For some start-ups, getting clients on board is a problem. For many others, such as our Bengaluru-based venture, it’s getting the right people on board that weighs on their minds. My Sunny Balcony was founded with the novel concept of making green apartment spaces in Bengaluru. However, instead of plants, pots or profits, its founders have been grappling with people issues. “There is scope for many verticals, but we have realised that till we get more people on board, none of this can happen,” rues Shailesh Deshpande, one of the co-founders. Over the last three months, they have been hunting for suitable reinforcements to their team. The founders have realised that matching salaries, competencies, aspirations and job definitions are becoming formidable obstacles. All wizened up, the team has now decided to revisit its salary offerings. “We just have to take the plunge and offer industry competitive salaries. We can’t hire somebody to do a Rs 100-per-hour job and pay them Rs 50 an hour,” says one of them. They have fixed ambitious “people” targets for themselves, asserting that they will hire for three to four positions in July, mainly an extra gardener, a project co-ordinator and an administrative staff. “It’s a chicken and egg situation. But the truth is that till we have these people, we just can’t grow,” says the team, suddenly realising what it can mean dealing with the realities at the ground level of business. The four are now digging into their “friend” network on Facebook to hunt for the “modern maali”. Visiting the student base at the Indian Institute of Horticultural Research College in Bangalore is another strategy for sourcing potential talent. Interestingly, demand for their services has never been a problem. Their core business has started flourishing, with implementation of more than 10 gardens in the past two months. The company’s product offerings have also been widened to include
Talent Ignite enthusiasm among employees this page Sales & Marketing A company that drives home drunk clients, for a fee, gets new marketing ideas page 61 The Way I Work Ranjan Chopra, the founder of Team Computers, has fine-tuned his role into a system of inspections page 64
Elevator Pitch
Rabbits and mice for laboratory testing page 62
STRATEGY Fire Power Priya Kumar’s firewalking workshops are sought by companies for employee development.
COURTESY COMPANY
Talent A walk on fire And other things that will ignite enthusiasm among employees At a workshop a few months back, pharmaceutical giant Unichem used a unique training tool to make its sales force truly believe that nothing is impossible. With the help of an expert, the company got its 170-strong sales team to participate in a firewalking session. Yes, that’s right. They walked on fire to “break
down mental barriers” against seemingly unrealistic milestones of achievement. A combination of ash and coal was burnt and crushed to lay out a smooth red hot path of embers. While it seemed impossible to walk over the red hot coals without singeing their feet, the parJULY 2010
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STRATEGY
ticipants were assured by the presence of Priya Kumar, a certified firewalker. The audience, consisting mostly of doubters, followed her instructions, focusedww their inner powers on the task ahead, and eventually walked over fire, with some help from Kumar. What followed, says Rajshri Gaur Gupta, deputy general manager for marketing at Unichem, and one of the participants, was a burst of enthusiasm and energy—exactly the response that the pharmaceutical firm was hoping to ignite. “We sell mostly generic drugs. Therefore, there is hardly anything unique in our products. On top of that, we face fierce competition, which lead to ambitious targets for our people. Many times, we ask them to go beyond the call of duty. This workshop helped employees identify with a feeling of unprecedented and unimaginable success,” explains Gupta. Explaining the power of fire-walking, Kumar says: “Fire is a symbol of purification and rebirth. Such experiential workshops have a huge impact on people. Everyone thinks it’s impossible to walk on fire. However, once they finish walking over it, they are overwhelmed with the feeling that they can achieve just about anything.” Adds Gupta: “It worked in two ways. We got a thrill and were greatly impressed with the uniqueness of the experience.” Like Unichem, several companies are seeking out unusual employee development programmes. As corporate trainers adapt new tricks to cater to the demand, there is a variety of innovative training modules to choose from. Apart from fire-walking, Kumar, for instance, takes what she calls “personal breakthrough” sessions on board-breaking, steel-bending and walking on shattered glass. “Over the past few years, demand for these workshops has been so brisk, and the response so tremendous, that I’ve discontinued my classroombased, lecture-oriented programmes. Nobody wants them,” she confesses. For those who think the above sessions are too adventurous, there is a mellower 60
