Startups in India are variously hailed as employment
generators, the future and so on. There
are now sites dedicated to various aspects of the Startup ecosystem; you have
experts in Startups, specialists so to speak; you can get courses in Startups,
and much more. On the one hand, as one of my recent book reviews show, there is
also the faint hint of a bubble – while on the other hand, as 3 of my book
reviews detail, you have a list of successful startup companies in operation. Where
the truth lies is hard to say at this point in time, as there is persuasive
evidence on both sides of the argument; this question can only be answered in
the due course of time. What we can do
is, take a look at some failures, and try and draw some basic lessons for the
startup ecosystem….
STARTUPS : FAILURE ANECDOTES
In this section, I will detail a few startups that failed-
the objective being to learn lessons from their failure. The first that comes to
mind is a company in the Mobile & Devices space. The exact name/s will of
course remain unsaid. This was brought to my attention by my management 5 years
ago. I was tasked to handle the GTM strategy and head the Western India rollout
for this company, which allied with my employers for a faster rollout. My
initial research into the company and its product lines produced a negative
feedback from the channel – this was ignored, as the market was supposedly a fast growing market. My
research also revealed the suspect foundation of this assumption. During the
GTM implementation, we ran into Service troubles, and big hurdles in scaling
up.
The second example that comes to mind is another
startup in the Mobile & Devices space – this one, with a decent product
range, in a somewhat crowded market but with a different offering. The market
was there – so was the team and the channel. This company signed a deal with an
MNC to market their products in India – without
doing the homework, based on the assumption of a world leading brand, and wide
market acceptance. During the GTM implementation, we could not find a
single channel partner, as the product pricing of the precise same range of products was more than a 100% higher.
Turns out the previous import partner had off loaded entire range at 20% - 30%
pricing. Further, the newest range launched by the company was not present in
our lineup. To make matters worse, another import brand of ours, in another
division, pulled out of India. The result – unpaid salaries, office expenses
and TA Bills of the staff, and mass resignations / layoffs.
The third example that comes up is of a company handling
a range of products, among the highest selling in the world, with one of the top
4 largest production facilities worldwide. The task was setting up the market
in India for this range. One problem. Just one. This was the third time – with
two failures behind them already. This wasn’t
factored in when signing the deal for the brand. The launch was with a
limited range of products, and a solid Channel GTM Plan, among the finest I
have implemented. The issue was logistical delays in supply to us from the partner;
resulting in incorrect pricing making product uncompetitive as market adjusted downwards
in the interim; and moderate channel resistance due to two previous failures.
Compounding all this? No marketing effort, no precise Customer level Marketing Plan by parent. Not one of this was known to the importer.
LESSONS
All the above three companies failed, big time. All people
connected with it lost, and they lost a lot. But study these three cases
together, and a pattern begins to emerge, from which we can all draw some pertinent
lessons for our own future – so let us
learn. In all three, the promoters did not have precise actionable knowledge
of the physical market and its realities. They operated on big picture numbers,
and ignored the evidence to the contrary. In two cases, perhaps all three, even the
teams were not aware, as no one actually went into the market and asked the right
comprehensive market mapping questions. In all cases, scaling up posed
massive challenges, leading to burnout of the company.
In all three cases, it was a marketing failure, as just selling the product is useless, unless
there is customer demand. Nothing was
done for catering to customer demand in two, and quickly abandoned in the third
due to scalability issues; in two of the three cases, intent was a major issue –
as I clearly recall a director telling me, on my reservations, that if this doesn’t
sell, we will simply sell something else… and the icing on the cake, no one
had a defined stop-loss or exit plan – save the first, wherein the management
had given me a clear stop-loss on day one, before outlining the project
benefits. And in all three cases, there
was zero support for the field teams in operation.
LESSONS ANALYSED
Lets start with scalability.
Most gung-ho managers state don’t be defensive – I concur. But, it is one thing
to be defensive, and quite another to
be realistic. Critical to success of any organization is available resources
and risk tolerance of the management, which needs to categorically spelled out,
and understood – as in one case. This can prove critical, as that one was the
only organization to emerge from the fiasco unscathed. When you overestimate
your abilities and your resources, the whole plan goes haywire – and a series
of problems which would otherwise have
been overcome – derail the plan, as you don’t have the requisite resources.
Reason – you have extended the company way beyond its ability and its present &
foreseeable resources.
Market
Analysis – you don’t judge a market from
excel sheet calculations or hoity-toity market maps n charts of market size
& direction vectors etc, or mere listing of competitive products in comparison.
They reveal precisely nothing, repeat - nothing. 100% of all professional market analyses I
have seen focus only on the product in
the present time, and one vector of timescale. There are many attributes to a
product – even on timescale, logistics, consumer perception, consumer need/
want/choice; consumer problem resolution-ease-of-usage / alternatives etc – that aren’t design or market size parameters.
There are also the other three –
Price, Place and Promotion – to consider.
In each of the cases above the plan failed to cater
to one or more of these four parameters – the proverbial 4Ps, with respect to
their ground reality. You don’t make
plans in offices; plans are made in the Market, and only placed on paper in the
confines of the office. Let us consider one sub-parameter – logistics. Few managers
in my knowledge consider it as part of the product planning at market level –
and yet, I am aware of 3 companies – 1 startup, one Indian 1000-Cr company, and
one wordwide European MNC that has botched up on this parameter, leading to
massive losses. Of these, only the global leader, with its massive resources
and risk tolerance, survived, and hammered back with true learning from its
failure alluded to above.
CONCLUSION
Detailng the full detailed learnings from these
examples above is beyond the scope of one single article; that is why I chose
to look briefly at only two aspects here. The Marketing, and the Intent aspects deserve
much greater attention, as also Product, Place {Distribution} and Pricing
aspects, needing a dedicated article on each parameter, which I may pen at a
future date. For now, let me close this article with a basic point I wanted to make
with these real brief case studies given
above.
What kind of market are you getting into – this is a
question that needs detailed contemplation; your business plan needs to be robust,
one that caters to all foreseeable risks, as well as opportunities. In one case,
a short term bubble was interpreted as a future big market; in two others,
global leaders were incorrectly assumed to be market winners in India; In two
cases, channel resistance and issues were downplayed and not catered to; In two
cases, logistics forced the companies into risk-control mode, firefighting – which is never the right mode for building
brands.
If these
anecdotes were isolated, there wouldn’t be an issue; but these are symptomatic of many companies in the industry in
my own personal knowledge. And most of
these were good products, in a present market, with problems that could be
overcome with foresight and prior proper planning, anticipation and problem resolution.
All emergent problems were common market knowledge, and were not captured by managements. Were the problems avoidable?
In all cases, yes. That, sir, is my single point in this first of the Startup
series
In the coming articles, I shall go deeper into each
parameter above, basis real cases from
my experience and knowledge, documenting failures, and later on – successes, and
doing comparisons with cases from established companies, in an attempt to learn
how a startup is both the same as well as different from an established firm; driving home the learning that some of the fundamentals
dont change, be it startup or big firm. In the last part, we shall try and
learn how and where startups require a differential approach…
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