December 2005


Completed one year of our startup today!

26th Dec, 2004 – was the day when our first store was inaugurated. Many things have happened in last one year. We started as a 2 person team having one store with 300 SKU. One year past we are 2 store and a warehouse facility, 5 people team, with 1300 SKU, and double the sales. We have graduated from being a new comer in the market to becoming the most well known retail brand here.

But that is not the most significant thing to happen in last one year. The more important thing has been the learning associated with this venture. I will share it with you. Any startup is a high-risk, high-velocity, high-adrenalin atmosphere. I think four skills are crucial for an entrepreneur who hopes to strike it right.

Think Ahead: Yes, you are the navigator-without-maps. You have to steer the future course of direction for the company. You need to decide left or right. Just left or right. But that may be ALL the difference between success and failure. So think ahead. Look b-e-y-o-n-d the obvious.

Prioritise: At any point of time, there can be so many things that you can do. There is a huge number of things, all seemingly important, that one could be doing, be absolutely busy, and yet achieve nothing in the sense of “creation”. Its easy to get lost in details, in nuts and bolts – there are so many of them in a startup. You need to prioritize, to find only the most important task and do it before the less important ones.

Delegate: Delegation is multiplying yourself. Maybe the person you delegate to will not do as good a job as you think you can, but if you try to do everything yourself then you will simply run out of time. Decide the wireframe structure, and hand it over to someone else to hammer the sheets and nails. Its difficult to believe that someone else will do the job as good as you, but an essential part of being an entrepreuner is to have faith in your team. Its difficult to tear yourself away from something you think you can do best and leave it to someone else, but it has to be done. You only have one mind, 2 hands and 24 hours – delegating to your team will overcome that limitation.

Do: There is NO substitute for action. There are no right ways – what may be the “best” strategy today, may become wrong tomorrow, and a blunder the day after that. It is better to do something now (even if it is not-so-right) than to do it perfectly right much later (and waste time preparing for that). Yes, there is something called “killing through the speed of action”. There IS no substitute for action

Surely, there would be many more “must-have” skills. My learning is far from over. Its just one year, and we have lots to cover. Miles to go before I sleep…

I received a promotional email from ICICI Bank. It enumerated the benefits of using online banking at their portal – no queues, fast transactions, secure blah blah.. and requested customers to login at their portal. Now comes the best part – I am already using online banking for past 3 years! Still I get one such email almost every 15 days. Obviously the email was a blinder, and was sent to every customer of ICICI Bank without any heed to wether he is already using online banking or not.

My question is this – How dumb one has to be to send such blinders? And keep sending them? If my email software is intelligent enough to recognise such mails as Bulk, how dumb the IT managers at ICICI Bank should be to not understand that? Seriously, does it takes that much amount of knowledge to understand a simple fact – that you are NOT supposed to spam your customers for using online banking if they have just checked it a day earlier, and have been doing it for last three years!

I think companies need to understand that sending junk to customer hurts your business in (atleast) three ways –
1. It irritates your customers, and kills their precious time.
2. It makes any subsequent promotional emails you send, less effective. Even if your next email contains some new scheme, product or service that you are providing, chances of my opening that email is getting lesser with every junk that you send.
3. It makes people write not so good words about your nompany on the internet media (blogs, emails, forums and groups).

You are spending millions on IT, all it takes a little bit of commonsense and a simple logic in your software code – just check the last login time of a customer before sending such blinders. The logic you have for free. So what are you spending the millions for? Commonsense? Huh!

Sonu asked me today, “Bhai, ek crore rupya kaisa lagta hain?” What does one crore looks like? That is supposed to be BIG money here.

And his questions triggered me into thoughts. Seriously, how does one crore looks like? Or say 1 lakhs? I don’t know – money changes form. And face as well. Long back money was a hunted down animal, a loaf of bread or anything you were willing to trade for something else. Later, it was copper, gold, and now its paper. Increasingly, the paper form is also vanishing and the electronic form is taking prominence. If I visit a bank today and ask them to show me my money, the best they will do is type in a few numbers, turn the computer screen towards me and say, “Here look at it, there is your thousand bucks”. “Yeah! Thats right. But I want to “see” my money.” There will be a surprised look on their face if I say that. I guess there will be a day in future, when the only place you will see a paper currency will be in meusuems – where we find gold coins today. (An interesting history of Indian currencies is online at RBI Museum. Follow the links on the left pane once you are in).

Did the old kingdoms and countries ever wonder that one day gold will no longer be the form of money? Maybe if one was futuristic, he would have thought that money will change form, from gold to some other metal, maybe even paper. But now it seems to have lost form all together. Money is bits encoded on a plastic card.

I find encoding money in digital form is as great a step in financial engineering as electricity was in physical engineering. With the advent of electricity, one form of energy could be transmitted miles across and converted into another form required there. Today I can transfer money from India to miles across to an account in US at just the click of a button and use it a form required there – paper, gold, certificate or agreement. Nothing could be more parallel! The electronic face of money makes it possible.

Apart from what we already have, there is one transaction I would like to see facilitated by the electronic currency. If we can transfer money from one account to another, through net banking, atms, cards and even emails then why not have it transfer between and from mobiles phones as well. If we can have PayPal, then why not a Pay2Mobile!

The possibilities are huge – especially for India. Even today in rural India, swipe cards and atms are a rarity. Physical money carries risk – gets mutilated, can be forged, gets stolen or damaged in fire etc. What a boon will mobile money be for India. For ex,

– I can walk into any shop, buy stuff, and dial a number – transfer money from my mobile to the shop owner’s, thats it! No matter wether the shop was an upscale computer shop in Delhi, selling ultra modern smartphones and disks, or a traditional kirana shop wayside the bus stand in Lakhimpur selling only panmasala and cigrattes.

