Indian VCs are dumb f**ks. They do not have the balls or the brains to invest in Indian startups which can become the next Google, Facebook or Twitter !! If I can get a rupee for every time I hear these sentiments I will be reasonably rich soon.
The argument goes that VCs and Angels in US have invested in such start-ups even while revenue models have not been obvious. Fair. VCs in US invested in anything that had a 'dot' in a dot-com during the boom as well!!! What happened to all those companies?? This does not showcase that American VCs have bigger balls or better brains. It only tells that the supply and demand (of surplus funds) in that part of the economy (for that period of time) is different. India is NOT America or Israel or Bangladesh or Taiwan or China or...
Economy across countries differ. Heck, Economy in the same country across timelines differ!! Its not the same USA that it is now when it was 6years back. Reflect on the spectacular failures the so called awesome investors in USA has caused through prescient acquisition of sub-prime mortgages inflating the markets. The world economy nearly crashed.
Money is only a very small part of the equation of why a Google or a Facebook is what it is. If money and smart entrepreneurs alone can have spectacular home runs, then the world will be a different place. How about luck? Does that play a part? We hear about these start-ups only because they are successful. What about all of the ones which got funded in US by the US investors (which had super awesome teams) and failed? Should we really have such retro-rational arguments on successful businesses which is across a geography and from a different time?
What if Google had messed it up? Huh? Would you blame the VC then or the Entrepreneur?
IMO The most important aspect for any start-up to 'survive' is finding traction with early adopters in the right markets. And subsequently for a start-up to 'succeed' they need to cross the chasm to find early majority.
Finding early adopters and early majority is NOT a function of getting funded. A market has many constraints ranging from economics, culture, social-influences, demographics, psychographics, clusters, niches, segments, categories, attribute ownership etc. The Diffusion of innovation and business is completely different for every possible combination of the above dynamics. The rate of acceptance or adoption of a 'utility' differ significantly for these combinations across industry verticals.
Among the stated dynamics, culture and social-influences play a priority. Tangential to this debate let us ask the hard questions first. Why do Indians throw garbage on the roadside? Why do we spit on the walls? Why do we pee outside on the wall of the public toilets? Why do we kill baby girls? (I know you may be nodding your head in disbelief how these questions slipped by in this article!!) Well I will say that you just missed the clue train then.
How many of you have used a really good hyper-local news and deal app that a good friend of mine has built? How many of you have participated in making it viral? How about a great crowd-sourced testing platform from India that another good friend has built? How about a really cool platform for secondary markets for used-items? How about a book and content publishing platform? You would know the names only if you are early adopters. And hell NO, early adopters are NOT marketed to. There is no marketing budgets for early adopters (Not even in your beloved USofA. There were no marketing budgets for the big three sexy companies you quote in the debates as well).
I do not have anything against US VCs nor am I in bed with the Indian VCs. I feel all VCs are opportunists. They are all the same. They have to make money for their LPs. Yes some are smart others are not. The point is, it is not specific to any geography or time or color of the skin or the size of their you know what.
Indian start-ups fail or succeed because of Indians. Period. (I am an Indian entrepreneur in India building a India specific platform for Indian markets).
I know most of you will not like this post and you will have intelligent arguments supporting your claim. I also know that if you get funded when you do not understand market economics, then, not only will you NOT give us a winning sixer, but you will also mess the case for the other deserving ones. Think through that, Arighty? Peace...
Tuesday, June 28, 2011
Saturday, June 25, 2011
Principles of Failure
Of course you have a great idea. Sure you are a visionary. No question you have battled hard to be where you are. So was Van Gogh or Nikola Tesla.
Did you get rejected by your Customer? Market or your Investor? Hmmm, they must be dumb then, no? Customers are not able to identify the latent problem that is lurking? How lame. Markets do not understand the utility you provide? How immature. Investors do not comprehend the scale you shall bring? How myopic. Sounds familiar? (Note the saracasm, please)
You may strongly believe all of the above as true !! That is besides the point for this post.
Rejections are inevitable. I am not an expert, but Economics (Macro or Micro) is the study of scarcity (due to existence of scarcity) isn't it?
Very broadly stated:
- Customers cannot buy from everyone.
- Markets cannot always accommodate everything having a utility (due to alternatives and irrationality that is pervasive)
- Investors cannot invest in every great idea.
Also, markets and economies are not equal across geographies (and even across time) so basing your rationality across markets or across time may not help.
Some of the good leaders I have studied or have had pleasure to work with, have one strong trait in common: They demonstrate tremendous maturity in handling rejections.
As an entrepreneur, nothing is more handy a tool than managing failures and rejections. This helps in conserving entrepreneurial-energy and dip back into the pool of irrational exuberance or optimism as some call.
Neither Van Gogh nor Tesla gave up in the face of failures to the end (They were in love with what they did). Yes its unfortunate that they are posthumously famous. Its (grossly) unfortunate 5 billion of the worlds population (across geographies, not that it matters) could not identify with them in their time.
Aside, principally though, your ability to resolve forward in the face of rejections has a higher probability of positive impact on your eco-system, than your human instinct to share experiences by considering your markets, customers or investors as lame (even if they happen to be lame) and giving up. [If your failures have had a impact or a burn-out due to which you cannot move forward, then that's a different matter which is valid.]
Also, consider the fact that maybe, (just a little maybe) that the markets, customers and investors are probably not that lame. Then, isn't it important to avoid the rut of ignorance (arrogance?) not seeing holes in your own proposition?
Does handling rejections teach you to sharpen your tool better? What is your opinion?
Did you get rejected by your Customer? Market or your Investor? Hmmm, they must be dumb then, no? Customers are not able to identify the latent problem that is lurking? How lame. Markets do not understand the utility you provide? How immature. Investors do not comprehend the scale you shall bring? How myopic. Sounds familiar? (Note the saracasm, please)
You may strongly believe all of the above as true !! That is besides the point for this post.
Rejections are inevitable. I am not an expert, but Economics (Macro or Micro) is the study of scarcity (due to existence of scarcity) isn't it?
Very broadly stated:
- Customers cannot buy from everyone.
- Markets cannot always accommodate everything having a utility (due to alternatives and irrationality that is pervasive)
- Investors cannot invest in every great idea.
Also, markets and economies are not equal across geographies (and even across time) so basing your rationality across markets or across time may not help.
Some of the good leaders I have studied or have had pleasure to work with, have one strong trait in common: They demonstrate tremendous maturity in handling rejections.
As an entrepreneur, nothing is more handy a tool than managing failures and rejections. This helps in conserving entrepreneurial-energy and dip back into the pool of irrational exuberance or optimism as some call.
Neither Van Gogh nor Tesla gave up in the face of failures to the end (They were in love with what they did). Yes its unfortunate that they are posthumously famous. Its (grossly) unfortunate 5 billion of the worlds population (across geographies, not that it matters) could not identify with them in their time.
Aside, principally though, your ability to resolve forward in the face of rejections has a higher probability of positive impact on your eco-system, than your human instinct to share experiences by considering your markets, customers or investors as lame (even if they happen to be lame) and giving up. [If your failures have had a impact or a burn-out due to which you cannot move forward, then that's a different matter which is valid.]
Also, consider the fact that maybe, (just a little maybe) that the markets, customers and investors are probably not that lame. Then, isn't it important to avoid the rut of ignorance (arrogance?) not seeing holes in your own proposition?
Does handling rejections teach you to sharpen your tool better? What is your opinion?
Wednesday, June 22, 2011
What is your Story?
First, check this video out :
You had no clue what he was singing right? (Unless of course you are a Korean or understand the language). Did the song still move you? I bet it did.
If you had just jumped right into the song sans the story, would it have moved you enough? captured the same interest? Maybe... But the song within the context of the story is a sure shot winner.
Lesson? A good story which people can 'emote' with, almost always sets a strong context for any performance. Be it a talent show, brand, product or a start-up. It does not have to be a sad story. It does not have to be a powerful story either. What a story does is establish trust right from the word go. Empathy is the shortest route to trust.
Isn't 'Trust' the most important faculty when you social-proof? It seems to be the strongest bond that carries people, product, brand and companies through rough weather.
Stories about people who built the product, the journey, country of origin, culture, happy moments shared, rough moments endured, individual or group struggles and victories are all seemingly the levers that can be very humbly sprinkled into the context. Being honest and sincere about it will surely set the tone, intonation, cadence and the 'pitch' right.
It helps to be inclusive. Involve your customers into the story. Make them part of your story, their struggles, their victories, their pains and joys told from the perspective of your brand.
This is what the Experience Economy should be all about. Isn't it?
What's your opinion?
You had no clue what he was singing right? (Unless of course you are a Korean or understand the language). Did the song still move you? I bet it did.
If you had just jumped right into the song sans the story, would it have moved you enough? captured the same interest? Maybe... But the song within the context of the story is a sure shot winner.
Lesson? A good story which people can 'emote' with, almost always sets a strong context for any performance. Be it a talent show, brand, product or a start-up. It does not have to be a sad story. It does not have to be a powerful story either. What a story does is establish trust right from the word go. Empathy is the shortest route to trust.
Isn't 'Trust' the most important faculty when you social-proof? It seems to be the strongest bond that carries people, product, brand and companies through rough weather.
Stories about people who built the product, the journey, country of origin, culture, happy moments shared, rough moments endured, individual or group struggles and victories are all seemingly the levers that can be very humbly sprinkled into the context. Being honest and sincere about it will surely set the tone, intonation, cadence and the 'pitch' right.
It helps to be inclusive. Involve your customers into the story. Make them part of your story, their struggles, their victories, their pains and joys told from the perspective of your brand.
This is what the Experience Economy should be all about. Isn't it?
What's your opinion?
Friday, June 03, 2011
Value Erosion - Prisoner's Dilemma & Defections
My previous blog did evoke some interesting conversations on pros-cons on the Group Buying models. Mostly the argument for Pro group buying almost always veered towards group buying being a great model for service which has high-fixed cost and excess capacity. The examples almost always ended with Travel (Airline) and Hotel Industry and extrapolating that to SMBs!
