A lot of promise on the Indian e-commerce front! Consumers shopping online is growing exponentially, mobile driven commerce is accelerating.  The Snapdeals and Flipkarts are becoming household names. But what is forgotten in this e-tailing revolution are the unsung heroes - the ecommerce enablers - most importantly logistics and supply chain/inventory management.


Lets runs through the process - Assume a consumer clicks the buy button on an ecommerce site and chooses Cash on Delivery which continues to be a predominant payment method in India  and chooses one day delivery.


How does the ecommerce vendor manage its orders? How does the vendor manage the warehouse? How does a vendor manage suppliers and get inventory in a timely fashion to be shipped to the consumer? If a customer pays cash, how fast and securely does the cash reach the ecommerce vendor?  This is where the ecommerce logistics companies like Delhivery and inventory/order management software companies like Unicommerce come into play.  The less talked about heroes that help enable the trade to happen or in other words they are the "commerce" in e-commerce!


India will see a huge revolution in the e-commerce infrastructure space over the next decade just like the tower companies and other mobile telephony equipment companies powered the infrastructure revolution in the wireless telecom space.  Unlike in other developed economies where some of the basic infrastructure around logistics and retail technology was already in existence and e-commerce players focused solely on building out the front end by plugging into this infrastructure effortlessly, India is seeing the ecommerce players and the infrastructure players growing up simultaneously and adapting to each others needs as they grow and form a robust ecosystem.

I have been amazed at the buzz that has been generated around these Health tracking devices. I see a lot of people wearing bands of different colors. And now there seem to be companies that are offering coaches alongside the devices.


Really?  What was lacking in our lives was a measurement device that measured how much we walked, how we slept and once we had that data, we would  be able to fix our lives? Is that the real problem that we had no data available real time? Or that we didn't have anyone pinging us and telling us that we did not meet our fitness objectives for the day?


I don't think so. I think the real problem lies in the innate human motivation for anything we do.  A device can remind you but it is a temporary fix.  After a few months, if there is no motivation to continue with an exercise regimen, no device in the world can help. And if there is motivation to continue on a health track, a device stuck to your body all day is really of little value.


Lack of sleep at night is often tied to stress levels and other ailments which a device cannot help with. And the symptoms resulting from a lack of sleep is often visible the next day be it fatigue, irritability, etc. And even if the symptoms are not visible and there is data to show unhealthy sleep, the problem lies in the drivers of the sleep which are not easily fixable and are often deep routed which can take serious behavior and mindset change to make a positive difference over a long period of time.


So just like our New Year's Resolution to Lose Weight and subsequently signing up for a Gym Membership,  I believe the purchase of these health tracking devices is impulsive and not fully thought through.   While this  fitness oriented wearable devices do get sales just like a lot of Gyms get memberships post New Years, there are other social motivations/influencers of a physical Gym that allow for sustaining a membership at a Gym even though the activity levels at the Gym have dropped.  These don't exist for a fitness tracking device. So I don't see users continuously upgrading or renewing their fitness devices like they do Gym memberships or their Ipods/Iphones.  I believe that there is a segment of wearable devices that is very valuable such as those that help with monitoring statistics for chronic diseases, etc which enable timely care.  I don't believe devices that try and influence human motivation are scalable or sustainable.  But devices that help with critical information that can be acted upon without deep mindset shifts can work.


I think these fitness device companies will continue to attract sales as there a lot of headroom for first time users that may buy the device in the hope that it will change their fitness behavior. In the interim, if these companies figure out a way to keep these users by introducing hooks that are beyond basic fitness, this industry could thrive. Otherwise, I forsee challenges.  Not to take away from the super talent and all the hard work put in by the management and employees at all these firms.  And the investor money gone in to help create these companies.


What next, shall we have devices for kids to remind them to do their homework on time?

Did anyone predict that a substitute player would win the World Cup 2014 for Germany and that too against the team that has the worlds most branded player.   If this subsitutute player was not brought in at the 88th minnute of the game, would the game go into penalty kicks? And who would have won if penalty kicks was the sole determinant of the outcome? Penalty kicks are more about individual performance and not teamwork. 

At the end it is all about the psychological confidence, teamwork and quick strategic decisions taken at critical moments that makes a winner in this sport.  Startups are no different. When a company is starting out, there are more often than not, other branded players operating in their space with experienced management. However what differentiates a successful startup from those that are not so successful is the psychological confidence, trust and teamwork of the team in executing rapidly, and the critical strategic calls - what should the product positioning be, what should the approach be, who are the key hires, etc. Great companies are created by ordinary people doing extraordinary things together under the right leadership. A well functioning team can achieve a lot more than individual prima donnas in a team that is not gelling well together. And branded/experienced individuals are not necessarily the winning formula in creating winning companies. Inexperienced passionate smart individuals can create entrepreneurial magic as has been witnessed time and again with first time entrepreneur success worldwide.

Football and other team sports are a good teacher of lessons in entrepreneurship!

There has been some activities by international incubators in india, especially in the consumer internet space. This is the path they seem to be following :
a. Think of a copycat idea that has worked globally
b. Fund the company with reasonable startup capital - own most of the company
c. Hire smart consultants/bankers, give him nominal equity, and make them work real hard for 4 years
d. Build the company with the hope of an exit in 4 years

There are several flaws to this model :

1. Hiring CEOs into ground zero startups rarely work and more so in India where there is a lot of friction to starting a company. Many hired CEOs dont have the entrepreneurial gut to tide through the myriad issues at the early stages of a company. And given that it is not their baby, there is limited passion.

