What differentiates a successful start-up from a failed one?

I am a keen observer of the start-up space in India. Nothing interests me more than reading a success story of a start-up on YourStory or any similar forum. I was really happy for Shradha Sharma and the YourStory team when they recently received their first round of funding from Ratan Tata and three others. It was a strong message that one can actually make a business out of writing stories on entrepreneurs who want to make it big!

Shradha Sharma bootstrapped for close to 7 years before her start-up could receive its first round of funding. What does this indicate? If you believe in the vision of the organization you have founded and strongly work towards it, nothing can stop your start-up from succeeding. Right?

Not really.

From what I’ve gathered, there’s more to starting up AND succeeding than meets the eye.  Reports floating around on the internet say that 85% of start-ups fail. No one wants their enterprise to fail. What, then, makes it so difficult for a company to succeed in their industry?

At the risk of sounding preachy, let me try to list down a few things that differentiate a successful start-up from a failed one.

Clarity of Vision

While I am not denying the fact that start-ups can be founded and run by a single person, it’s a fact that most start-ups are founded by two or more people – a set of co-founders. Infosys, Google, Flipkart and most other successful start-ups were founded by a set of two or more people.

In that case, alignment of the organization’s vision among the co-founders and working towards it becomes very important. For example, if Sachin Bansal wanted to start with books and Binny wanted to capture the mobile phone market in 2007, Flipkart would have been nowhere today.

Building the right leadership team

Many a time, hiring the right person for a role can be taken for granted. In reality, that’s not the case. One right senior hire has the potential to make or break the start-up’s future. The person should first align with the organization’s vision and then polarize his complete team’s focus towards achieving results that will take the company forward. Keeping the employees motivated, rewarding them for doing something great, keeping them aligned with the thinking of the top management are some main responsibilities of the senior team which may well decide the trajectory of a start-up. Start-ups cannot afford to ignore these softer aspects of business.

Understanding your Core competence

Does Porter’s Generic Strategies ring a bell? In his book “Competitive Advantage: Creating and sustaining superior performance”, Michael Porter talked about three generic strategies: Cost Leadership, Differentiation and Focus. Running a business is all about getting more sales, irrespective of the industry you operate in. While in e-Commerce or FMCG, “sales” has a direct connotation, in other industries, it might be indirect. Google wants more people to click on their paid ads, YourStory wants more readers, NGOs want more sources of income, and so on. At the end of the day, how is your start-up going to be different from those which are already present in your industry?

Porter says any company needs to tread the path of one of the three generic strategies: Cost Leadership, Differentiation and Focus.

When ShopClues was started, Flipkart was already a major player in India and there were other smaller players too. So what did ShopClues do? It “differentiated” itself by being India’s first online marketplace. Looking at the success it garnered and the huge potential and benefits of operating as a marketplace, other players shifted to this model too.

Jabong, on the other hand, took the “Focus” approach, venturing only into the lifestyle vertical. Unlike Flipkart, Snapdeal, Amazon and ShopClues which were Horizontal e-Commerce firms, Jabong chose to focus on lifestyle and make it big there. And they did. Because of this focused approach, they were able to offer a lot of things to the customer which other players in e-Commerce couldn’t.

The most recounted examples for “Cost leadership” are the no-frills breed of airlines spearheaded by Indigo. By cutting operational costs, they were able to transfer the benefits to the customer.

Good customer retention strategy

Marketers say that the cost of acquiring a customer is generally 15-20 times the cost of retaining one. Start-ups can sometimes get into this loop of spending big on customer acquisition but not focusing as much on retaining them. A successful start-up has fundamental strategies in place to balance out both.

Traditional ways of acquiring customers involve Paid search, Display Ads, Print Ads, TV Commercials, Outdoor and the like. Start-ups which do not have too much money generally focus on other organic ways of acquiring customers. Referrals is increasingly being used to acquire new “good quality” customers. One other way is by being strong on long tail SEO. For example, if your start-up is a taxi aggregator in the Gurgaon region, you will have to ensure you feature in the (first page of) organic results when someone searches for “Book Taxi Online Gurgaon” in a search engine.

Coming to customer retention, there is so much a start-up – any start-up – can do with complete customer information (demographics, purchase history) handy. You could shoot out customized e-mailers to the customer, send a push notification in a sale he/she might be interested in, or, at a much higher level, create a company-level loyalty program to keep bringing your customer back. In retail, Shoppers Stop and Lifestyle are pioneers in Loyalty Program.