To recap: High-Fixed cost services which has excess capacity (after recovering its fixed cost) tends to gain from every $ they earn for the same session (Airplane, Yoga Studio etc..) as the cost of acquisition is not significant there after. The Key here is "post fixed cost recovery" and "same session". This is a very Rational Viewpoint. The flipside is, behavioral economics, human beings and market dynamics are not Rational!
Lets take a Yoga Studio as in one of the examples. If the fixed costs were $2000 (lets say) per month (Lets call this a monthly session) and you have enough students who have already covered your cost. Now every additional student (assuming you have excess capacity) you add to the same session should be profitable for the Yoga instructor correct? Rationally Correct.
The challenge with this debate is exactly what the "all customer defects" scenario as per the Prisoner's dilemma presents. When the initial paying customers gets a wind of what you do to fill the remaining capacity of the Studio, they start defecting to wait for that Deal... and this catches on (is catching on). Airline and similar (Hotel) industry is only very few industry which can afford to operate in this model as people are 'pressed' to fly and cannot always wait for a deal. For everything else (which is not pressing), they will wait for a deal. This is already happening in the SMB markets in volumes as we speak. Regular paying customers are defecting to wait for deals. Also, they would now not mind to switch loyalty off the Merchants if someone else gives a deal.
We must exercise caution while extrapolating such models to SMBs right off. Unlike airline industry, the 'long tail' of similar merchants (Yoga, Cafe, Saloon...) is relatively much voluminous in a given city than a consolidated few flight schedules between two cities across airline players. which means, there will mostly always be a deal for me to defect.
When most customer's defect, then, the prisoner's dilemma feeds on itself to erode value out of the system. Talk to the SMBs to feel their pain and validate this.
A key metric on the current deal-seekers for Merchants now includes in excess of 50% (median) and as high as 90% in some formats of "existing" customers biting the deal! Did you add additional footfalls then? or are you defecting your current paying customers?
When most of them defect, the SMB will now be fully dependent on the likes of Groupon for filling seats to recover their high-fixed cost. Great if you are Groupon, Living Social, Google Offers..., Epic win if you are a Consumer, Sucks if you are a SMB. You know what SMBs will do if this happens right? (and what will be left of the business model.)
Bottom-line: The current avatar of group buying is just not a proven model yet and needs to focus on a whole lot of market dynamics to assure a equilibrium before we can claim that it works.
To recap: High-Fixed cost services which has excess capacity (after recovering its fixed cost) tends to gain from every $ they earn for the same session (Airplane, Yoga Studio etc..) as the cost of acquisition is not significant there after. The Key here is "post fixed cost recovery" and "same session". This is a very Rational Viewpoint. The flipside is, behavioral economics, human beings and market dynamics are not Rational!
Lets take a Yoga Studio as in one of the examples. If the fixed costs were $2000 (lets say) per month (Lets call this a monthly session) and you have enough students who have already covered your cost. Now every additional student (assuming you have excess capacity) you add to the same session should be profitable for the Yoga instructor correct? Rationally Correct.
The challenge with this debate is exactly what the "all customer defects" scenario as per the Prisoner's dilemma presents. When the initial paying customers gets a wind of what you do to fill the remaining capacity of the Studio, they start defecting to wait for that Deal... and this catches on (is catching on). Airline and similar (Hotel) industry is only very few industry which can afford to operate in this model as people are 'pressed' to fly and cannot always wait for a deal. For everything else (which is not pressing), they will wait for a deal. This is already happening in the SMB markets in volumes as we speak. Regular paying customers are defecting to wait for deals. Also, they would now not mind to switch loyalty off the Merchants if someone else gives a deal.
We must exercise caution while extrapolating such models to SMBs right off. Unlike airline industry, the 'long tail' of similar merchants (Yoga, Cafe, Saloon...) is relatively much voluminous in a given city than a consolidated few flight schedules between two cities across airline players. which means, there will mostly always be a deal for me to defect.
When most customer's defect, then, the prisoner's dilemma feeds on itself to erode value out of the system. Talk to the SMBs to feel their pain and validate this.
A key metric on the current deal-seekers for Merchants now includes in excess of 50% (median) and as high as 90% in some formats of "existing" customers biting the deal! Did you add additional footfalls then? or are you defecting your current paying customers?
When most of them defect, the SMB will now be fully dependent on the likes of Groupon for filling seats to recover their high-fixed cost. Great if you are Groupon, Living Social, Google Offers..., Epic win if you are a Consumer, Sucks if you are a SMB. You know what SMBs will do if this happens right? (and what will be left of the business model.)
Bottom-line: The current avatar of group buying is just not a proven model yet and needs to focus on a whole lot of market dynamics to assure a equilibrium before we can claim that it works.
Thursday, June 02, 2011
Group Value, Where Art Thou?
There are exciting theories and debates on group buying, thanks to the promised land prescribed by Groupon who made Group buying the current rock-star of the fledgling US markets (post, recent down-turns that is). (Is it adding to inflation or aiding? Hmmm, tangentially different debate.) With today's S-1 filing, the heat (usually which allows a hot air balloon to raise) seems to be turned on. Don't get me wrong. Hot air balloons are the greatest invention which allowed mankind to fly. Just that its not a preferred mode of transport since the Heidenburg disaster. So is Group buying a proven model yet?
Quick recap: Retailers usually break down their sales life cycle largely into Acquisition, Retention and Servicing. The budgets for ATL (Above the line), deep-discounts and loss-leader line of products typically falls in the Acquisition cycles. The loyalty and BTL (Below the line) promotions fall into the Retention bucket. Upgrades and up-sell falls into the Servicing bucket. Smart Retailers do not aggregate a single promotional budget to track their consumer micro-segments. Instead, they spend their research and sampling $$ on new customers, marketing $$ on Silver profiles, retention $$ on Gold profiles and the Service $$ on Platinum profiles. Not all these budgets are equal. Most important of all, The ROI of each of these spends are significantly different for each micro-segment. Also, retailers trade-up during boom cycles and trade-down during bust-cycles (So the budget varies).
Where does group-buying fall into? Clearly the Acquisition bucket (which is NOT a capex spend but a marketing cost). The Acquisition is the big funnel that marketers fill in order to convert the footfalls towards the Retention bucket. One must make sure that they fill quality leads which aids in healthy conversion helping them move the leads to the Retention bucket. What are quality leads? Are consistent deal-seekers quality leads? Are Bargain hunters quality leads? Is the cumulative conversion index per consumption-segment positive? These are some of the questions which a optimized, organized retailer such as GAP, Walmart etc. asks. Are these measures different for a SMB retailer? I would argue that they are even more applicable for a SMB...
When does one deep-discount? typically, when you have end-of-line sale, surplus capacity whose account has gone into sunken cost, poor-utilization rates (Ex: Hotel Rooms), Expiring shelf-life, to clear product line whose GMROII is not positive, Projected increase in policy costs (Taxation changes on holding inventory), or adding large sampling to acquire new customer base for virgin markets or virgin products. (I may have missed few others for sake of brevity). Most of the above is a provisional measure for retailers who are operating in a larger scale of economy. What are the premise for SMBs then? In my umpteen conversations with the SMBs, deep-discounting occurs primarily to add leads to their funnel in the hope that the consumer shall experience the "Unique product offering, Service and Ambiance" which is a differentiation for the SMB to exist. Now this sounds like a virgin offering. So it clearly is for "Sampling" then for the SMBs.
Now, the Cost of Consumer Acquisition (CCA) should be paying off on the long run through two different measures that adds up.
1) NPV or the Net Present Value of the Consumer.
2) LTV or the Life Time Value of the Consumer.
The NPV for virgin footfalls does not exist. Which leaves the LTV. This materializes only after the conversion. Remember that the CCA of 'N' who are added to the funnel is used in determining the 'M' conversions and their LTV. Meaning the CCA cost of adding 100 virgin footfalls must be offset by the LTV of the 5 who gets converted (5% as a example).
The CCA and LTV are very segment specific (Beauty & Massage parlours, Small Eateries & Restaurants, Boutique Hotels, Convenience Stores etc..). The conversions are also segment specific. Not only are they segment specific, the country of operation, the consumer behavioral context, culture and current economy makes a huge difference in any of these measures.
As an example: A country like USA where people leave a tip in the Restaurant on the original price of the meal-offer (Not on the group-discounted price) makes a significantly large difference in the operating cost for the Vendor as against in India where people usually do not like to leave tips or have a standard 5 Rupee coin for whatever the ware maybe.
Also the LTV is a layered value derived based on effective frequency of visit. Meaning, How many of them visited 1 time, 2 times etc... and the relative spend thereafter. Also, there is a break even frequency at the same cost before a positive value can be derived (Here is a simplified calculator)
Not all SMBs are also geared to service a peak footfall that occurs during this group-buying frenzy, which results in diluted service/offering. This hampers the conversions badly. Most of the SMBs are not seeing a conversion above 3% (median) of the footfall. I have been following rants about SMBs saying that they shall never go back for Group-buying again . I have also heard rave reviews about some Up-sale (NOT conversion) during such frenzy, especially in the Beauty Segment (people walk in for 500 RS worth of ware but spend 10K), These guys love the group-buying models... besides, there has been theories that deal-seeking bargain-hunters are never loyal (There are stats to prove this)... All of this has to play out towards a equilibrium in the long run.
The point is: Group-buying in its current avatar (Independent of what ever the top-line suggests for Groupon) is not YET a proven model for SMBs. It cannot address the economy of scale challenges of the big retailers either. So where does it fit as a positive operational model? I am not saying that this will fail. Its just that there is a lot more nuance and context specific treatment that is required to make this a classic. I am sure the markets will figure it out eventually...
