Building the Next Generation Company Date:   Thursday , July 02, 2009 Well one can find several young minds who want to build a next generation company as it’s an opportunity to produce something special of his own, which could create ripples in the industry. Many entrepreneurs are driven by the need to build something great, help other people, or leave something unforgettable behind. It’s easy to think about Google, Apple, or Twitter when you think about what a ‘next generation’ company might look like. Needless to say, challenges are immense on what it takes to build a next generation company. Scaling Up and Envisioning the Future Let’s say, one has already started the journey and he or she now wants to scale up and finds that it’s not so easy. Situations will always change once you grow bigger, though it may not happen overnight. Jeya Kumar, CEO, Patni Computers, says, “For instance, it took Patni 25 years to earn the first $100 million. In the early days, GE accounted for 80 percent of our business. Now our volumes have grown in such a way that today GE accounts for less than 10 percent of our total business. In the last seven years, when the industry was growing three times faster than before, Patni used the opportunity efficiently and reached $720 million mark.” Thus, in order to be on the growth trajectory a company, whether it is public, private, or a startup, has to be dynamically scalable. The need is to have different methods and ways to ensure that the company continues to grow. Even an organization’s structure is supposed to be transient on an ongoing basis, as it has to adapt to changes that happen around the company. In fact, this may help bring in people from other areas where this firm does not have expertise. Anticipating the future is the greatest skill one, who wants to cash in on the upcoming opportunities, should develop. It is usually the one who anticipates things and deals with the changes that first walks away with a huge share of the cake. In fact, Sasken was born out of such anticipation and a firm belief in that. As Rajiv C Mody, Chairman and CEO of Sasken puts it, “In 1995, we foresaw that signal processing technology is the next big thing and we invested in that heavily. We had an understanding that wireless and multimedia, which were then at the starting point of the technology curve, would require this technology on a large scale. We also invested in the third generation wireless technology in 1997 when it was unknown whether that technology would take off. Hence, it is all about taking a conscious decision well in advance and believing in it,” Mody explains. Innovate to Stand Out When one is into a business, competition is inevitable and you just can’t avoid it. Vying for market share is not easy and one needs to have a resolute spirit to win it. In the midst of incumbents’ threats and tricks, establishing a difference is a significant and tough task for a startup, but it is possible through innovations. Here, need-based innovation could be the only mantra to achieve success. The need for innovations could be put in simple terms as this: “What is obvious is often too late. So look around, anticipate changes, and do it before somebody else starts doing it.” While large companies are good at scaling things, small firms are great at doing innovations that solve customers’ problems. But GE is an exception as while being a large company, GE invests immensely on innovations. Companies nowadays are opting for automated solutions, services, or products, which require very less human involvement and help organizations reach a stage where the cost of production becomes very marginal. “When I was working with Sun, we were trying to buy a $500 million company with a headcount of 400. Out of their total employees, 300 were based in the U.S. and 100 in India. Operating margin of that firm which emphasizes complete automation was just close to 60 percent. They build not just tools but also processes. They watch the problems their employees are facing and how they are solving the same and finally they automate that process. That is the kind of innovation one should be looking at,” opines Kumar. Needless to say, great companies like Apple are mainly doing the same - solving customers’ problems, which is actually innovation. As evident, no market remains static as each industry is always on the move from one stage to another, upwards or downwards. Hence, the maturity of any industry is a function of the growth rate of the market. The faster one grows, the faster the industry attains maturity and exhausts the value proposition. Though that is a challenge the industry facing now, innovation could be the answer for the same. Marketing it in the Right Market “A thorough knowledge in the concerned domain will be enough to build a technology, but building a market is just as tough as building a company,” opines Suresh Elangovan, CEO and MD, Mindlogicx. However, to address any market, a company should show to the customers that they have something unique to offer. For Elangovan, the motto of marketing should be not to sell anything that is not salable. His company, Mindlogicx, which is operating in the higher education sector, took four to five years to build a product. Sanjay Swamy, CEO of the mobile payment firm mChek, has this opinion. As far as mChek is concerned, whether it is Pizza on the payment side or Airtel on telecom side, the company not only believes in their own offers but also tries to get others from the customers’ side to believe in the same offer. “You have to go with the fundamental assumption that it is not only you who are talking to a particular client but there are others also who are talking to the same company. And your client has the choice and you don’t,” he says. “Instead of going to the global market, which could be an expensive exercise, startups can try to establish a base in local market where there are a lot of opportunities awaiting them. Moreover, since the solutions aimed at global market have to be highly competitive, they should be reworked meticulously and accepted here in the Indian market before being taken to the global market,” opines