If you have 10 million customers on whom you earn on the average $10 per year you have revenues of $100 million. ( The service could be free for the consumer and paid for by the provider/advertiser. Alternatively it could be a fee paid by the consumer or a combination ). When you think of the Indian market there are large number of individual and business users.
Existing pain points , unmet needs and low service levels provide an interesting context.
The nice thing about these kinds of businesses is that doing an alpha version does not cost much. Building scale is tough and once built the barriers to entry become high. I hope over the next few months I can be an advisor/investor to some entrepreneurial teams who want to build elephants with a high volume low margin strategy.
Over the next few weeks I intend to add comments to this thread based on my experience in building these sorts of businesses. I hope this thread and the comments will help some elephants to emerge.
- Community Platform For Ward 103 - November 22, 2012
- Municipal Elections New Delhi-16 days for rolls to close - October 15, 2011
- The next Facebook ? - September 17, 2011
Lesson #4 – Hybrid thinking
At that time, 1985, those who watched our business succeed thought it was because Citibank had the best technology ( our branches were connected and we had a central server which was less powerful then a high end desktop today). Our superior technology helped a little but our model was a hybrid one which used couriers, paper receipts and a lot of manual processes to achieve scale. Our partner banks were not computerised. Often our customers or their dealers had no computers. We made do with what was available to craft solutions that delivered critical mass. As far as our central server was concerned all inputs to it were electronic.
This kind of thinking is very relevant in India today. It is much easier to be innovative and make money in an inefficient market than an efficient one. If your thinking is based on getting critical mass then you will think of intermediating commerce and not just m-commerce or e-commerce. USA has the luxury of very deep markets so you can build an elephant by sticking to narrow segments but in India hybrid thinking could be quite important
With elegant design you can be input/output device agnostic to an extent. The pricing for different modes could be different. A consumer who accesses you through the web may be free. Phone access could cost Rs10 and physical access Rs 20. Models such as Bill Junction which required internet access for bill payment failed. Models such as ticketing for Air Deccan where you can buy your ticket through Internet or at a Reliance Web World outlet are better.
Business and technical architectures that incorporate hybrid thinking and are input/output device agnostic are more likely to succeed.
Lesson #3 – Domain Knowledge
The saying goes that “the devil is in the detail” and that genius is “99% prespiration and 1% inspiration” . We were obsessive to the point of madness in acquiring knowledge to make our products the best. We talked about Citiclear, Citispeed and Citicheck so much that my son who was about two at that thime one day picked up the phone and said Citiclean speaking.
To build an elephant acquiring detailed domain knowledge is a vital and continuing process. We knew more about corporate cash management in India then anybody else and we also knew a fair amount of best practices the world over. We also went far back into understanding the entire process for some of our larger customers so that we could add value. I remember travelling to HLL warehouses and visiting their dealers to understand how the cheques that HLL got originated and the total work involved. For TELCO we designed special receipts based on which if we certified that the cheque had cleared the truck was released to the purchaser. For SPIC a fertilizer company in the south a Citibank person picked up their Fertilizer subsidy cheque ( around 10 crores) and we had available money in their account in Chennai in minutes.
We also understood that in our books money in transit qualified to meet our SLR requirements so for the bank this asset was very low cost. This enabled us to discount outstation cheques and advance money at very attractive rates. This also helped us do deals with our partner banks because they met their deposit targets ( we left money with them) and in our books the asset qualified to meet our reserve requirements.
To cut a long story short I think it would be safe to say that at that time the knowledge that our team built helped Citibank to remain market leaders for a long time.
DRIFT and therefor a shorter sales/product cycle is a must for any small company. We are highly inspired by ‘Competing for the Future -C.K. Prahalad’ and using ‘Stretch as a Strategy’ for a start-up is critical. It’s important for small organization to reach the furst customer asap and get the feedback. And then get innovative to stretch themselves to make up for the resources which their bigger counterparts may have. Similarly, as you transfused passion in your Team, a single motive should be sent across organization and achieved in a time frame. For example, it can be ‘ Total focus on Product Improvisation’ for frst six months, then customer service for a period and then quality and then may be cost effectiveness or taking over a competitor. Putting one of the goals at a time enables a small organization mobilise its resources better and get a cohesive culture. Idea is not to deemphasis other things while focussing on one, but the esence is to say that all brains/efforts should consciously achieve the set objective with no compromises.
Lesson #2- Service Gtee’s & a Passion for Excellence
We remember being inspired by Tom Peters “A passion for excellence” and using lessons from that book to build the corporate cash management business for Citibank in India from 1985-1989. We moved money for our customer faster than anyone else and gave them an unconditional guarantee that any delay would be compensated at 16.5% per day ( interest rates were higher then). It did not matter whether our systems were down or telecom engineers were on strike ( the environment then was much worse). We had backup systems which involved designated persons talking on the phone, using data entry, calling customers etc. to make sure we met our service level agreements. In a few cases we did slip up and I remember going to a customer with a compensation check of around Rs.50000. The customer was surprised because they had not even made a claim. We told them we knew we had made an error and were sorry about that. There was no need for them to claim. We kept listening to our customers and meeting more and more of their needs.
As I look at the environment in India today, process design and service orientation is still weak and I think that presents tremendous opportunity. If you can build a trusted relationship with your customers and are driven by a passion for excellence you should win.
Another interesting thing that we found was that every employee in the business felt the passion and knew that we would pay our customers for our errors. This helped us move to six sigma like quality even though it was not a cliche at that time. Accepting a deposit from a customer may seem like a trivial task but in our case it was quite complex and our first point of failure. We had to do it right and quickly. We spent a lot of time in desgning workstations and training on “DIRFT” ( Do it right first time).
SanjayG,
For a 10-10 play focusing on the e-population would be a mistake. The Internet is just a business model enabler. In India I think a BHWHC ( Business -Human-Web-Human-Consumer) model is interesting for critical mass. In the US, human is very expensive and comfort levels with web are higher so a BWC model can achieve critical mass more easily.
I am using Web very loosely to include mobile, SMS etc. If one does that then in some cases BWC models have worked in India as well with SMS being the prime example. The revenues from ring tones/SMS etc. are quite large.