For now, how many of you are standing in the line for the Groupon IPO? Make sure you do not sell your house as of yet to invest :)
Quick recap: Retailers usually break down their sales life cycle largely into Acquisition, Retention and Servicing. The budgets for ATL (Above the line), deep-discounts and loss-leader line of products typically falls in the Acquisition cycles. The loyalty and BTL (Below the line) promotions fall into the Retention bucket. Upgrades and up-sell falls into the Servicing bucket. Smart Retailers do not aggregate a single promotional budget to track their consumer micro-segments. Instead, they spend their research and sampling $$ on new customers, marketing $$ on Silver profiles, retention $$ on Gold profiles and the Service $$ on Platinum profiles. Not all these budgets are equal. Most important of all, The ROI of each of these spends are significantly different for each micro-segment. Also, retailers trade-up during boom cycles and trade-down during bust-cycles (So the budget varies).
Where does group-buying fall into? Clearly the Acquisition bucket (which is NOT a capex spend but a marketing cost). The Acquisition is the big funnel that marketers fill in order to convert the footfalls towards the Retention bucket. One must make sure that they fill quality leads which aids in healthy conversion helping them move the leads to the Retention bucket. What are quality leads? Are consistent deal-seekers quality leads? Are Bargain hunters quality leads? Is the cumulative conversion index per consumption-segment positive? These are some of the questions which a optimized, organized retailer such as GAP, Walmart etc. asks. Are these measures different for a SMB retailer? I would argue that they are even more applicable for a SMB...
When does one deep-discount? typically, when you have end-of-line sale, surplus capacity whose account has gone into sunken cost, poor-utilization rates (Ex: Hotel Rooms), Expiring shelf-life, to clear product line whose GMROII is not positive, Projected increase in policy costs (Taxation changes on holding inventory), or adding large sampling to acquire new customer base for virgin markets or virgin products. (I may have missed few others for sake of brevity). Most of the above is a provisional measure for retailers who are operating in a larger scale of economy. What are the premise for SMBs then? In my umpteen conversations with the SMBs, deep-discounting occurs primarily to add leads to their funnel in the hope that the consumer shall experience the "Unique product offering, Service and Ambiance" which is a differentiation for the SMB to exist. Now this sounds like a virgin offering. So it clearly is for "Sampling" then for the SMBs.
Now, the Cost of Consumer Acquisition (CCA) should be paying off on the long run through two different measures that adds up.
1) NPV or the Net Present Value of the Consumer.
2) LTV or the Life Time Value of the Consumer.
The NPV for virgin footfalls does not exist. Which leaves the LTV. This materializes only after the conversion. Remember that the CCA of 'N' who are added to the funnel is used in determining the 'M' conversions and their LTV. Meaning the CCA cost of adding 100 virgin footfalls must be offset by the LTV of the 5 who gets converted (5% as a example).
The CCA and LTV are very segment specific (Beauty & Massage parlours, Small Eateries & Restaurants, Boutique Hotels, Convenience Stores etc..). The conversions are also segment specific. Not only are they segment specific, the country of operation, the consumer behavioral context, culture and current economy makes a huge difference in any of these measures.
As an example: A country like USA where people leave a tip in the Restaurant on the original price of the meal-offer (Not on the group-discounted price) makes a significantly large difference in the operating cost for the Vendor as against in India where people usually do not like to leave tips or have a standard 5 Rupee coin for whatever the ware maybe.
Also the LTV is a layered value derived based on effective frequency of visit. Meaning, How many of them visited 1 time, 2 times etc... and the relative spend thereafter. Also, there is a break even frequency at the same cost before a positive value can be derived (Here is a simplified calculator)
Not all SMBs are also geared to service a peak footfall that occurs during this group-buying frenzy, which results in diluted service/offering. This hampers the conversions badly. Most of the SMBs are not seeing a conversion above 3% (median) of the footfall. I have been following rants about SMBs saying that they shall never go back for Group-buying again . I have also heard rave reviews about some Up-sale (NOT conversion) during such frenzy, especially in the Beauty Segment (people walk in for 500 RS worth of ware but spend 10K), These guys love the group-buying models... besides, there has been theories that deal-seeking bargain-hunters are never loyal (There are stats to prove this)... All of this has to play out towards a equilibrium in the long run.
The point is: Group-buying in its current avatar (Independent of what ever the top-line suggests for Groupon) is not YET a proven model for SMBs. It cannot address the economy of scale challenges of the big retailers either. So where does it fit as a positive operational model? I am not saying that this will fail. Its just that there is a lot more nuance and context specific treatment that is required to make this a classic. I am sure the markets will figure it out eventually...
For now, how many of you are standing in the line for the Groupon IPO? Make sure you do not sell your house as of yet to invest :)
Monday, May 23, 2011
Where lies the rhetoric?
Its amazing how many debates exist out there on what should be the 'right' reasons to start a business. There are so many theories around making-meaning, start-to-scale, greed-is-good, fast-company etc... The proportions of these principles contradicting each other is high. Equal number of empirical evidence exists to hold each of these theory on its own. The empirical evidence is mostly either in the form of demonstrated success stories and strong learning post-success or some are retro-rationale (as some call it). Are there enough based on the principles of failure in this culture and economic context? Are there enough which are from here (India) and not pre-canned?
There seems to be camps which discourage entrepreneurs-in-the-making (EIM) to first find the 'right' reason. If the reasons does not match the eye-of-the-beholder, they are quick to dismiss the EIM as a wannabe. There is also a term 'wannapreneur' for such dismissals. This seems to be applicable to the ideas as well, which gets discouraged cause the beholder has a strong opinion against it. Woah!!!
Funnily enough, these dismissals does not come from the Investment community. Most of the investors I have come across or heard of have mostly NEVER dismissed an entrepreneur based on the stated right or wrong reasons of the EIM. Generally, the Indian investment community (I have no interactions with others) is really a mature lot in understanding that there is no point being predictive and judgmental about the reasons. Also the investors confess that they have no way to even tell, as a matter of fact, if a given idea is a great scalable idea which will have huge returns or not. They have invested in ideas they think are awesome and failed (Ok, there are many reasons to fail. I agree), and have passed great ideas, where they did not have enough gut-feel (yes, that feeling in their stomach, not the brain) but later found that it was a big hit (Yes, there are equally many reasons to succeed).
Shouldn't people start business based on whatever reasons, principles, theories they believe-in is right? If the reasons are 'strong enough' to make a difference then it shall find the early-adopters, and if it is 'right enough', they will cross the chasm.
If the markets are the best course of correction, then, shouldn't we encourage every one who is willing to crossover, to do so, independent of their reasons? Shouldn't the eco-system have a healthy amount of failure for everyone to figure out the cost of failure (or a new path to succeed) for whatever the reasons may be?
I am of the belief that India lacks by huge margins (yet) in the number of startups per year (given the per-capita measure). Also, it is way-early to define reasons/principles of success which are context, economy and culture specific, as there are very few successful startups or number of exits (yet). The only way to increase this is to initially increase the size of funnel before applying any "qualifications" to the funnel. The qualifiers are not known yet. Even if (hypothetically) known, its not reason enough to stop the inflow of entrepreneur-energy-capital.
Entrepreneurial-Energy is a scarce resource. Kindly, encourage them to start...
There seems to be camps which discourage entrepreneurs-in-the-making (EIM) to first find the 'right' reason. If the reasons does not match the eye-of-the-beholder, they are quick to dismiss the EIM as a wannabe. There is also a term 'wannapreneur' for such dismissals. This seems to be applicable to the ideas as well, which gets discouraged cause the beholder has a strong opinion against it. Woah!!!
Funnily enough, these dismissals does not come from the Investment community. Most of the investors I have come across or heard of have mostly NEVER dismissed an entrepreneur based on the stated right or wrong reasons of the EIM. Generally, the Indian investment community (I have no interactions with others) is really a mature lot in understanding that there is no point being predictive and judgmental about the reasons. Also the investors confess that they have no way to even tell, as a matter of fact, if a given idea is a great scalable idea which will have huge returns or not. They have invested in ideas they think are awesome and failed (Ok, there are many reasons to fail. I agree), and have passed great ideas, where they did not have enough gut-feel (yes, that feeling in their stomach, not the brain) but later found that it was a big hit (Yes, there are equally many reasons to succeed).
Shouldn't people start business based on whatever reasons, principles, theories they believe-in is right? If the reasons are 'strong enough' to make a difference then it shall find the early-adopters, and if it is 'right enough', they will cross the chasm.
If the markets are the best course of correction, then, shouldn't we encourage every one who is willing to crossover, to do so, independent of their reasons? Shouldn't the eco-system have a healthy amount of failure for everyone to figure out the cost of failure (or a new path to succeed) for whatever the reasons may be?
I am of the belief that India lacks by huge margins (yet) in the number of startups per year (given the per-capita measure). Also, it is way-early to define reasons/principles of success which are context, economy and culture specific, as there are very few successful startups or number of exits (yet). The only way to increase this is to initially increase the size of funnel before applying any "qualifications" to the funnel. The qualifiers are not known yet. Even if (hypothetically) known, its not reason enough to stop the inflow of entrepreneur-energy-capital.
Entrepreneurial-Energy is a scarce resource. Kindly, encourage them to start...
Sunday, May 22, 2011
What's the price?
I assisted a friend to purchase an assembled computer recently. There were 2 equally good vendors who offered the goods. One of the vendors was close to where we live while the other was about 30mins away. We approached the vendor nearby (In J P Nagar) and bargained on the price (common while purchasing assembled goods). The vendor nearby quoted INR 27,300/- for the same configuration while the other vendor was willing to go down to INR 27,150/. My friend settled to place an order with the vendor nearby as the price differential was only 0.5%.
Next we went to the nearby bookstore to browse some books. Friend decided to (after my rave reviews) pick the "The Black Swan" priced at INR 495/-. When we approached the desk, the gentleman behind the desk advised that a paper back version of the book discounted at 30%, is available in another store near Indiranagar (which is 40mins drive). We drove to Indiranagar to purchase the book.
Reflecting upon the events, the mental math made for NOT travelling an additional 30mins to save 0.5% off a purchase price, was offset (on the same day) by the mental math of saving a 30% off another product for which friend decided to drive 40mins.
In absolute terms, the savings in either case was INR 150/-. We clearly choose one versus the other.
Basic observation using this as an analogy for product pricing
(Eliminating the details around same-product versus like-to-like price comparisons)
Having a list-price of your product set to a ideal-ask price and then providing a relative discount to the list price has an edge compared to having a lower-list price and not offering discounts (while the absolute sale price being the same).