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option—Carnatic music training modules aimed at helping employees gain new perspectives. The “voices within” programme extracts management lessons from musical concepts like sadhana, ritu and dhruva. Carnatic music exponents, TM Krishna and Bombay Jayashri, along with communications consultant R Sridhar, draw from the life experiences of seven maestros and distil their work into a list of principles that can find resonance at the workplace. For those more comfortable with the stage, there are theatre workshops, too. “We actually take people into a theatre
the larger organisations? Parimal Rathod, national training head, Max New York Life (MNYL), says the needs don’t differ much for mid-sized growing companies. “In fact, often these companies are competing with the bigger ones. They are operating in the same market, and need to be equipped with the same creativity, drive, and zeal.” “People are pretty much the same in different departments. Yes, different patterns emerge mainly because of age and the pressures of the job. If a client requires us to customise, we seek two insights. One, what is the age group of people participat-
“People think it is impossible to walk on fire. But once they do it, they begin to feel that they can achieve anything.” and let their natural selves come out on stage. We don’t tell them not to be nervous, or not to fiddle with their hair. We want them to understand that their natural self is the best, and that one of the basics of building rapport is being who you are,” says Vivek Arora of Maynard Leigh Associates, a talent engagement company that uses ideas from theatre for its behaviour change programmes. Ogilvy & Mather, a leading advertising firm, even held an art appreciation workshop for its team of copywriters, art directors and visualisers to help them stay in tune with the changing language of art. For those who didn’t go into formal art schools, the module helped bring in a familiarity with the basic terminologies and concepts that crop up in their everyday jobs. Participants were taken through slides of masterpieces, beginning right from the Renaissance. With a raft of options available, the question is how to pick a programme that suits your needs and works for your employees? More specifically, should the programmes be tailor-made for different departments? Unichem, for instance, used the fire-walk sessions only for its sales staff. And, are such quirks just the preserve of
ing. And, second, what is the cultural DNA of the organisation they are coming from. Leadership styles hugely impact the culture of an organisation,” adds Maynard Leigh’s Arora. Experiential workshops also work well for team building, says Rathod. “At MNYL, we regularly have team building plans, where we take our people outside closed conference rooms and offices. In a recent programme, the teams participated in a jungle trek, where they carried supplies to the jungle all by themselves. It was a great experience and helped in fostering communication,” says he. What might work well for a particular team, say, sales or finance or marketing, might not achieve the same results with the entire group, warns Unichem’s Gupta. So, choose the programme carefully. For instance, walking on fire is an incredible high for an individual, but may not be the ideal session to develop bond members of the team. With a bouquet of options to choose from, it will not be difficult to find what puts the fire in the belly of your employees. So, go ahead, fire up your imagination—and your team’s power. —Shreyasi Singh
STRATEGY
Sales & Marketing Get drunk and get home safe What ideas can steer this? How would you sell that?
Shiven Madan and Nikhil Saigal started the Home Safe service to help party-goers drink
in peace, and still get home in one piece. If someone is too drunk to drive, they can hire a driver for a couple of hours. The duo recently added ‘day services’ and ‘outstation trips’ to their offerings as well. They receive 10 calls for their night service every week, and around 40 calls per week for their day service. They claim to have amassed a database of nearly 5,000 drivers since the launch eight months ago and have invested over Rs 6 lakh in the unique venture. So far, they have tied up with restaurants, bars and clubs in the NCR region putting up sun boards, posters and standees in these establishments. We asked four entrepreneurs for marketing ideas that could help the duo reach their revenue mark safely. — Jacob Cherian PITCH NO. 4: From door-to-door to flyers Vitek Goyel, founder of Pixeltek Gaming Solutions, builds videogames Create two separate brands—for the day and night services as both the clientele will be distinct from one another. For the “night out” model, I would try to get a buzz going with the party-going community. For the “day drive” service, it will be a good idea to do a door-todoor campaign giving out handouts in neighbourhoods and in local grocery stores and shopping complexes. It will be a good idea to cater to a corporate crowd as well, and have flyers in office buildings and business districts.