The fundamental principle behind spending on retention is: you would rather spend 100 rupees to retain a customer than spending 1000 to acquire one.

Start-up India, Stand up India

With our Hon’ble PM Narendra Modi coming up with the “Start-up India, Stand-up India” slogan during his recent I-Day speech and with Government rules creating an environment for new businesses to thrive, these are exciting times for the start-up space in our country.

If start-ups have clarity in vision with alignment within the organization, build the right leadership team, understand their core competence and execute a good customer retention strategy, they’re going to succeed more often than not.

Town Hall & some life lessons

I work for an e-Commerce startup. There are a lot of things I love about my company and about the way we work. Most of all, I love the concept of having a Town hall, once in a month.

Town Halls are informal public meetings within a company where typically a general business update is given to all employees, to bring them on the same page w.r.t to organization’s goal/focus areas for the next few months. Other points in the agenda for a Town Hall meeting could be Rewards/Recognition (appreciating good talent/work), cultural performances from employees, introduction of new joinees, Quiz questions about the company’s key metrics, et cetera.

Yesterday, for a change, our HR team had organized a Town Hall outside Office, in a club, open air (These gatherings till date used to happen within Office premises).

During the Q&A session with the CEO and CBO, one employee raised an interesting question. “Hi, I am a part of the xyz team. Like all teams, we put in our 100% at work. But there are cases where all our efforts go waste because of *some business related technical issue*. It becomes difficult to accept at times, about this injustice done to our hard work”

To which our CEO replied, “Hi X, I understand your pain. I’m sure we can solve this problem through *some solution*. I would like to make the scope of this question a bit more wide so that everyone sitting here can relate to it”.

He looks at the entire audience now, and continues. “Like X, all of us might be facing day to day situations where despite giving our 100%, things might not go our way, because of factors that are not directly under our control. My only piece of advice is this. Please understand that the world around you is imperfect. It is always going to be. The only way to stay sane in this chaotic world is to give it your all for things that are under your control, and stop worrying about things that are not in your control.”

“I always take this example. Consider a nurse working in an emergency first aid ward in a hospital. Every single day, she might be facing cases like people who met with accidents because of drunken driving, because of not wearing helmet/seat belt, etc. When they come to emergency ward, she has to give 100% attention to the task at hand, which is giving immediate first aid to the patient. At that point, she cannot think or crib about why the patient didn’t wear a seat belt or why the patient drove under the influence of alcohol. These are things that are out of her control and distracting thoughts at that point in time.”

“Same goes with all of us. The Marketing guy only needs to think about getting more Visits to our website. The Logistics guy should only think about delivering all our x lac orders within promised date. All our energies should be focused on how better can we do the job that is directly under our control. Only if we are extraordinary and dedicated to our work can we demand the same from our peers. And trust me, if all of us do this, the world would be a better place”

I think his talk made a lot of sense.

Startup Diaries #3: Gharofy.com

I love the concept behind which YourStory.in was started. There are hundreds of media houses, newspapers and forums that cover already successful startups. Stats show that only about 1 in 10 startups succeed or stand the test of time. Who covers startups that are yet to hog the limelight? The startups that are still finding it challenging to establish themselves among peers/competitors who are thousand times bigger? No one, literally.That’s why (and how) YourStory was born. Let’s talk about YourStory and Shradha Sharma some other day.

Today, I’m covering one of those budding startups, called Gharofy.com, which offers a plethora of products that come under the Home & Garden category.

As soon as I visit their website (www.gharofy.com), the first thing that strikes me is their simple and elegant UI. The colors are predominantly black and white and the CTAs (Call to Action) are very evident and stand out.

They offer products in five main categories: Kitchen pack, Housekeeping pack, Bedroom pack, Study room pack and stuff for rent.

The catalog comprises a good few hundred products. The biggest categories are Kitchen and Housekeeping. There are only a few tens of products available in the other categories. “Stuff for rent” is a welcome addition, promoting need based usage among consumers without having to spend a fortune for a new product (Most products under Stuff for rent were “Out of stock” at the time of writing this blog though).

Prices are competitive for many products (compared to similar products in Fabfurnish, Pepperfry, Flipkart, etc.) but is on the higher side for few of them. They currently deliver products in and around Bangalore. And COD is the only payment option available as of now. They guarantee delivery within 48 hours and even promise a refund of Rs. 500 if this SLA is breached, which seems cool.

Gurgaon, followed by Bangalore are the top cities that have a migrant working population. That way,  I think Gharofy has hit the nail on its head by choosing Bangalore to start their business with. I’m sure they’ll expand to rest of India and scale up their Product catalog soon.