Behavioral Economics supports these observations and conclusions.
Worth pondering ?
Next we went to the nearby bookstore to browse some books. Friend decided to (after my rave reviews) pick the "The Black Swan" priced at INR 495/-. When we approached the desk, the gentleman behind the desk advised that a paper back version of the book discounted at 30%, is available in another store near Indiranagar (which is 40mins drive). We drove to Indiranagar to purchase the book.
Reflecting upon the events, the mental math made for NOT travelling an additional 30mins to save 0.5% off a purchase price, was offset (on the same day) by the mental math of saving a 30% off another product for which friend decided to drive 40mins.
In absolute terms, the savings in either case was INR 150/-. We clearly choose one versus the other.
Basic observation using this as an analogy for product pricing
(Eliminating the details around same-product versus like-to-like price comparisons)
Having a list-price of your product set to a ideal-ask price and then providing a relative discount to the list price has an edge compared to having a lower-list price and not offering discounts (while the absolute sale price being the same).
Behavioral Economics supports these observations and conclusions.
Worth pondering ?
Sunday, October 17, 2010
What is fair ?
Life they say has a mind of its own. You may be the protagonist but not the hero. Dreams may not come true. Have tried and failed. Life is not fair.
But, Fairness has nothing to do with working on your dreams, even if you do not succeed. Standing up for who you are is one thing life cannot touch.
You know there is certain death. But will you stop living life ?
I am getting sore of hearing to excuses by well meaning people (whom i admire professionally) having amazing ideas and vibrant dreams which can change the world. Your If-only-this and but-only-that is harassing me in the arguments. Please stop. I can feel you dying a slow death. You are in pain. Is that fair ?
Show-up, walk the talk, live the dream. Get started. Now...
But, Fairness has nothing to do with working on your dreams, even if you do not succeed. Standing up for who you are is one thing life cannot touch.
You know there is certain death. But will you stop living life ?
I am getting sore of hearing to excuses by well meaning people (whom i admire professionally) having amazing ideas and vibrant dreams which can change the world. Your If-only-this and but-only-that is harassing me in the arguments. Please stop. I can feel you dying a slow death. You are in pain. Is that fair ?
Show-up, walk the talk, live the dream. Get started. Now...
Monday, August 23, 2010
Welcome to the Jungle
And, if you need to learn the rules of the Jungle, you must live in the Jungle. Live, breathe and eat what the nature provides. You start with minimal resources anyway. The objective is to make good use of the resources provided by the eco-system. Learn the eco-system. The most important thing in the initial days is to get used to the eco-system. The new set of pathogens, different food, climate and creatures. It is these initial days that makes or breaks you. Once you weather the storm, you start getting acclimatized. The bacterias in your gut will change to accommodate digestion of different food. Your immune system will change.
Best of all, your so called intuition will change. You develop a Jungle sense of your own. You will be enamored with wild, rippling muscles and stamina required to participate in the eco-system. Your energy levels will be up. A brand new 'You'. It is this sense of feeling you must crave for...
The transition for some is painful. There is NO such thing as, "Ohhh, I shall go back to the city for some time and when I am feeling OK, I shall then return back to the Jungle...".
"Ohhh, I shall go back to the corporate life for some time and when the conditions are right i shall return back to start-up..."
I admit, its not this extreme (of course many die in the Jungle. But many more die in the city relatively... or live like deads...). I admit it does sound naive and yes your choices are always open. The metaphor is a different food for thought...
Best of all, your so called intuition will change. You develop a Jungle sense of your own. You will be enamored with wild, rippling muscles and stamina required to participate in the eco-system. Your energy levels will be up. A brand new 'You'. It is this sense of feeling you must crave for...
The transition for some is painful. There is NO such thing as, "Ohhh, I shall go back to the city for some time and when I am feeling OK, I shall then return back to the Jungle...".
"Ohhh, I shall go back to the corporate life for some time and when the conditions are right i shall return back to start-up..."
I admit, its not this extreme (of course many die in the Jungle. But many more die in the city relatively... or live like deads...). I admit it does sound naive and yes your choices are always open. The metaphor is a different food for thought...
Sunday, March 28, 2010
The Distribution of Intention
On one of the networks 'India Leadership' on linkedIn, I did come across a interesting question as follows: "Tens and thousands of millionaires and millions of hungry/poor people in India!! How can this contradiction exist?"
My thoughts: The "distribution" of "Intention" needs to be fixed. If 'rice' is an intention, then we need to fix the distribution problems which amounts to 45% of wastage as per stats. If 'positive thought' is an intention, we need to enable effective distribution of this to reach to enough people who can make this actionable (Lynch pins). If 'money' is an intention, then we need to hold the distribution of it accountable, that, they have done enough research to economize and invest in important problems (as against urgent problems as well). if 'leadership' is an intention, we need to hold the democracy as a collective system of distribution to elect and hold these leaders accountable. Why? because, hunger, pain and suffering are viral. Their efficiency to distribute and replicate by far outweigh the positive systems that are in place in the eco-system.
Can this hold true for the "product start-up" debate as well ? I think so. The distribution of Intention is the biggest problem we as a country are facing now to enable positive sustainable eco-systems. Here is a link on those thoughts.
Misery loves company.
My thoughts: The "distribution" of "Intention" needs to be fixed. If 'rice' is an intention, then we need to fix the distribution problems which amounts to 45% of wastage as per stats. If 'positive thought' is an intention, we need to enable effective distribution of this to reach to enough people who can make this actionable (Lynch pins). If 'money' is an intention, then we need to hold the distribution of it accountable, that, they have done enough research to economize and invest in important problems (as against urgent problems as well). if 'leadership' is an intention, we need to hold the democracy as a collective system of distribution to elect and hold these leaders accountable. Why? because, hunger, pain and suffering are viral. Their efficiency to distribute and replicate by far outweigh the positive systems that are in place in the eco-system.
Can this hold true for the "product start-up" debate as well ? I think so. The distribution of Intention is the biggest problem we as a country are facing now to enable positive sustainable eco-systems. Here is a link on those thoughts.
Misery loves company.
Thursday, March 25, 2010
What does it take to create successful IT product companies in India?
This thought keeps bothering me off late. Many have beaten this debate to death. I am still not at peace. What does it take to create more 'successful, innovative' indigenous IT product companies in India ?
Approximate guess says that we have less than 1% 'successful, innovative' IT product companies in India. Enough hypothesis, conjunctures and theories have proven that product based solutions (due to replication of effort and automation) provides significantly higher bang per dollar invested than services based solutions. Scaling of services is resource intensive and puts strain on economies of scale and scope. Why are we not there yet? What happened ?
Are we genetically at a disadvantage ? Are we less risk prone ? Is it a geo-political conspiracy ? Are we capital averse ? Is service mentality ingrained in our culture ? Argumentative Indians, by virtue of our intellectual pluralism have wisely concluded that Services-for-Life leads to Nirvana ?
I admit I am naive. Yes, it was beneficial to apply economies of scale and cost arbitrage creating large amount of wealth for the nation. Yes we are moving towards value arbitrage (premium services) and upping the ante. But, this just cannot be 99% of what we do in IT.
Through and through, we have been both perceptually and conceptually primed through our success in services, so much so, that we are unable to (even if we desire) embrace the paradigm shift towards products mindset.
Successful products model is R&D intensive, bets on disruptive innovation (serendipitous), is technology intensive, utilitarian and demonstrates high tolerance to creativity. Yes, "tolerance to creativity". Creativity puts focus on the individual as against focus on the group. Services model benefits from focus-on-the-group as it creates uniformity and conformance. There is a world of difference culturally in these models. You can see the culture shock and pain one goes through when a person moves from a product company to a services company and vice versa.
We need to reverse this priming. We have to focus on Indian product startups (Big companies are hard to change) and foster a eco-system which benefits product startups. We have to glorify the product model to 'exaggerated' proportions. We need to 'invent' heroes to win quick sub-conscious battles and influence the psyche. We need war veterans 'imported' to teach us the trade. We need 'real' angel investors and significant hand-holding for new startups. We need favorable business incubation centers through a Govt. endorsed PPP (Public-Private-Participation). We need to fix our priorities.
We may lack many things but cannot afford to lack priorities. If we are presented with a deaf and a blind, then, a deaf leading a blind is always better (than other way around). Vision needs to be higher in priority than the ability to hear (to the potential market). Market vision comes from innate ability to identify latent demands. How does one harness that ability ? How can we identify and nurture Visionaries ? Do We need a Revolution ?
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Addendum: The definition of a services company in this post is any company providing solutions which are labour intensive similar to the big 3 IT success stories in India. Not to be confused with software as a service or social networking services or b2b/b2c services which are driven by platforms/products.
---
Approximate guess says that we have less than 1% 'successful, innovative' IT product companies in India. Enough hypothesis, conjunctures and theories have proven that product based solutions (due to replication of effort and automation) provides significantly higher bang per dollar invested than services based solutions. Scaling of services is resource intensive and puts strain on economies of scale and scope. Why are we not there yet? What happened ?
Are we genetically at a disadvantage ? Are we less risk prone ? Is it a geo-political conspiracy ? Are we capital averse ? Is service mentality ingrained in our culture ? Argumentative Indians, by virtue of our intellectual pluralism have wisely concluded that Services-for-Life leads to Nirvana ?
I admit I am naive. Yes, it was beneficial to apply economies of scale and cost arbitrage creating large amount of wealth for the nation. Yes we are moving towards value arbitrage (premium services) and upping the ante. But, this just cannot be 99% of what we do in IT.
Through and through, we have been both perceptually and conceptually primed through our success in services, so much so, that we are unable to (even if we desire) embrace the paradigm shift towards products mindset.
Successful products model is R&D intensive, bets on disruptive innovation (serendipitous), is technology intensive, utilitarian and demonstrates high tolerance to creativity. Yes, "tolerance to creativity". Creativity puts focus on the individual as against focus on the group. Services model benefits from focus-on-the-group as it creates uniformity and conformance. There is a world of difference culturally in these models. You can see the culture shock and pain one goes through when a person moves from a product company to a services company and vice versa.