PHOTOS.COM
PITCH NO. 1: Presence in party invites and a limo-service Rashmi Vaswani, founder of Rage Chocolatiers, makes gourmet chocolate in Bangalore They could include pamphlets advertising services with invites that are sent out for the many parties that keep happening around the city. They could tie-up with an event-management company that could throw in the service as a value-add. Home Safe could offer commission to young people who like to go out and party—people are more likely to call in this service if a friend recommends it. Ideally, they should offer special services to high-end clients. Perhaps they could hire out a limo for the girls’ night out. After all, their service is all about people partying safely.
PITCH NO. 2: Direct-to-home Nathan Steele, founder of Escape Delhi, that offers weekend-getaway packages around Delhi Micro-breweries and alcoholic drink manufacturers might get involved in marketing this service, as they are quite restricted in their advertising options. Mixing their brand with the service could give out a positive brand message of responsible drinking. They have already done a good job in tying up with pubs, but not everyone goes out to pubs for a drink. Several people drink at a friend’s house. Home Safe should think of ways of getting to these potential clients.
Partying Smart For a couple of hundred rupees, revellers can be dropped home in their own car.
PITCH NO. 3: Awareness through social media Pradeep Chopra, founder of Digital Vidya, offers training in digital marketing in NCR Given that this is a unique concept, the company needs to have a “selling the concept” strategy in their marketing communication. This can be achieved through multiple means—especially through statistics. For e.g. number of accidents that happen because of drunken driving. “Fear” can be a great “attention seeking” element here. Or, they could provide testimonials.
FEEDBACK ON THE FEEDBACK: We want to reduce tie-ups with event management companies as most of them want money. We are now trying to tie-up with multiple alcohol companies directly. We already have people recommending it—we don’t pay them, instead we give them free service. We don’t want to hire out cars, because there are enough radio cabs in the market. And, we don’t have that kind of money to rent or buy a vehicle. We’re trying to get the Delhi Police to make drunken driving checks mandatory. Initially, the service did include statistics and date; however, we saw that the campaign was becoming “too strong” and putting people off. Customers almost thought of us as an NGO. JULY 2010
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STRATEGY
Elevator Pitch Lara Biotech breeds animals for lab tests. Can Rs 90 lakh help them prosper?
FOUNDERS:
Raghunath SR & Latha LOCATION:
Malur, Bengaluru EMPLOYEES:
10 full-time & three part-time scientists FOUNDED:
February 2010 PROJECTED REVENUE (2010-11):
Rs 1.2 crore
REVENUE BREAKDOWN:
60 per cent rabbit meat sales; 40 per cent lab, research; 10 per cent pet sales PROJECTED GROSS PROFIT MARGIN:
The Pitch “After the IT boom, bio-technology is set to dominate the future
of India. There are several bio-tech and pharmacy companies that are in constant need of animals for research purposes. Here rabbits, mice and rats are used extensively. We plan on catering to the 1,500-such registered laboratories around the country. We produce high-quality animals for laboratory testing. We have three scientists who ensure that we raise the best quality stock. Another revenue stream is rabbit meat. India lacks a large-scale, rabbit-meat production facility. Funds will be utilised to expand the present unit, as well as to set up a new laboratory, a processing unit, a manufacturing pellet unit (for animal consumption) and a cold storage. ” —As told to Jacob Cherian
45 per cent
AVERAGE MONTHLY SALES:
Rs 10 lakh per month (from meat and research) FUNDING SOUGHT:
Rs 90 lakh
The Experts Weigh In PITCH NEEDS WORK