2. In markets that take time to mature, hired CEOs don't have the staying power to stick it out for a decade or longer. Given that it is not their idea, there is no pride of ownership, economic incentive or moral responsibility to stick around.They look at the opportunity as a learning experience for a few years and decide to move on well before the company has really matured. Typically in such markets, an exit is unlikely in 4-5 years.

3. Sometimes Consultants/Bankers may not make the best entrepreneurs. Just raw smarts may be a necessary but not sufficient condition to becoming a great entreprenuer. And if they are really smart, they realise that working in an incubator with miniscule equity for a long period of time is less desirable than starting on thier own since the equity in these incubated companies will take a lot of time to be worth anything and it is better to start your company if you are going to put in a decade of hard work.

Several incubated companies started in 2009-10 have now begun to crack.  Management is leaving these companies en masse. Moral is not high. I am sure the incubators are worried. And if not, they should wake up and smell the Indian coffee....

Moral of the story -  Try and implement this strategy in developed markets where you can incubate, hire for smarts, micromanage the hired help for 4 years and then flip the company. In India it can take a lot lot longer and this formula may not work.

 

There has been a lot of news recently on startups  raising a large sums of venture capital in technology and the internet . For some reason, a large capital round seems to be equated to the success of that startup. The fundamental assumption is that the investors must be smart if they are investing big cash into the company and this company is bound to succeed. Well, there is more to the success of a company than capital. 

The reason the investors are investing big monies is that they have seen strong traction in the company and are betting that with this large round, the company can accelerate growth, establish leadership and become profitable. However raising a large round does not guarantee success. In fact the onus is that much greater for the entrepreneurs to deploy the large pools of capital very effectively and strategically as missteps at this stage can prove fatal to a company.  This is what defines a good entrepreneur from a great entreprenuer. A great entrepreneur understands the revenue drivers and cost structures of the business deeply and think though what will it take to achieve a sustainable and profitable market leadership in the segment it is operating in. Sometimes  spending "habits" can creep into a fast growth company - for example, overhiring at the top, high compensation, large marketing spends, unweildly capex, large offices, high travel expenses, etc.  A great entrepreneur continously checks and challenges these spends. A great entrepreneur also understands that excessive marketing can hide the lack of  differentiation or defensibility in a product. He or she understands that marketing is temporary and the core value proposition and differentiation is what will eventually win and obsessively focuses on strengthening that core proposition - be it superior product, flawless customer service, etc.

Recent news on  Whatsapp, the worlds biggest venture backed company exit till date, mentions how the priority of the entrereneurs were to create a very simple product that had no bells and whistles so that adoption was viral acquistion costs could be close to nil. The company could have easily invested in features and consumer marketing after they raised their last large round given the hyper competition in this space. Full marks to the founders for keeping the discipline on superior product offering with an eye towards building a profitable and sustainable business. Many other messenger companies exist in the world have access to similar levels of capital and possibly even more than what Whatsapp had.. Yet, Whatsapp has achieved world domination.  Capital doesn't build great companies, great entrepreneurs do!

At Nexus, we are blessed to be able to work with some such great entrepreneurs who are on their way to building great market leading companies.

 

There has been a lot of chatter recently on Hybrid commerce as a new business model. I have seen and heard various versions of this. Some examples of  business lines that ecommerce companies are contemplating are :
a. Offline Stores
b. Bulk Exports
c. Domestic Wholesale
d. TV Shopping

From marketing to merchandising, from warehouse to logistics, from technology to sales, the processes and organisational DNA required are very different. The reason many of the entreprenuers are thinking about this is because they want to grow their business faster and are thinking of new avenues of growth.

 I would strongly urge entrepreneurs to think through the drivers of a new contemplated business direction, the management and resource bandwidth required and the distraction/opportunity cost of not focusing on the core business.  Sometimes, "new" channels may seem like the easy answer to growing revenues, but with that can come signficant hidden organisational costs that can cause strain to the core business, especially in a young startup where capital is scare and organisational stability is fragile. 

An entrepreneur should assess how much of the "new channel" is leveraging existing people and processes and organisational learning and how much of it is an entirely "new business line" which requires organisational retooling. To give a simple analogy, Mcdonalds entering Fine Dining is a new business line while McDonalds introducing "Drive Thru" or "Home Delivery" is one more channel. 
 

Look around you in any city in India and you will see a small business owner.  High chances that someone in your family is a small business owner. All of these small businesses are resource constrained and are looking for on demand technology solutions across the value chain from more efficient marketing to easier data management to better book-keeping  to cost effective communication. Unlikely any of these small businesses have an IT team and are looking for "zero touch" solutions that can be deployed and managed with ease and low cost.

The advent of cloud has really helped in innovation for the small business across segments.  India can be a great test bed for such technologies that could then also be deployed globally. 

India is beginning to see active entrepreneurship in this arena. Some of the early examples in the Nexus portfolio are DimDim (Web Collaboration) , Helpshift (Mobile CRM),  Unicommerce (Supply Chain), Druva (Data  Backup), GenWi (Mobile Publishing), etc.   Some of the other notable companies are Tally (Accounting) and FreshDesk (CRM), Practo (Healthcare),  Knowlarity (Communication), Capillary (Retail Loyalty), etc.  There are hundreds of startups that are emerging and will emerge in the next few years. This next decade will witness the emergence of the Indian Software for Small Business.