We need to reverse this priming. We have to focus on Indian product startups (Big companies are hard to change) and foster a eco-system which benefits product startups. We have to glorify the product model to 'exaggerated' proportions. We need to 'invent' heroes to win quick sub-conscious battles and influence the psyche. We need war veterans 'imported' to teach us the trade. We need 'real' angel investors and significant hand-holding for new startups. We need favorable business incubation centers through a Govt. endorsed PPP (Public-Private-Participation). We need to fix our priorities.
We may lack many things but cannot afford to lack priorities. If we are presented with a deaf and a blind, then, a deaf leading a blind is always better (than other way around). Vision needs to be higher in priority than the ability to hear (to the potential market). Market vision comes from innate ability to identify latent demands. How does one harness that ability ? How can we identify and nurture Visionaries ? Do We need a Revolution ?
---
Addendum: The definition of a services company in this post is any company providing solutions which are labour intensive similar to the big 3 IT success stories in India. Not to be confused with software as a service or social networking services or b2b/b2c services which are driven by platforms/products.
---
Friday, March 12, 2010
What will you do ?
"What would you do if your were the last person on earth?" - A simple question.
Most of the people whom I interacted with on this question, responded with the following set of emotions: Despair, Attachment, Experience, Learning from the past... Deep brow, Thoughtful, Effort to reinstate the past.
Now I asked a different question to different set of people
"What will you do if you were the first person on earth?" - Simple again
This time around, the answers portrayed Desire, Hope, Passion, Trying things... Open, Thoughtful, Willingness to create the new.
Try this your self. Ask a few.
Its perplexing and amazing how much of a difference a change in the worldview makes. In both cases you were alone in the world. The thought of end-of-the-world or beginning-of-the-new made such a vast difference in the way people perceived how they would behave.
What will you do if its your first-job or last ? your first assignment or last? Your first start-up, will this be your last ?
Most of the people whom I interacted with on this question, responded with the following set of emotions: Despair, Attachment, Experience, Learning from the past... Deep brow, Thoughtful, Effort to reinstate the past.
Now I asked a different question to different set of people
"What will you do if you were the first person on earth?" - Simple again
This time around, the answers portrayed Desire, Hope, Passion, Trying things... Open, Thoughtful, Willingness to create the new.
Try this your self. Ask a few.
Its perplexing and amazing how much of a difference a change in the worldview makes. In both cases you were alone in the world. The thought of end-of-the-world or beginning-of-the-new made such a vast difference in the way people perceived how they would behave.
What will you do if its your first-job or last ? your first assignment or last? Your first start-up, will this be your last ?
Tuesday, March 09, 2010
Right Casting your Core
If you are a startup and looking out to build a core team, think through on what type of people you need. Being part of several start-ups in the past and also currently being a founder of a new one, I understand the constant pressure you might go through to find the team. My personal opinion and observations on this (more of a philosophy) is not to hurry or compromise.
Do not fall into the valuation trap to bring in high-fliers and experts in their respective fields. On one side, even if the chemistry works and the people you are bringing in are experts, if they do not have enough important work to do, then, you land up diluting the interests and morale apart from the equity anyway. It is OK if you pass on great people. Make it 'equitable' for the organization and the people you bring in.
On the contrary, keep the focus on getting people with passion and who are willing to take up work beyond their capability. This has magical effects on the productivity of the team as well as the morale. I have first hand experience of this effect in the recent past. A sense of camaraderie is what makes a winning team. I have seen and heard of teams with real high fliers and the CEOs fulltime job in managing egos and fire fights.
Of course, promote the strengths and augment the weakness with advisors to the board and external help from the network. You would not want to set your core team up for failure if they absolutely lack capabilities and are just full of passion.
In short, Keep the focus on the core, promoting people with passion and assign accountability and responsibility greater than their current ability. Reduce the bling effect. You do not need big guys for valuation. This philosophy works at all levels apart from the core. Try it. Let me know.
Do not fall into the valuation trap to bring in high-fliers and experts in their respective fields. On one side, even if the chemistry works and the people you are bringing in are experts, if they do not have enough important work to do, then, you land up diluting the interests and morale apart from the equity anyway. It is OK if you pass on great people. Make it 'equitable' for the organization and the people you bring in.
On the contrary, keep the focus on getting people with passion and who are willing to take up work beyond their capability. This has magical effects on the productivity of the team as well as the morale. I have first hand experience of this effect in the recent past. A sense of camaraderie is what makes a winning team. I have seen and heard of teams with real high fliers and the CEOs fulltime job in managing egos and fire fights.
Of course, promote the strengths and augment the weakness with advisors to the board and external help from the network. You would not want to set your core team up for failure if they absolutely lack capabilities and are just full of passion.
In short, Keep the focus on the core, promoting people with passion and assign accountability and responsibility greater than their current ability. Reduce the bling effect. You do not need big guys for valuation. This philosophy works at all levels apart from the core. Try it. Let me know.
Thursday, February 25, 2010
What do you do ?
Old Grandpa decided to take little Yajur to a field trip on Yajur's 5th birthday. Grandpa choose a factory which makes awesome mousetraps for the field trip. On the day, they walked into the factory, Grandpa instructed Yajur to ask as many questions as he wishes.
The field guide decided to take them to the manufacturing department first. Yajur asked the chief engineer what they are doing ? The Chief engineer said they are building the most awesome mousetrap to catch a mouse. He explained that his team is responsible to make the trap so efficient that the trap closes in super-duper-speed as soon as the mouse enters the trap.
They went to the R&D department next, Yajur asked the same question. What do you guys do ? The Head of R&D explained, you see, we are inventing the yummiest cheese to attract the mouse to the trap so that we can catch the mouse. Our research says that it is not the mouse trap but the Cheese which matters the most.
Next, they went to the marketing department. What do you guys do ? The Marketing Chief said that his job is to put the mouse trap in the most colorful boxes so that people can like the package and buy the mouse trap to catch the mouse. He also said he conducts market research on 'positioning' the mouse trap in the right place so that people can improve their chances of catching the mouse.
Next they went into a big awesome room with a nice view. The field guide explained that this is the 'Thinking' room where the CEO, the advisors and experts discuss and innovate. Yajur walked up to a expert/advisor and asked him what does he do. The expert said, see little boy, we invent new ways to catch mice. Mousetrap is only one way to catch the mice. We provide solutions to come up with newer, better, cooler devices to catch the mice.
Grandpa and Yajur were driving back home. Yajur was all along looking confused, so grandpa asked Yajur whats' bothering him. Yajur questioned back hastily, "But, grandpa why do people catch mouse?", Grandpa said, to get rid of it as its' a pest in the house. More confused, Yajur quizzed again, but, do we need to catch the mouse to get rid of it? Grandpa smiled and knew that the day's wisdom has been delivered.
The field guide decided to take them to the manufacturing department first. Yajur asked the chief engineer what they are doing ? The Chief engineer said they are building the most awesome mousetrap to catch a mouse. He explained that his team is responsible to make the trap so efficient that the trap closes in super-duper-speed as soon as the mouse enters the trap.
They went to the R&D department next, Yajur asked the same question. What do you guys do ? The Head of R&D explained, you see, we are inventing the yummiest cheese to attract the mouse to the trap so that we can catch the mouse. Our research says that it is not the mouse trap but the Cheese which matters the most.
Next, they went to the marketing department. What do you guys do ? The Marketing Chief said that his job is to put the mouse trap in the most colorful boxes so that people can like the package and buy the mouse trap to catch the mouse. He also said he conducts market research on 'positioning' the mouse trap in the right place so that people can improve their chances of catching the mouse.
Next they went into a big awesome room with a nice view. The field guide explained that this is the 'Thinking' room where the CEO, the advisors and experts discuss and innovate. Yajur walked up to a expert/advisor and asked him what does he do. The expert said, see little boy, we invent new ways to catch mice. Mousetrap is only one way to catch the mice. We provide solutions to come up with newer, better, cooler devices to catch the mice.
Grandpa and Yajur were driving back home. Yajur was all along looking confused, so grandpa asked Yajur whats' bothering him. Yajur questioned back hastily, "But, grandpa why do people catch mouse?", Grandpa said, to get rid of it as its' a pest in the house. More confused, Yajur quizzed again, but, do we need to catch the mouse to get rid of it? Grandpa smiled and knew that the day's wisdom has been delivered.
Saturday, February 20, 2010
Quantama Hiring Call - In Retrospect
In retrospect, this call for action on Venture Woods brought in the highest calls and reactions for job application to Quantama on March 2009.
The Job posting excerpt:
------
I am looking for people with entrepreneurial bent of mind to join the founding team of Quantama.com a mobile proximity company. I have the business case validated and have one of the largest retailers in India showing Intent to implement when the product is ready… Angel rounds are being vetted and talks in process… Have product case and prototypes in development…
The markets we are addressing are emergent and pervasive… A distant fortune is heard of…
I promise you that your experience shall be cast with risks, hardship, pain, sweat and blood. The journey will be turbulent given the economic times.
If you see providence where others see peril, do get in touch with me for more detail and I shall be glad to consider a sitting…
------
The Job posting excerpt:
------
I am looking for people with entrepreneurial bent of mind to join the founding team of Quantama.com a mobile proximity company. I have the business case validated and have one of the largest retailers in India showing Intent to implement when the product is ready… Angel rounds are being vetted and talks in process… Have product case and prototypes in development…
The markets we are addressing are emergent and pervasive… A distant fortune is heard of…
I promise you that your experience shall be cast with risks, hardship, pain, sweat and blood. The journey will be turbulent given the economic times.
If you see providence where others see peril, do get in touch with me for more detail and I shall be glad to consider a sitting…
------
Friday, February 19, 2010
Serendipity is the Key.
Most of the established businesses get into a pattern of finding out what is working and doing 'more of it'. This is good for bottom line, margins, and retention of your existing customers. But, is it good for breaking new grounds ? Making the pie bigger ? Your Top-line?