The pitch is sketchy. It has a high-level statement of intent. Business and operating models are unclear. How will Lara “produce” the animals and ensure that they’re diseasefree, of the right weight, age and size? Where are the labs currently sourcing requirements and at what prices? Why would the labs shift from current suppliers? What qualifications do the founders have? Supplying rabbit meat is a different business from producing rabbits for labs. Who will the company supply to? Chettinad restaurants, for example, already serve rabbit in several south Indian cities. How will demand be generated? SANJAY ANANDARAM, managing director, JumpStartUp Fund
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RELATIONSHIPS AND MORE
To breed animals for research and sell them to bio-tech companies the company should enter into contracts or relationships with potential customers so they can understand their needs better. They need to be close to customers—physically—to be able to supply the animals. There are some unanswered questions here, like: What is the total size of this market? How easy is to scale? Are there any government regulations regarding where one can breed—in terms of distance from city or residential areas? From an investor’s point of view, it needs to be seen how does one exit this business? And I haven’t heard of animal breeders that have gone public. BHARATI JACOB, partner, Seedfund
FINALLY A STABLE SUPPLIER
It’s a good concept, because pharma companies often face a scarcity. Recently, it took us seven days to get more mice delivered. These mice were different sizes thereby their metabolic rates, too, were different. Labs need standardised animals. Companies in Ahmedabad get mice from either labs that raise them in-house or local farmers who catch them from the wild. The former charges over Rs 500 per animal, while the latter charges about Rs 200. This company should cater to urgent deliveries. Currently a pharma company has to deal with upto 20 sources, which is difficult to manage. A single stable source is needed. KRUTIN CHATURVEDI, director, Halewood Laboratories PHOTOGRAPH BY GIREESH GV
Bunny Bucks Raghunath SR and Latha want to produce more rabbits for lab testing.
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THE WAY I WORK | Ranjan Chopra
“I have converted my role into a system of inspections.” “You don’t get what you expect. You get what you inspect,” that’s one of Ranjan Chopra’s favourite one-liners, borrowed from Luke Gessner’s When Elephants Can Dance. Not for nothing, he describes his role in his company as a system of inspections. It’s a core principle of his company, Team Computers, which he started in 1988 to service laser printers and support Apple shops. Over the years, the firm has become a significant IT infrastructure solutions provider, supporting more than 600 customers across the country and generating Rs 300 crore in revenue. This IIT-Kanpur alum, who has been a part of the founding teams of eight other companies, hates bureaucratic processes, spoon-feeding ideas and pushing people around. A sucker for the saxophone, he loves getting his Frankie’s songs right.
AS TOLD TO JACOB CHERIAN | PHOTOGRAPH BY DIPANKAR GHOSAL
I wake up around 7 am. I like to have some fruit before reaching out for my laptop to write my ECR. That’s short for executive contribution report, a kind of daily status update. I’ve been doing this for the past five years. My mentor, Dr Jain, suggested I do it and now it has spread across the organisation. Everyone in my company does the same thing. However, only 50 people send it to me. The rest send it to their supervisors. It’s just a way of keeping everyone in the loop about the stuff you are up to. Sometimes, it’s not even about work. For example, when the Icelandic volcano left me stranded in New
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An Unusual Investor Ranjan Chopra prefers to invest in people and ideas, than in real estate and the stock market.