Mody. He believes that India’s local markets suit a startup better. In fact, Indian startups have big opportunities in the local market of the country and most of them are already focused on the same. Marketing involves branding. However, there are not many takers for the idea of branding a company by pumping extensive money into advertisement in a short term. Most of the company heads think that branding has to be done on a long-term basis. They think that working with partners and associates is an effective strategy in building a brand. “Branding is no different from solving an engineering problem where you have to come up with new solutions,” says Swamy. But Elangovan has a different take on this aspect. He advises, “Brand your company yourselves by being your own brand ambassadors wherever possible. Go and talk about your company and your products whenever you get a chance.” Love your Business to Stay Focused Great entrepreneurs like Narayana Murthy of Infosys are well known for the passion and love they blended into their businesses. It is said that as long as entrepreneurs believe in and love the cause they stand for and the reason why they are doing the business, no challenge will knock them off the path to success. Swamy believes, “Even at a discussion table with a prospective client, or may be a venture capitalist, entrepreneurs should be firm on their stand when the deal a client offers requires them to change or morph their business plans and divert from the actual goal. This is possible only if you have a great love for your business and have the clarity of vision about what you want to achieve. If one is confident about his goal, there should not be room for any compromises.” There is a possibility that this attitude can eventually cause misapprehension and perhaps create a negative impression about the company within the business circle, which is not good. One needs to meticulously tackle the issue. Mody proposes a business strategy named ‘communication focused play’, where a company would engage in continuous communication with clients to understand the pulse of the industry and to convey the right message in the right way to its employees, clients, and business partners. “Business goals have to be clear always. Being able to see the end goal from the beginning will keep the work flowing and motivate all in the organization,” opines Elangovan. Motivate Employees with Passion, Not with Salary A big challenge for any company is managing its workforce. Mody feels that, fundamentally a startup company has to motivate its employees with passion, not with salary. “If the employees start thinking that they will get the same or higher amount of money in other firms as well, the employers will find themselves on a sticky wicket,” he says. Today the attrition rate in the IT and ITeS sectors have come down to 10 percent from 25-30, mainly due to the economic recession. The situation may revert to the previous state once the recession completely bottoms out. It’s again an evident challenge to deal with. Is there any better way to eliminate the evil of attrition? Elangovan has considered views on this: “Convey to your employees a sustainable vision, and motivate and ignite them to pursue that. For this you have to ensure that your idea is a road-based conception. Behave not like a boss but like a leader as nobody would like to work for a boss. Employees will not switch companies for the sake of getting a few thousand rupees more, but they will if the attitude of the CEO is not right. It is always the work atmosphere that pushes them to hop. The only way to sustain your team is to make them believe that you are a great company and convey that message constantly to them.” Organizational culture is defined by all of the life experiences, strengths, weaknesses, education, upbringing, and so on and so forth of the employees. While executive leaders play a big role in defining the organizational culture by their actions and leadership, all other employees contribute to the organizational culture as well. “Organizational culture is a factor in deciding the attrition rate. The good or bad things the leader of a particular company does will be reflected as an organization’s culture,” believes Kumar. The Next Big Thing For the first 30 years of IT service outsourcing, the focus was more on cost reduction; then after the Y2K conundrum, the focus moved to differentiation. This aspect of constant change is a part of any system that grows, and Mody feels that to keep pace with this growth, the Indian startups should adopt the approach of fundamentally innovating new concepts and new markets. What could be the next big thing? Well, the new wave of technology of the future would be cloud computing, which is a style of computing in which scalable and virtualized resources are provided as a service over the Internet. Software as a Service (SaaS) is a hot and emerging business model today. As of now, the only technology component that is projected to grow at more than 50 percent in the next three years is SaaS. The migration to SaaS is gaining momentum in India as well, as companies are more aggressive in cutting costs. The country is now seeing the first phase of this transformation as consolidation has already started across applications, verticals, and even companies. “There are immense opportunities for startups who really want to make it big and bring out innovations to cash in on the next big thing,” opines Mody. An entrepreneur’s great challenge lies in converting the hindrances into opportunities. Each ‘up’ will be followed by a ‘down’ and vice versa. Well, downturn is an opportunity created to innovate. It was after the great depression of 1970s in the U.S., that many of the today’s most successful technology companies like Dell, Sun Microsystems and Cisco took birth, riding on a close to $780 billion economic stimuli pumped into market by the then U.S. President Ronald Wilson Reagan. Now the challenge is back.Though the current world economic scenario is gloomy, it’s again an opportunity created for innovative minds that dare to dream to emerge out of this ‘cloud’ and rule the roost tomorrow.