Business-as-Usual is to work hard consistently, trying to cash out on the idea that made the business successful. They work hard at establishing Cliches. Cliches are good. They are 'time immemorial'. They express ideas in simple words, but they lack the freshness and eloquence of a magical orator. If you have read the blogs of Seth Godin or heard president Obama speak or have followed the marketing of Apple, they do not rely on Cliches. They break the mold, create new meaning, speak different truth, change the worldview, present their stories in a more innate yet excitingly new package. They are Contrarians. They are Serendipitous. Here is what Seth Godin has to say about Cliches
Imagine that you are a T-Shirt vendor with a inventory of T-Shirts made of several attributes. Lets say you have 4 sizes (S, M, L, XL) and 4 Colors (Red, Blue, Green, White). When you first set shop, you do not know how many of each T-Shirt variant to carry (how many of Blue-XL will sell?). So you start with 10 shirts per variant combination and open business. Now, the first month you sold all the Green-L shirts, some Blue-XL and none of the others. What do we do? We decided that Green-L sells more in this catchment and order a bigger inventory of Green-L and lesser of others (Finding out what is working and doing more of it). If for the next few months, the trend continues, then, going by the pace, you may land up being a Green-L T-Shirt vendor. Its obvious that the more Green-Ls you have, the more your sales-report shows that you have sold the same. You already know whats wrong in this analogy. Yes, its a simple example, its so easy to see. Its a no-brainer.
But then, how come you do not see this analogy in the business strategies you follow ? How come you are not trying to find out what else your consumers are willing to try ? Why do we intellectualize for ages on why something "may not" work because "your" past data provides facts to your beliefs. Is it Fear ?
Start-ups on the other hand does not fear to be serendipitous (In a way, they have nothing to loose). An entrepreneur identifies an opportunity to make meaning. A passion-fruit colored T-Shirt, A Vanilla-Sky colored Tshirt. Try something afresh yet innate. Change the fabric, the texture, the weaving, the grain count, whatever... But be eager to explore, break the Cliche, turn it upside down. This is why it works and new tribes are formed. This why the most successful ones are Genre-Bending.
Every time you support your views on past-data, think again. Question yourself. Give Serendipity a chance. Believe in the art of possible.
Business-as-Usual is to work hard consistently, trying to cash out on the idea that made the business successful. They work hard at establishing Cliches. Cliches are good. They are 'time immemorial'. They express ideas in simple words, but they lack the freshness and eloquence of a magical orator. If you have read the blogs of Seth Godin or heard president Obama speak or have followed the marketing of Apple, they do not rely on Cliches. They break the mold, create new meaning, speak different truth, change the worldview, present their stories in a more innate yet excitingly new package. They are Contrarians. They are Serendipitous. Here is what Seth Godin has to say about Cliches
Imagine that you are a T-Shirt vendor with a inventory of T-Shirts made of several attributes. Lets say you have 4 sizes (S, M, L, XL) and 4 Colors (Red, Blue, Green, White). When you first set shop, you do not know how many of each T-Shirt variant to carry (how many of Blue-XL will sell?). So you start with 10 shirts per variant combination and open business. Now, the first month you sold all the Green-L shirts, some Blue-XL and none of the others. What do we do? We decided that Green-L sells more in this catchment and order a bigger inventory of Green-L and lesser of others (Finding out what is working and doing more of it). If for the next few months, the trend continues, then, going by the pace, you may land up being a Green-L T-Shirt vendor. Its obvious that the more Green-Ls you have, the more your sales-report shows that you have sold the same. You already know whats wrong in this analogy. Yes, its a simple example, its so easy to see. Its a no-brainer.
But then, how come you do not see this analogy in the business strategies you follow ? How come you are not trying to find out what else your consumers are willing to try ? Why do we intellectualize for ages on why something "may not" work because "your" past data provides facts to your beliefs. Is it Fear ?
Start-ups on the other hand does not fear to be serendipitous (In a way, they have nothing to loose). An entrepreneur identifies an opportunity to make meaning. A passion-fruit colored T-Shirt, A Vanilla-Sky colored Tshirt. Try something afresh yet innate. Change the fabric, the texture, the weaving, the grain count, whatever... But be eager to explore, break the Cliche, turn it upside down. This is why it works and new tribes are formed. This why the most successful ones are Genre-Bending.
Every time you support your views on past-data, think again. Question yourself. Give Serendipity a chance. Believe in the art of possible.
Monday, July 27, 2009
Shared Consumer Data, Reciprocal Marketing and Conversions for Retail
Reciprocal Marketing is not a new concept in Retail marketing in India. Mostly in the B2B segment where promotions, cross-subsidy and cross-sale combinations exists. Insurance is offered for people who open bank accounts. Credit cards are offered in conjunction with book buying (landmark). Money back when you fill gas in a IBP station on debit cards etc... All this hints towards sharing the consumer (data).
To carry this to the next level, it is important for Retailers to come out of their shell and stop worrying about 'who owns the consumer data'. I keep getting into all sorts of debates and uncertainties of why Organized Retailers should or should not expose their Consumer data. The claim for not exposing is that, clean data is expensive and the IP differentiator for better conversions and loyalty for a given retailer, so the data should be owned and not shared.
But what is clean data ? How do you validate it ? How do you maintain it ? What is the cost of logistics ? What is the strategy for conversion ?
Clearly, the sum of cost of solving above hurdles for "clean consumer data" is significantly higher for the Retailer before gaining any benefits from such a data if each and every individual Retailer repeatedly manage their own datasets. This is why there is a half hearted effort by every Retailer. Nobody seems to have walked the whole mile (maybe except the Gas Agencies as its a regulatory body and they must validate). Consumer Loyalty forms, credit card records and Home delivery challans are the only validators existing today. Among this, credit card companies will not authenticate the consumer info fully. Payment gateways are a black box. Obtaining consumer psychographic details is a costly research and catchment exercise.
Instead, why not free the data ? Put it up on a "Consumer Data Cloud". Open the collaboration of consumer data by offering direct incentive to the consumers for maintaining and upkeep of their own info (with a shroud of privacy). Technology exists for this today.
Sharing the consumer data across segments shall be the next disruptive wave to change the Retail horizon.
The time has come to reap the benefits of open collaboration (Given that consumers are readily pouring their life's worth on Facebook, Twitter, MySpace and the rest of the Ning bases). Yes, privacy is a concern. Privacy must be the focus while collaborating such data independent of whether it is on a Retailer's platform or otherwise. I would go a step further and argue that privacy can be better managed, audited and assured if consumer data is managed as a single source of truth (single cloud). The cost of assuring privacy for such data for every Retailer on their own infrastructure is high and incredulous !
The benefits of freeing consumer data ?
- Pruning of costs across CRM which releases fairly significant chunk of capital. A portion of that capital can be re-purposed for interacting with the 'consumer data cloud' (smaller than the cost of managing your own dataset)
- Single source of truth both for the Consumer and the Retailer. Consumers especially can have a single pane of glass across all their Retail outlay (visits, purchase, spend, loyalty points). Retailers of course benefits from higher analytics and trending across consumption lifecycle of the consumers.
- Enablement of a Co-Opetition framework where Retailers can co-operate as well as compete for the Consumer's attention. This is where true reciprocal marketing evolves. Cross loyalty, cross segment combo kits (dinner and a movie package), targeted promos, cross segment redemption schemes will be more meaningful and rich in ideas and innovation.
End result? better engagement, targeted touches, hand holding across consumption lifecycle, point discounts, higher redemption and yes, absolute conversions. Sounds like utopia, maybe not. But truly a step closer.
All this and more is possible only if Retailers break their shell and hatch. Its about time the data is free (as in freedom)...
To carry this to the next level, it is important for Retailers to come out of their shell and stop worrying about 'who owns the consumer data'. I keep getting into all sorts of debates and uncertainties of why Organized Retailers should or should not expose their Consumer data. The claim for not exposing is that, clean data is expensive and the IP differentiator for better conversions and loyalty for a given retailer, so the data should be owned and not shared.
But what is clean data ? How do you validate it ? How do you maintain it ? What is the cost of logistics ? What is the strategy for conversion ?
Clearly, the sum of cost of solving above hurdles for "clean consumer data" is significantly higher for the Retailer before gaining any benefits from such a data if each and every individual Retailer repeatedly manage their own datasets. This is why there is a half hearted effort by every Retailer. Nobody seems to have walked the whole mile (maybe except the Gas Agencies as its a regulatory body and they must validate). Consumer Loyalty forms, credit card records and Home delivery challans are the only validators existing today. Among this, credit card companies will not authenticate the consumer info fully. Payment gateways are a black box. Obtaining consumer psychographic details is a costly research and catchment exercise.
Instead, why not free the data ? Put it up on a "Consumer Data Cloud". Open the collaboration of consumer data by offering direct incentive to the consumers for maintaining and upkeep of their own info (with a shroud of privacy). Technology exists for this today.
Sharing the consumer data across segments shall be the next disruptive wave to change the Retail horizon.
The time has come to reap the benefits of open collaboration (Given that consumers are readily pouring their life's worth on Facebook, Twitter, MySpace and the rest of the Ning bases). Yes, privacy is a concern. Privacy must be the focus while collaborating such data independent of whether it is on a Retailer's platform or otherwise. I would go a step further and argue that privacy can be better managed, audited and assured if consumer data is managed as a single source of truth (single cloud). The cost of assuring privacy for such data for every Retailer on their own infrastructure is high and incredulous !
The benefits of freeing consumer data ?
- Pruning of costs across CRM which releases fairly significant chunk of capital. A portion of that capital can be re-purposed for interacting with the 'consumer data cloud' (smaller than the cost of managing your own dataset)
- Single source of truth both for the Consumer and the Retailer. Consumers especially can have a single pane of glass across all their Retail outlay (visits, purchase, spend, loyalty points). Retailers of course benefits from higher analytics and trending across consumption lifecycle of the consumers.
- Enablement of a Co-Opetition framework where Retailers can co-operate as well as compete for the Consumer's attention. This is where true reciprocal marketing evolves. Cross loyalty, cross segment combo kits (dinner and a movie package), targeted promos, cross segment redemption schemes will be more meaningful and rich in ideas and innovation.
