Monthly Archives: January 2010

Entrepreneurship in India – Rules for Spectators – Part 5

Entrepreneurship in India – Rules for Spectators – Part 4

LOS ANGELES, CA - JULY 24: A 'Drive Thru, Ope...

Rubber meets the road

In early 2004, in its fifth year, our first startup broke even. I recall us making plans to finally buy decent ergonomic chairs for our committed and long-suffering employees. The demands of growth and the challenges of cash flow made sure we never got those new chairs. Yet with more clients, more visitors and greater travel by our staff, we ended up hiring a car and driver on a monthly basis. The same people who’d send us a cab for the airport trips now sent a car and driver who’d be at our disposal all the time, for a flat monthly fee.

Balan^* was the driver and in my first trip to the airport I learnt that he owned the car we were in, and he was a sub-contractor to our regular rental car supplier. Over the next two car rides, I picked up his story – high school drop out, set out driving an auto (that he’d rent on a daily basis), then worked as a driver in a company, before saving enough money to buy his first Indica. Now he owned two cars, drove one himself and had another driver on his payroll. He sub-contracted for a number of folks who had small fleets and one day hoped to build up his own fleet.

Last week I got a call from Balan. He was calling to introduce his nephew, who’d just graduated from college. Balan’s fleet has grown from the two Indicas to two eight cars now. Despite the recession his business had thrived and he’s effusive in expressing his gratitude for us giving him a leg up with our steady business. At a time when even basic services such as barber shops and restaurants were seeing customers cut back on their spending, that fact his business had grown is testament to his drive and what Ram Charan terms “business acumen.”

The town and the gown

Once we sold our first startup in early 2006, I have had the time and opportunity to consult for friends and several clients to help with their businesses. These have all been college-educated, entrepreneurs – ranging from manufacturing (electrical gear), distribution (music to mobile phones in Class B towns), software products to training services. In many instances, Prasad the barber, Girish the restaurateur and Balan the fleet owner, have a far clearer sense of where their businesses stood, who their clients were and where they made their margins. And these were the folks without the college (or even high school) degrees. Yet both groups of entrepreneurs are successful and struggling with common questions – from the strategic, “How do I grow my business?” “Should I grow my business?” “How do I raise capital?” “Should I take on debt or do I dilute equity?” – to the tactical decision making on hiring, pricing, marketing and promotion.

Academicians who study entrepreneurship make the distinction between voluntary (those who make a choice) entrepreneurs and those that fall into entrepreneurship, without a choice. Most entrepreneurs that get formal funding or the media mostly talks about belong to the former voluntary group while folks who go into their family businesses or traders and micro-entrepreneurs fall into the latter, involuntary group.

Yet both these groups have far more in common, particularly when it comes to problems they face and mistakes they make. Much like parenting, most entrepreneurship involves learning on the job. While reading up about parenting (particularly in my case about adolescent behavior) will help, it only takes us so far. Grand-parents (for people) and consultants (for businesses) help speed up the learning and avoid the most egregious mistakes, but nothing can replace the learning that experience brings. Yet the journey to achieve such experience need not be as stressful and lonely as it sometimes seems.

Entrepreneurship in India – Rules for Spectators – Part 3*

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This is actually Tom's Restaurant, NYC. Famous...

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Watching the numbers, one dish at a time

Ramani, my neighbor is himself a first generation entrepreneur. Though formally trained as a chemical engineer he has built a successful electrical business, initially in trading and subsequently in panel manufacturing. An active member of the morning walking group at the local park, he has roped me in as well to bundle up even on cold Bangalore mornings to put in our six or so rounds. The talk inevitably turns to our businesses and the challenges we face and many a days we lose count of both the rounds we’ve made and time that hurries by. I met Girish^{(name changed)}at one of these morning walks.

A diminutive man, who’s rapid walking pace merely hints at the energy packed in him, Girish came to Bangalore less than 20 years ago. Hoping to be the first person to make it to college in his family, he started on his pre-university course. His father and numerous younger brothers meanwhile were attempting to make a go of the family farm in their village. However, the family soon faced mounting debts and struggled to make ends meet. Girish abandoned his college dreams and returned to take care of the family farm. After several years of being a farmer, Girish found himself running very hard to stay in the same place. The little money they managed to eke out of farming went wholly to service the interest costs of the family’s debt. The principal they owed was untouched. Girish made the bold decision to head back to the city, and figure a way to make his fortune there.

Through a family friend, he got his first job, in a darshini – a fast-food restaurant. Paying a princely sum of Rs. 700 a month, the job required him to stand by the kitchen door, and note down every menu item that left the kitchen through out the day. At the close of business, his numbers had to be reconciled with the receipts at the cash counter. The very first month, the (absentee) owners of the restaurant saw so much savings, that they gave Girish a more than 25% raise to Rs. 900. Within six months Girish became the manager of the darshini, with yet another pay raise. The bulk of Girish’s monthly income was sent home to retire the family’s debt. Through family friends, a marriage proposal came and Girish soon was a married man.

A couple of years of running a restaurant 7 days a week, awakened him to the potential of the business. He approached the owners, who’d pretty much ceded the day-to-day operations of the business to him, with a proposal to expand their single outlet to a chain of fast-food restaurants and a small equity stake for himself. The owners were conservative and a little aghast that this 20-something wanted equity in the business and turned him down. Whilst disappointed, Girish did not give up on his dream and decided to strike out on his own. His father-in-law was prepared to provide him some seed money to get started. So Girish, in his own words, “I sought the permission and blessing of my employers” to set up his own restaurant and never looked back.