THE WAY I WORK
York, I wrote about new jazz musicians who I had discovered. These write-ups are usually not more than 100 words. It’s a way of filtering your thought process. This usually takes me about 20 minutes. If I take more time, then I know I’m not doing something right. I try not to read emails right at the start of the day. I usually open the inbox just to send out the ECR. This done, I head for the pool. It’s very refreshing and helps me focus better. I usually do around 100 laps. The rush of water kick starts my thoughts. During this time, I usually take a particular topic and deep dive into it to. I spend about 30 per cent of my time planning and thinking for the business, and this swim-time is a part of it. Double Time Readyto-use information On some days, my six-year-old son joins me saves the time spent for a swim. This is almost the only exclusive time I ensures that all reports are readily available and on writing reports. spend with him. So I just love this bit of the day. constantly updated. I use this to verify and inspect Sometimes, he will ask me for help with his probwhat’s happening across our offices. It gives me a lems. I don’t give him the answers. I like to push bird’s eye view of the business. And that is another him into doing his own thinking and get his own answers. 30 per cent of what I do—inspection. I’ve converted my role into a As a rule, I don’t like to give people solutions. Instead, I ask system of inspections. them to get to the root cause of what is troubling them. When you I’m always online, thanks to my Blackberry. I get about 100 get to the root of something, you’re not just solving an issue; you’re internal mails a day. I usually respond to them only after reaching dealing with a whole category of problems. office, if I go there. Else, I get to them after my swim and breakfast Once a month, I sit down with the heads of my business units from my home-office. for a review meeting. These are more like coaching sessions. We Since we have moved into our new house four months ago, I first go through what’s happened in the past month and then go try to work out of home for at least three days in a week; so there is about troubleshooting the issues that have cropped up. no fixed daily schedule for me now. I even hold meetings here Monday mornings are for the weekly conference calls. The since we have the space to do so. business heads of various units and their teams assess their perforMeeting people takes up the other 30 per cent of my time. mance in the previous week and set new targets for the week These could be meetings with existing, new or potential clients, ahead. I don’t get involved with these anymore. which I like to call relationship meetings. I don’t get into transacThere are two kinds of people in this world—those who believe tions anymore. I can’t remember the last time I did that. I sell ideas, that people don’t want to work and therefore, need to be policed. but don’t get into the deal itself. We have a team that is fully capable And then, there are those, like me, who of carrying it out. believe that people want to work and y wife is my best critic. Everyone else, I are trustworthy. With this belief feel, is a lot gentler. My way of dealing system, the whole policing dimension with it is to be quiet and absorb it. I try disappears. Instead, what stays is to look at it as a gift and accept it. Quite verification. frankly, I manage to do this only about So, I set a goal, assign a set of tasks six out of 10 times. When it comes to me and then verify it later. It’s not like a giving criticism, I try to follow the nine surprise check; it is more regular. is to one rule—which is point out nine When I go to office, I usually get fixed good things that a person does for every before the six screens installed inside one point of criticism. my cabin. It gives the feeling of a cockWhenever I find myself in a crisis, I pit. These gadgets give me whatever take deeper breaths to calm myself. It is numbers I need. We use our own busithe best way to get through a moment of ness intelligence software for this. crisis. I learnt that from Sri Sri RavishanIn our office, we never waste time kar. His teachings have had a great impact writing reports. The BI software 66
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THE WAY I WORK
on me. This way, I can also get rid of anger much faster. I’ve realised that if you are angry and aware of it, you are in control of it. Being upset affects productivity. I’ve been a part of the founding process of around eight companies. One of our other successful companies is Black Magic Toners. It manufactures and distributes ink cartridges for printers. I spend about one day a year on this company. I hold a majority stake in it, but it is run very effectively by its CEO. Then we have Team Business Solutions, which builds BI solutions for clients in the US. Team Serve is another company that offers managed IT services. I have faced failure as well in building some other companies. Way back, I tried to set up a printing solutions company. In the early nineties, I started a company that exported educational software to Australia. When satellite television started gaining popularity, a team of four of us tried to tap the market by distributing dish antennas. All of these ventures collapsed for a variety of reasons, but these experiences taught me valuable lessons. I don’t invest in the stock market or in property. I only invest in people, ideas and businesses. Some time ago, I also tried to create a platform for musicians. It’s still in the “pause” mode. I called it Zorba, after one of my favourite books on philosophy, Zorba the Greek. I’ve been a voracious reader since college. I’m a speed reader