End result? better engagement, targeted touches, hand holding across consumption lifecycle, point discounts, higher redemption and yes, absolute conversions. Sounds like utopia, maybe not. But truly a step closer.
All this and more is possible only if Retailers break their shell and hatch. Its about time the data is free (as in freedom)...
Wednesday, July 22, 2009
The Worth of Value
How does one sell in a down economy ? Given that consumers are becoming value conscious, many of the Retailers I am speaking to are seemingly trying to answer the question "How do I assess, reach out and offer what is 'valuable' to consumers contextually ?
Why is Value contextual ? Because, it is based on the end user, end-usage and the environment. This is a coarse grained dimension of Value. Let's delve into the intricacies further and understand this point.
Marketing gurus exemplify that other fine grained dimensions of value exists.
- Value is Relative; relative to alternatives available within the given context.
- Value is Perceptual; driven by the current senses.
- Value is Provisional; New information can change percepts.
Given these, the dimensionality of value from a economic perspective brings in the concept of the "worth" of value. The risk in acquiring a value target determines the worth of the target.
So are consumers really value-conscious or worth-conscious. I guess they are both. Once they (some how) determine that something is valuable, then they start seeking to find if its worthy. How can Retailers determine the worth of a value for the consumers? For one, the worth is driven by what the consumer perceives as intrinsic risk in acquisition of value. Mostly, the risk of "being wrong" in whatever sense it may be is the biggest risk I foresee in determining the worth.
What if I paid too much ? What if I could have got a better product at the same price ? Does this look good on me ? What does my spouse think of it ? Does this product convey a better meaning of me (Cool, Smart, Sharp) ? Is it hygienic ? Do I have place to keep it ? etc... etc... are the risk driven questions in the consumers mind.
The exploding choice of products providing same/similar value is going to add to the "risk quotient" in determining the worth of value. The lesser the choice, the higher the worth. The higher the worth, the higher the price.
In essence, it does boil down to offering value to consumers across all dimensions while making it worthy (Branding). Especially from the dimension of 'Value being provisional' where the Retailers provide differentiated clarity for the value being offered. Providing that differentiated clarity should start way early in the consumption life-cycle. Typically the consumption life-cycle from a consumer perspective (Not the retailers perspective) is across the phases of Awareness, Research, Transaction, Delivery and Consumption. It is primarily important that the clarity is provisioned through out this lifecycle.
Providing clarity requires personalized touches and individual reciprocation with each of your consumer. Knowing the consumer including likes, dislikes, opinions, past purchases, current context, psychography etc. along with the intrinsic knowledge of the product assortments offered is a requirement. Building a value/worth grid based on this knowledge is essential. Engaging the consumer interactively through differentiated (not different) marketing channels is important. I guess this is the place where technology should gear-up to enable the "Experiential Economy" to make the while worth.
Convergence of Proximity based Technologies, Social Media, Collaborative Filtering, CRM and other such Simulacrum may offer probable solution. It shall be some while before true convergence can happen. Disruptions in marketing channels, technology, loyalty programs, product management and category management may be inevitable before it gets worthy more than valuable.
Why is Value contextual ? Because, it is based on the end user, end-usage and the environment. This is a coarse grained dimension of Value. Let's delve into the intricacies further and understand this point.
Marketing gurus exemplify that other fine grained dimensions of value exists.
- Value is Relative; relative to alternatives available within the given context.
- Value is Perceptual; driven by the current senses.
- Value is Provisional; New information can change percepts.
Given these, the dimensionality of value from a economic perspective brings in the concept of the "worth" of value. The risk in acquiring a value target determines the worth of the target.
So are consumers really value-conscious or worth-conscious. I guess they are both. Once they (some how) determine that something is valuable, then they start seeking to find if its worthy. How can Retailers determine the worth of a value for the consumers? For one, the worth is driven by what the consumer perceives as intrinsic risk in acquisition of value. Mostly, the risk of "being wrong" in whatever sense it may be is the biggest risk I foresee in determining the worth.
What if I paid too much ? What if I could have got a better product at the same price ? Does this look good on me ? What does my spouse think of it ? Does this product convey a better meaning of me (Cool, Smart, Sharp) ? Is it hygienic ? Do I have place to keep it ? etc... etc... are the risk driven questions in the consumers mind.
The exploding choice of products providing same/similar value is going to add to the "risk quotient" in determining the worth of value. The lesser the choice, the higher the worth. The higher the worth, the higher the price.
In essence, it does boil down to offering value to consumers across all dimensions while making it worthy (Branding). Especially from the dimension of 'Value being provisional' where the Retailers provide differentiated clarity for the value being offered. Providing that differentiated clarity should start way early in the consumption life-cycle. Typically the consumption life-cycle from a consumer perspective (Not the retailers perspective) is across the phases of Awareness, Research, Transaction, Delivery and Consumption. It is primarily important that the clarity is provisioned through out this lifecycle.
Providing clarity requires personalized touches and individual reciprocation with each of your consumer. Knowing the consumer including likes, dislikes, opinions, past purchases, current context, psychography etc. along with the intrinsic knowledge of the product assortments offered is a requirement. Building a value/worth grid based on this knowledge is essential. Engaging the consumer interactively through differentiated (not different) marketing channels is important. I guess this is the place where technology should gear-up to enable the "Experiential Economy" to make the while worth.
Convergence of Proximity based Technologies, Social Media, Collaborative Filtering, CRM and other such Simulacrum may offer probable solution. It shall be some while before true convergence can happen. Disruptions in marketing channels, technology, loyalty programs, product management and category management may be inevitable before it gets worthy more than valuable.
Wednesday, July 08, 2009
The Experience Economy of Mobility and Convergence
The Experience Economy specifically in the convergence and mobility (as in mobile based) sector shall gain new heights both from a continuous and dis-continuous innovation.
Why ? Purely because of the disruptive nature of just having more bandwidth on majority of the handsets across social strata.
Experience economy as defined is the orchestrated events made memorable to the consumers which collectively by in itself becomes a "product". Flashback to the Movie "Minority Report" in which Tom Cruise walks through a shopping mall and based on his iris scan, he gets beamed with relevant promotions within the vicinity that is specific to his profile and custom tuned to his liking.
Though I will not get into the super cool ingredients that may go into making this sci-fi happen today (as I am ignorant), I am fairly confident that a similar (diluted) experience can be achieved using the Mobile devices. Ability to ID the consumer through the device, Cloud Compute servers to crunch and store relevant Consumer Info (considering privacy), Relevance algorithms (similar to what is being used in NetFlix and Amazon) exists in one form or other. The missing ingredient was ubiquity of bandwidth on mobile devices.
Bandwidth hurdle being removed (3G, Bluetooth 2.0), the play will boil down to "What is the best impact provided during the time of maximum exposure ?". The time of maximum exposure is when the consumers is in your store or the shopping mall, browsing.
As arcane and cryptic as it sounds, there in lies the key for many new entrants and start-ups opening up new market categories. Each player can significantly differentiate themselves by choosing the right attributes to own.
Quantama is one of such start-ups creating a new category in the mobile proximity space for Organized Retail. Stay Tuned...
Why ? Purely because of the disruptive nature of just having more bandwidth on majority of the handsets across social strata.
Experience economy as defined is the orchestrated events made memorable to the consumers which collectively by in itself becomes a "product". Flashback to the Movie "Minority Report" in which Tom Cruise walks through a shopping mall and based on his iris scan, he gets beamed with relevant promotions within the vicinity that is specific to his profile and custom tuned to his liking.
Though I will not get into the super cool ingredients that may go into making this sci-fi happen today (as I am ignorant), I am fairly confident that a similar (diluted) experience can be achieved using the Mobile devices. Ability to ID the consumer through the device, Cloud Compute servers to crunch and store relevant Consumer Info (considering privacy), Relevance algorithms (similar to what is being used in NetFlix and Amazon) exists in one form or other. The missing ingredient was ubiquity of bandwidth on mobile devices.
Bandwidth hurdle being removed (3G, Bluetooth 2.0), the play will boil down to "What is the best impact provided during the time of maximum exposure ?". The time of maximum exposure is when the consumers is in your store or the shopping mall, browsing.
As arcane and cryptic as it sounds, there in lies the key for many new entrants and start-ups opening up new market categories. Each player can significantly differentiate themselves by choosing the right attributes to own.
Quantama is one of such start-ups creating a new category in the mobile proximity space for Organized Retail. Stay Tuned...
Tuesday, July 07, 2009
Emerging Business Drivers and Orthogonal Validations
Rapid Adoption of IT systems across sectors and Domain: Globally as more and more systems are being digitized, the need for testers have increased drastically. The availability of the resource pool who has the necessary domain knowledge is also shrinking which has lead to a resource pool crunch. That said, it would be paramount to ramp-up Business Analysts and Product Primes to acquire the pre-existing knowledge within the domain and innovate upon that knowledge. Bringing testers up to speed then becomes the responsibilities of the Analysts and Product primes. The secondary problem of non-availability of Skilled (automation scripts) testers to perform the necessary functions gives raise to a requirement of machine based frameworks to fill in the gaps of non-availability of the resource pool. This gives rise to the lateral industry of automated code generation for developers speeding solution development as well as automated test case generation aiding the Quality Assurance folks. Business Analysts are demanding tools which enables them to create test scenarios without having to write code.
Impedance mis-match during knowledge transfer: When the knowledge transfer of the Domain has to flow from the Analyst to the developers and testers, the impedance mis-match in translating the knowledge in terms of articulating the nuances of the innovation and the capability of a tester (as per say) to understand and assimilate that knowledge into the respective Testcases is mind numbingly high. This high mismatch in what was expected to be built and tested and what landed up getting built and tested will lead to heartburns during acceptance scenarios. Demand for extreme traceability of Testcases and test steps to the requirements has increased rapidly.