– I could be sitting in a restaurant with my friends, and someone says, “Lets watch Mughl-e-Azam tonight. Its showing at Wave”. I just send an sms and lo! we have just booked ourself six tickets of the latest blockbuster in a nearby multiplex. We never even moved from our seats.

Given the increasing mobile density of India, I think its time someone seriously looks into the possibilites of mCommerce. Some 5 years back it was touted as the next BIG thing. Wonder why it vanished suddenly from the scene? Reliance, Bharti, Tata Indicom anyone listening? Of course the RBI and the FM would first need to put a policy in place. And cellular companies will need to get a banking license to treat prepaid cards or postpaid bills as ‘money’.

Sam Pitroda already holds a few patents for a mobile wallet. Bharti plans to venture into it. There are a select few countries where this is possible in a limited way. But it is not as seamless as Debit/Credit Cards. Lets see if Bharti or Reliance can pull it off.

I wonder how transactions will be done in future, say 50 yrs from now. Maybe, instead of a plastic card in our wallet that communicates with our bank accounts, we will have chips embedded under our skin. The moment you walk towards the checkout area of a shop, the computers would scan rfid of all the items in your cart, and deduct the total from the chip. So maybe all we will need to do is pick up an item and walk away – electronics takes care of the rest! No cards, no swiping, no checkout lines. 🙂

But till that cardless future, I am willing to do with the pay2mobile. 😉

The founder and CEO of a multimilliondollar company was looking out of the window of his cabin from the top floor of a multi-storeyed building. It was lunch time and the street below was active. A poor man crossed the street, came to a water dispensing machine, dranked water to his full and went away satisfied. It was a routine the CEO had watched almost every day. But that day it struck him something – why did the poor man always drank water from the same machine?He thought about it, and boiled down to three pts –

  • There was always water in the tap.
  • The water was of quality that he was satisfied with.
  • The water was available at a price that he was willing to pay (or at no price at all).

Ridiculously obvious points, yet overlooked by majority. The founder then formulated the strategy of his company on these lines – the product should always be available to the customer (should be within easy reach, never out of stock or booking-on-order), the product should satisfy the expectations of the customer with regard to quality and performance, and finally, it should be made available at a price that the customer is willing to pay easily. Executing on this strategy, his company shot into prominence, gained market share and became a household name for decades to come.

That was 1932, the founder and CEO was Konosuke Matsushita, and the company was Panasonic.

I am no Matsushita, and don’t see a poor guy drinking water, and we are not yet Panasonic – but I believe his mantra still holds true. Few months back, when we were groppling with our southwards sales, we applied his seemingly obvious conclusions to our retail business. And if results are anything to go by, it simply means that his findings as true today as they were seventy years earlier. We had two ingredients right – the quality of the product (or service in our case) and the price (we are the best discounters here). What was missing was the availablity. When customers walked into our stores, they were never sure whether what they want to buy will be on stock or out-of-inventory. That was a killer. Over the last two months that has changed dramatically.
Lesson for us?
Remember – There should always be water in the tap. It should be of good quality and affordable. Satiate your customers, hold them, bind them to yourself – don’t let them go.

I love one-liners, especially the ones that are simple, witty and power-packed. Here is the latest that I came across – Investing is nothing but arbitrage of ignorance.

There goes EMT for a toss! How apt. You bet on what the other person doesn’t know that you know about it. That reminds me of an interesting article I read long back, about Warren’s talk at Columbia University in 1984. He takes on the advocates of EMT who say that Buffet, and the likes (Walter Schloss, Tom Knapp etc) are “lucky exceptions”. Just to fire up you interest, here is a part of the speech –
“Before we begin this examination, I would like you to imagine a national coin-flipping contest. Let’s assume we get 225 million Americans up tomorrow morning and we ask them all to wager a dollar. They go out in the morning at sunrise, and they all call the flip of a coin. If they call correctly, they win a dollar from those who called wrong. Each day the losers drop out, and on the subsequent day the stakes build as all previous winnings are put on the line. After ten flips on ten mornings, there will be approximately 220,000 people in the United States who have correctly called ten flips in a row. They each will have won a little over $1,000.

Now this group will probably start getting a little puffed up about this, human nature being what it is. They may try to be modest, but at cocktail parties they will occasionally admit to attractive members of the opposite sex what their technique is, and what marvelous insights they bring to the field of flipping.

Assuming that the winners are getting the appropriate rewards from the losers, in another ten days we will have 215 people who have successfully called their coin flips 20 times in a row and who, by this exercise, each have turned one dollar into a little over $1 million. $225 million would have been lost, $225 million would have been won.

By then, this group will really lose their heads. They will probably write books on “How I turned a Dollar into a Million in Twenty Days Working Thirty Seconds a Morning.” Worse yet, they’ll probably start jetting around the country attending seminars on efficient coin-flipping and tackling skeptical professors with, “If it can’t be done, why are there 215 of us?”

By then some business school professor will probably be rude enough to bring up the fact that if 225 million orangutans had engaged in a similar exercise, the results would be much the same – 215 egotistical orangutans with 20 straight winning flips.”

An edited transcipt of the talk later appeared in the Appendix of The Intelligent Investor. You can read the full transcipt here. Warren Buffet surely is the smartest person in any room.

So what is my piece of wisdom for the next EMTists I come across? Investing is nothing but arbitrage of ignorance.