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now and conduct workshops on speed reading. I remember watching a show that had Bill Gates and Warren Buffett talking to an audience. They both said that if there was one thing that they would want in this world, it would be the ability to read faster. I completely agree with that. It’s been nearly 15 years since I stopped reading fiction. I think real life and business got a little too thrilling. I still read a lot of books on management and philosophy. One of my favourites is Luke Gessner’s When Elephants Can Dance. He says, “You don’t get what you expect. You get what you inspect.” That hit me like a sledge hammer. As soon as I read that, I realised that was me in that category. That’s where I learnt about the importance of inspection. I usually get home by eight in the evening. As soon as I reach home, I have to put on some music. That’s my way of unwinding. And, of course, there’s my saxophone. I love jazz. This is also the time I spend playing with my son. Since I am up till 1am, I try and put him to bed. Like every entrepreneur, my relationship with failure is very important. When you fail, it’s important to do a root-cause analysis and move on. The worst thing to do is to fail and call yourself a failure. It is not just a linguistic thing. We live in the language. As soon as you say it, it becomes your stigma.
12/22/2009 3:02:47 PM
I WISH I KNEW THEN...
Vinay Deshpande, Founder, Encore Technologies
I have come to realise that developing technology is the easiest part of building a business. Marketing that technology is umpteen times more difficult. With the Simputer, we expected orders to flow in as soon as the prototype was ready. We thought even the government would want it. That didn’t happened. Putting a technological marvel on the shelves requires enormous financial muscle. I wish I had set out with more finance for marketing the Simputer. In a way, the Simputer probably was ahead of its time, at least when we first released it seven years ago. There were issues of connectivity, and generally the eco-system did not have the bandwidth to accommodate such stuff. Today, things have changed. People want 20,000 pieces per order. But, seven precious years have gone into reaching this stage. The wait could have been shorter, now that I look back. Another shortcoming was that we only created a platform. We expected other developers to start developing applications immediately. Instead, we should have come up with the initial applications to encourage others to do so. This would have demonstrated the practicality of what we were offering. We might even have done that had I equipped myself better with system software capabilities and the ability to write end-user applications.
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ings. It’s easy to start doing business with Americans; they are pretty straightforward. In contrast, starting out with Japanese is difficult; but once begun, it’s almost like a marriage. That’s not the case with Americans. Europeans are a conservative lot, and are averse to getting technology from elsewhere. I spent a long time in Germany and learned that they prefer to develop systems software themselves. They tend to suffer from the notinvented-here syndrome. I have two children. I wish had been more balanced in the way I approached my work and family. I was biased The Technoholic Vinay Deshpande wants a more balanced approach between his work and family. towards work, and that’s a skew I am yet to correct. Work is not everything. At the same I think I have abundant energy and a time, work pays for your life, so if you don’t never-say-die attitude. Of course, no one is do it properly, then you have no life. Thereperfect. I have my own shortcomings. I trust fore, one depends on the other. It’s a pretty people too much. I also think that I act more symbiotic relationship, at least in my case, like a technologist than an entrepreneur where work seems to have got a complete when it comes to making business decisions. hold over life. But, I sure want to change that. People have to learn be a lot more cautious — As told to Jacob Cherian while building their companies. Having dealt with Americans, Japanese and Europeans, I also now know that relationships matter a lot even in business deal-
PHOTOGRAPH: COURTESY SUBJECT
From studying at Stanford to working at chip-design firms in the Californian valley to building a tool for poverty alleviation, Vinay Deshpande had traversed the globe as a technologist and an entrepreneur. His team’s mostfamous offering is the Simputer—a low-cost, handheld device aimed at spreading computational power. Today, the entrepreneur in him realises that developing technology is probably the least troublesome of the entire affair.