So are you just setting up your home in Bangalore? You could give Gharofy.com a try.

By the way, if you haven’t read the earlier posts on Startup Diaries series, you could read them here: PepperTap, Zomato

Startup Diaries #2: Peppertap

Imagine this scenario. Anupam Nair and Prateek Saurav are two bachelors who are working in Gurgaon, staying in a 2 BHK. Both of them are lazy by nature; so lazy that they think twice even for moving inside their house. So for them, going to the Grocery store to buy the weekly groceries was always going to be a colossal task. And in a city which has one of the maximum number of migrant employees staying away from home, Anupam Nair and Prateek Saurav are not alone.

It is this gap that Peppertap has identified and is trying to establish itself, as an Online Grocery, fruits and vegetables store. And they are slowly but surely making a mark in this space, in Gurgaon.

I heard about Peppertap three months ago, from a colleague whose friend is working there. I gave them a try. And they impressed. The Android App interface can be better and more user-friendly. There are nine Meta Categories, and anywhere between 2 to 9 sub-categories for each of the Meta Categories. So the App can be a bit tough to handle, initially. But then, their search bar is beyond awesome. I realized this only after my first 2-3 orders. After that, all I had to do was “search” for an item and add it to my cart. So instead of choosing “Fruits & Vegetables” and then choosing “Vegetables” and then choosing “Potatoes”, I could just type “Potatoes” on the search bar and add it to my cart.

And their selection is good, considering they’ve only started a few months back. I’m sure they’ll expand their category tree with time. Geography-wise, they’ve hit the bull’s eye by starting with Gurgaon.

Service is impressive. They deliver within two hours and there’s no extra charge for delivery if your basket size is above 250. I’ve had only one bad experience with them. I had ordered for 3 units of Nutrichoice 5 grain and got Nutrichoice Digestive delivered instead. To quote Deepika Padukone, it is “my choice” what biscuit I’d like to munch. Raised this issue with their customer service agent and they were quick to respond and cordial.

Google Playstore says that their Android App has 5000-10000 downloads and my latest order number was 9270. So they’re still young, but definitely growing.

Good luck, Peppertap!  Would love to see “peppertap” become a verb, like Whatsapp, Xerox.

Why go to the market to buy groceries when you can just PepperTap it.

Cheers!

Startup Diaries #1: Zomato

I just happened to download the Android App of Zomato a couple of days back, and fell in love with it, at first sight. The seamless interface, ease-of-use and the business problem it solves for, all made me an instant Zomato loyalist. This is for a person who is nowhere close to being a connoisseur and is very selective about his food. Makes me wonder about how useful it can be to people who actually have a thing for food.

Zomato is a perfect example of creating a business that delivers value to all stakeholders. The customer has the power to decide the best eat-out place suited for him/her in his/her locality. Restaurants get added traction because of their visibility to people even outside their locality. Zomato, obviously monetizes from the restaurants that are listed on it.

Zomato was a great business “idea” (not sure if there are older players in the same market) even before its App was launched, when it was present only in one platform – the Desktop site. With the launch of its Mobile App (in 2011), the end customer got to search and visit restaurants in and around the area where he/she was currently standing.

This gave the end customer a lot of options to choose from – ITC Grand Chola to Rahul Tea Stall, any place could get itself listed on Zomato. Deepinder Goyal (Founder) would have had a challenging time trying to accumulate the first set of restaurants to list themselves on Zomato. Once the initial barrier was breached, it was only about scaling up to add more and more restaurants, by showcasing success stories of already listed restaurants. The model built by Deepinder and Co. was easily scalable, which is why they were able to expand rapidly across hundreds of cities in India, and abroad, in so little time.

Rather than just being an online search service which aggregates restaurants in a particular locality, Zomato enabled the user to rate and review restaurants. This meant that the restaurants listed on Zomato took additional care to “delight” the customer, for they knew that the customer would use the power of social media to spread a word about them, positive or negative.

Zomato made use of the insight that “people like to talk about the places they visit, verbally or through social media”. They helped create an all new ecosystem for people who like to discuss food.

I’ve been a big fan of their marketing campaigns too, be it the “There are two kinds of people” campaign or their minimal poster designs which regularly do the rounds on Social media.

I came across an article that listed Zomato’s App as one of the most downloaded Apps in 2014 (in India). After downloading the app myself, now I know why.

Keenly looking forward to what Zomato has in store, in 2015.

Next on Startup Diaries: Ola Cabs!