When I met Girish on that morning walk, he was handing out laddoos from Tirupathi. His son had just been admitted to engineering school and he wanted to share the good news with his walking friends. His first food outlet had grown into a chain of five restaurants. Starting with his second restaurant, he had taken a (different) partner for each new restaurant – these partners being nephews and other young relatives of his father-in-law who were getting started with their lives. Making them his partners, Girish had groomed a whole new set of entrepreneurs. This was his way to repay his father-in-law’s initial support and faith bestowed in him. He had not only paid off the family debt, but personally paid for the restoration of the village’s dilapidated temple – the prasad from which he was sharing with the Tirupathi laddoos.

Ramani, my friend, piped in as Girish completed his story, “Sri’s a food aficionado. He’s been talking about maybe starting a restaurant.” “You’ve got to watch the numbers, at two places – when you procure your supplies and at the billing counter. That’s all there’s to running a successful restaurant. Happy to talk to you anytime,” was Girish’s immediate response.

Girish’s entrepreneurial story, if seen in a movie or a TV show would seem too good to be true. It might even be dismissed as typical Bollywood fare (without the gyrating damsels, alas). Yet it is, I suspect, representative of a large number of unheralded Indian entrepreneurs.

Entrepreneurship in India – Rules for Spectators – Part 2*

Indian Standard Time Warp

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NYC: Dali at Time Warner Center – Nobility of Time (Photo credit: wallyg)

“I’ve already spent more time on this than this deal is worth to me.”

That’s what a prospective business partner said to me, complaining about the 45 minutes we had spent in a meeting together.

I was taken aback. I had just flown most of the previous 20 hours (from Bangalore to Chennai to Frankfurt then onward to Stockholm before taking my final transfer to get to Gothenburg, Sweden) to get to the meeting.

I had merely asked him to help me understand why I should pay $100,000 to represent his company in India (but that’s another story). While I did manage to keep my cool that day, it brought home to me how direct people can be in a business setting.

Having worked most of my adult life in the U.S. – most of that in California’s laid back Silicon Valley – I was used to plain speaking. However in the year I had been back in India before the Gothenburg trip, I had clearly lost the habit of being direct. I had acquired a more fluid sense of both time and speech.

The move to India opened my eyes to the way things are done in the Valley, sort of like watching an unflattering video of myself at a stag party.

While working in San Jose, I had never quite noticed how rude we were when we failed to return voice mails or in moved meetings at the last minute, even when people had flown in from overseas to attend them.

This was in stark contrast to Japan where a great deal of my business was coming from in the first years back in India. In my first business meeting in Japan, two managers from a $40 billion firm spent two hours with me (the marketing guy from a $5 million dollar Indian company) to understand why we were charging “so much more” than the competition.

Of course, many people have apocryphal stories of negotiating in Japan or China where indirection and opacity seem the norm. In one, two-day session I found out only at dinner that the guy that seemed to spend most his time taking pictures was actually the key decision maker and the two people we hadn’t been introduced to were competitors

India, in many ways, straddles these two very different business cultures. The almost unquestioning acceptance of seniority, the acute awareness of hierarchy and near-obsession with not losing face that Japanese businesses are known for can be found in Indian companies as well.

Still, the Japanese put much more importance on time schedules. In India you could never imagine a client instructing you to take the 7:52 express train to the transfer station where the client would join you at 8:24 to reach their office at 8:50 – the requisite ten minutes before your 9:00 a.m. meeting. I regularly get detailed directions like this from our Japanese clients.

In India “Let’s meet at 11″ is generally a suggestion. It means “We should connect around that time and it’s likely that I’ll call you at 10:45 to tell you I am stuck in traffic and will be late by 30 minutes or more.”

This has been the biggest lesson for me about doing business in India. Time and communication (and even space if you try to drive here) take on a sponge-like quality here.

In my unending naiveté, I initially believed that the inability to stick to schedules was the fault of the sales and marketing folks or overburdened C-level executives. That illusion didn’t last long. I started to understand what really happens after sitting through a weekly customer call with my engineering team.

“How can the deliverable slip by a month when we were on schedule last week?” the customer asked. I could visualize the apoplectic look on the client’s face even without a webcam.

Our engineers, I found out, were well aware of the delay that was accumulating daily but had redoubled their efforts to crack the problem on time. They had been confident they’d solve the problem and recover the lost month and wanted to avoid causing anxiety to the poor client.

The most positive way I have found to look at this delivery dilemma is to figure we Indians are eternally optimistic. We are optimistic to a fault. We are certain that we will clutch victory from the jaws of defeat much like a Bollywood hero gets his girl at the end of the movie, just as the police drag away the dastardly villain. When we say the report will be done this evening or we’ll get there in 15 minutes, we believe it – the laws of physics be damned!

As with all understanding about India, there may be exceptions. You might meet an ex-military type or maybe a Bengali or Tamil gentleman who will confound you by always being on time. Worse still, they might expect you to be on time like the Japanese or direct and brash like the Valley types.

Fortunately India is so vast that such encounters are likely to be rare.

This article first appeared in the Wall Street Journal’s India Journal

Design of Business

Business, Culture & Entrepreneurship