Complexity of the Product: The choice of the technologies and frameworks and platforms used in manufacturing and building the solution also adds up to the complexity of the test cycles. ERP implementation, PDLC of a Enterprise Product, SaaS based Solution Delivery, Cloud Compute enabled solutions, Data Center Management, Legacy Integration etc, are not only rich in semantics from a Domain perspective but are also complex to assimilate to understand the breadth and depth of testing strategies required to validate and provide assurance of quality. Demand for pre-built adapters and catalogs which can readily integrate and work as expected during last mile integration is on the rise.
Heterogeneity of the Systems: Added to the complexity of the product, the IT eco-system in which these product operates today are made up of different systems from vendors such as IBM, Oracle, Microsoft, SAP, Sun, HP etc... (including home grown solution) that contains various platforms patched up together through ESB and SOA integration. Even the choice of Operating systems and hardware platforms have become varied that performing a configuration and version compatibility test for any given platform has started to look daunting. Virtualization and Automation is becoming the norm of the day.
Shrinking GTM and Focus on short gain cycles: Typically the Product development lifecycles and Go to market cycles are shrinking in the light of ever changing business dynamics. Every one wants to put the product out in the market as soon as possible capturing the customer share as soon to gain control on the changing business dynamics. Agility, it seems is paying dividends for such short GTMs and providing a quick ROI. SaaS based and On-line solutions are moving towards perpetual beta platforms which can rapidly adopt to the customers needs. This also holds true for ERP implementation cycles which are shrinking by the day. What used to take 5 years are now being reduced to 1 year implementation cycles with rapid customizations. Demand for baseline Testcases covering top few probable customizations of a large product base is increasing. Pre-built Test Content 'cartridges' are the need of the day.
Shrinking IT Budgets: Discretionary spend has been monitored more closely and also the overall IT budget is shrinking by the day. CFOs are breathing down the CTOs neck for efficiency and productivity for every dollar spent. This has lead to cost cutting in terms of support staff (people) and reduction in spend of applications and products (license). CFOs are moving away from making any large capital commitments at the outset impacting high CAPEX vendors. Converting the fixed costs to variable cost is the Financial Officers edict across LOBs. Demand for subscription based usage is on the rise.
Global Recession Driving Margin Pressures: Global recession being the new reality, the pressure on margins (not to mention survival) is high. Corporates are looking for operational efficiencies to increase the margins to retain the operating profits while the top line sinks. Increasingly corporates are betting on digitizing and automating all processes that can be automated which shall convert to cost savings by downsizing the cost centers. Demand for outsourcing the validation and assurance and SLA management is on the rise.
Demand for Highly Reliable Products and Service: The general tolerance for a good quality product has come down. Consumers are demanding 'excellent' quality products. In effect, what was excellent yesterday is just good enough today. Reliability and Relevance are the two parameters that are driving the world markets. If a product or a solution is not meeting the standards of 'excellence' then there is no place in the market for the solution. Corporates are trying to leverage machines (computers, robots, software) as much as possible to automate the core solutions. Automation unlike manual processes provides a high degree of reliability when employed through out the production cycle. Demand for metrics based reports with high degree of SLA while enabling automation is on the rise.
Regulatory Compliance: With the increase in the number of regulations in any given sector (HIPAA, SOX, GLBA etc...) the burden of certifying the product, platform, application or service has increased dramatically. This has led to the amortization of working capital from core production cycles (bread and butter cycles) to compliance activities. Given the same capital budget (which seemingly is shrinking as we speak), the number of activities in production has increased to cater to the compliance demands. Corporates again are seeking automated compliance testing tools to ensure certification which increases the operational efficiencies. The compliance requirements has made the corporates to refactor the dynamics of a verification and validation LOB from a cost center to a value center. Demand for compliance catalogs for verification is on the rise.
Increased Threats and Security Compliance: The threat levels have been ever increasing and the types and nature of threats have become innovative. Security Compliance has become a core activity of any validation cycles for products and solutions. Penetration testing, Functional Security, Security Standards Compliance etc... adds to the release and build test cycles as a natural PDLC flow increasing the number of core activities to be performed by QA. Corporates and QA departments are seeking automation platforms in these and other areas to release enough bandwidth of the existing people so that what has to be (and can be) performed as manual verification has enough people available to perform. Growing need for security verifications as part of the automation solutions is been on the rise.
What does these emerging drivers means for Verification and Validation process ?
Simply put, testing is not a gating function anymore. Testing has become an inherent QoS (Quality of Service) through out the life cycle of production or service delivery. Testing has become a change agent addressing risk early on in the lifecycle and continually assuring reliability, relevance, Security and compliance apart from providing functional acceptance and assurance for the product or service. Testing as per say has become a value creator and quality differentiator for the end product to provide the required edge to compete in the market place of excellence. Testing has become an "Orthogonal" platform, process and activity to cater to the demands of the new markets.
AutoCzar a test automation platform seems to be reinventing itself to cater to these emerging trends.
Impedance mis-match during knowledge transfer: When the knowledge transfer of the Domain has to flow from the Analyst to the developers and testers, the impedance mis-match in translating the knowledge in terms of articulating the nuances of the innovation and the capability of a tester (as per say) to understand and assimilate that knowledge into the respective Testcases is mind numbingly high. This high mismatch in what was expected to be built and tested and what landed up getting built and tested will lead to heartburns during acceptance scenarios. Demand for extreme traceability of Testcases and test steps to the requirements has increased rapidly.
Complexity of the Product: The choice of the technologies and frameworks and platforms used in manufacturing and building the solution also adds up to the complexity of the test cycles. ERP implementation, PDLC of a Enterprise Product, SaaS based Solution Delivery, Cloud Compute enabled solutions, Data Center Management, Legacy Integration etc, are not only rich in semantics from a Domain perspective but are also complex to assimilate to understand the breadth and depth of testing strategies required to validate and provide assurance of quality. Demand for pre-built adapters and catalogs which can readily integrate and work as expected during last mile integration is on the rise.
Heterogeneity of the Systems: Added to the complexity of the product, the IT eco-system in which these product operates today are made up of different systems from vendors such as IBM, Oracle, Microsoft, SAP, Sun, HP etc... (including home grown solution) that contains various platforms patched up together through ESB and SOA integration. Even the choice of Operating systems and hardware platforms have become varied that performing a configuration and version compatibility test for any given platform has started to look daunting. Virtualization and Automation is becoming the norm of the day.
Shrinking GTM and Focus on short gain cycles: Typically the Product development lifecycles and Go to market cycles are shrinking in the light of ever changing business dynamics. Every one wants to put the product out in the market as soon as possible capturing the customer share as soon to gain control on the changing business dynamics. Agility, it seems is paying dividends for such short GTMs and providing a quick ROI. SaaS based and On-line solutions are moving towards perpetual beta platforms which can rapidly adopt to the customers needs. This also holds true for ERP implementation cycles which are shrinking by the day. What used to take 5 years are now being reduced to 1 year implementation cycles with rapid customizations. Demand for baseline Testcases covering top few probable customizations of a large product base is increasing. Pre-built Test Content 'cartridges' are the need of the day.
Shrinking IT Budgets: Discretionary spend has been monitored more closely and also the overall IT budget is shrinking by the day. CFOs are breathing down the CTOs neck for efficiency and productivity for every dollar spent. This has lead to cost cutting in terms of support staff (people) and reduction in spend of applications and products (license). CFOs are moving away from making any large capital commitments at the outset impacting high CAPEX vendors. Converting the fixed costs to variable cost is the Financial Officers edict across LOBs. Demand for subscription based usage is on the rise.
Global Recession Driving Margin Pressures: Global recession being the new reality, the pressure on margins (not to mention survival) is high. Corporates are looking for operational efficiencies to increase the margins to retain the operating profits while the top line sinks. Increasingly corporates are betting on digitizing and automating all processes that can be automated which shall convert to cost savings by downsizing the cost centers. Demand for outsourcing the validation and assurance and SLA management is on the rise.
Demand for Highly Reliable Products and Service: The general tolerance for a good quality product has come down. Consumers are demanding 'excellent' quality products. In effect, what was excellent yesterday is just good enough today. Reliability and Relevance are the two parameters that are driving the world markets. If a product or a solution is not meeting the standards of 'excellence' then there is no place in the market for the solution. Corporates are trying to leverage machines (computers, robots, software) as much as possible to automate the core solutions. Automation unlike manual processes provides a high degree of reliability when employed through out the production cycle. Demand for metrics based reports with high degree of SLA while enabling automation is on the rise.
Regulatory Compliance: With the increase in the number of regulations in any given sector (HIPAA, SOX, GLBA etc...) the burden of certifying the product, platform, application or service has increased dramatically. This has led to the amortization of working capital from core production cycles (bread and butter cycles) to compliance activities. Given the same capital budget (which seemingly is shrinking as we speak), the number of activities in production has increased to cater to the compliance demands. Corporates again are seeking automated compliance testing tools to ensure certification which increases the operational efficiencies. The compliance requirements has made the corporates to refactor the dynamics of a verification and validation LOB from a cost center to a value center. Demand for compliance catalogs for verification is on the rise.
Increased Threats and Security Compliance: The threat levels have been ever increasing and the types and nature of threats have become innovative. Security Compliance has become a core activity of any validation cycles for products and solutions. Penetration testing, Functional Security, Security Standards Compliance etc... adds to the release and build test cycles as a natural PDLC flow increasing the number of core activities to be performed by QA. Corporates and QA departments are seeking automation platforms in these and other areas to release enough bandwidth of the existing people so that what has to be (and can be) performed as manual verification has enough people available to perform. Growing need for security verifications as part of the automation solutions is been on the rise.
What does these emerging drivers means for Verification and Validation process ?
Simply put, testing is not a gating function anymore. Testing has become an inherent QoS (Quality of Service) through out the life cycle of production or service delivery. Testing has become a change agent addressing risk early on in the lifecycle and continually assuring reliability, relevance, Security and compliance apart from providing functional acceptance and assurance for the product or service. Testing as per say has become a value creator and quality differentiator for the end product to provide the required edge to compete in the market place of excellence. Testing has become an "Orthogonal" platform, process and activity to cater to the demands of the new markets.
AutoCzar a test automation platform seems to be reinventing itself to cater to these emerging trends.
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