Even GPs who have capital to deploy are not in a great shape. They need to put to use huge sums of uninvested capital at a time when competition in dealmaking has become so intense. At the same time, they need to avoid overpaying for assets while deal multiples remain high.

These circumstances have forced PE investors to follow a somewhat similar investment style, something akin to their VC counterparts – i.e. buy small and buy more often, come in early into the lifecycle of a company which occupies an attractive niche in a fragmented market, and then carefully add on several other closely related businesses. Such strategies popularly known as “buy and build” have become fashionable in the PE circuit now.

Just last fortnight, private equity firm New Silk Route picked up a significant stake in Bangalore-based Vasudev Adiga’s Fast Food Ltd, which runs a chain of South Indian restaurants. The deal followed the private equity firm’s plans to create a platform in the food & beverages (F&B) sector. New Silk Route is looking to invest $100 million or Rs 500 crore in a portfolio of F&B formats.

Similarly, Everstone capital put in about $20 million in JS Hospitality Services, which operates about 30 Pind Balluchi restaurants, mostly in the National Capital Region, serving north Indian cuisine. The PE firm also invested in restaurant operator Blue Foods.

India Equity Partners, a private equity firm focused on control-oriented investments in Indian companies also recently bought a controlling stake in Swagath – a well known Brand of Restaurant chain in Northern India serving vegetarian cuisine with a speciality in south Indian delicacies and is probably looking at a platform play there.

Besides food & beverages, logistics and finance are spaces chased by PE firms for platform plays. For instance, India Equity Partners has been slowly and steadily building up its logistics platform by acquiring various businesses. It recently acquired domestic road operations of Dutch freight & logistics giant TNT Express in India. It strengthened exposure in the logistics sector adding to its three existing portfolio companies across different segments of the business.

These include Fourcee Infrastructure, a niche liquid logistics rail transportation company, which doubled its business over the previous fiscal year; Swastik Roadlines (Coldex), one of the country’s top cold chain surface transportation companies, and Ocean Sparkle, one of India’s largest private harbour and seaport management services providers.

Why are they doing this? Because, the PE firms want better control of how the companies are run and also a decisive say in the strategy and execution. They are no more willing to bet their fortunes on promoters alone. IEP, for instance, recently appointed Abhik Mitra, the former MD of TNT India, to lead the platform business in logistics.

In another example, Everstone Capital along with Beacon India Private Equity Fund and the private equity arm of Goldman Sachs Group Plc., set up a non-banking finance company Indostar Capital Finance Ltd and got Vimal Bhandari, the CEO of Aegon India, on board to head it up. Here the PE firms are the promoters from the scratch and brings in a management team to run the company who are incentivised with generous stock options and semi-entrepreneurial roles.

There are many advantages of buy and build strategy. It is an effective way to achieve scale in markets like India where scale companies are rare. Buying smaller companies and merging them is often less costly than buying scale businesses. Secondly, it’s less riskier as well as they are familiar with the space.

Funds can also gain a multiplier effect on their portfolio – by integrating several companies into a larger one, they can end up with an asset that is big enough for a public float or to attract the interest of a strategic buyer. Finally, buy-and-build increases the possibility that, by integrating additional assets, GPs could alter the profile of a business languishing in their portfolio and dramatically improve its prospects for a more profitable sale.

In fact, creating a platform or building a portfolio of sector-specific assets is not a novel concept to Indian GPs. ICICI Venture, one of country’s largest private equity fund in terms of assets under management, floated IVEN Medicare, a $250-million special vehicle for investing in the $40-45 billion institutional healthcare delivery segment in the country. The fund invested in more than half a dozen hospitals across the country and also had ambitions of getting listed.

Based on the proven logic that the whole can be worth more than the sum of its parts, such strategies are back into vogue.

According to a latest report in Bain Capital, buy and build bug has struck all global private equity majors too. Some of the high-profile transactions include KKR’s $428 million acquisition of Bond Air Services to complement its platform company Grupo Inaer, a Spanish-based helicopter fleet operator, in the aerospace industry.

In the US, Blackstone Group continued to add to its platform holding in Summit Materials, a building supplies outfit. In Asia-Pacific, TPG Capital picked up a $170 million stake in Emir Oil, an oil exploration enterprise based in Kazakhstan, through its platform company MIE Holdings, a Chinese oil and gas company.

Unlike with occasional corporate acquirers, deal making is a core competency of GPs and they seem to be pursuing steps in the right direction for a right ‘buy and build’ strategy- harnessing top talent, honing a repeatable model and planning the exit from the start. However, the jury is still out on if it will prove to be a successful strategy for domestic GPs and yield good returns for them.

Source: Marttj

I have worked with the Slideshare team, as a user, investor and board member at different times, from 2008 till late last year.  After the Slideshare + LinkedIn announcement last week, I have been reflecting on how much has changed and how much (or little, depending on your perspective) I have learnt from this experience since starting out in the venture business several years ago, as well being a founder myself in the late 1990′s.

Here’s what I learnt from Rashmi, Jon and Amit about best practices of founders.  I appreciated their willingness to work with me and be patient.

Passion & Focus

• Passion about your userbase is contagious. It impacts the employees and their retention, it impacts your core user base and their retention, it impacts customers and their retention.
• Focus, focus, focus on honing the product – UX, scalability, security, data, analytics and more – but keep trying new product angles quickly to iterate toward high engagement and clear value.
• Focus on crystallizing value to paying customers – make it easy for customers to understand value (packaging, positioning, messaging), connect value to price, and make it easy to pay as customers receive value. To do this, understand who your super-user segments are and why.

Growth and (or versus) Monetization

• Be frugal (if possible) but keep innovating, so you are around when lightning strikes in terms of user growth, revenue or outcomes.
• It’s tough to balance growth versus monetization versus profitability. There is definitely a trade-off. Get lots of input on this from people who have made these trade-offs successfully.
• Understand path from user acquisition to engagement to retention to monetization early on and track associated actionable metrics (a la Dave McClure’s AARRR). Especially for user-generated content, there’s no automatic connection between usage and revenue.

The Outside World

• Acquisitions and successful partnerships take time to develop.  They generally come from engaging over long periods of time. At the end of the day, it’s about people getting to know people.
• Keep tabs on competition, don’t obsess about them though – most companies die of self-inflicted wounds, not because of competition.
• Investors are people. Sometimes your investors and board members know what they are talking about, sometimes they don’t, hopefully more of the former.

Becoming a Better Board Member

Through hits (and misses), I also learnt some lessons on how to become a better board member over time:

• Be respectful w.r.t. founders – they known their business better than you do.
• Be patient – there’s no such thing as an overnight success – don’t get too impatient but still hold management’s feet to the fire
• Be thoughtful and have a high bar when suggesting workstreams for the company – their time is precious, don’t waste it.
• Focus on strategic impact – as an investor, focusing on daily management decisions (i.e. micro-managing) will not have a positive impact on the company (and may have a negative impact). Focus on strategic changes, such as building the best management team, making the right bets on monetization, making the right introductions to partners/acquirers, holding people accountable for outcomes.
• Conduct board meetings for the right reasons. Board meetings should not primarily be about reporting only but also about trying to solve problems together and laying the groundwork for scale.  The real action happens outside of board meetings though.
• Align with founders on outcomes. Understand your goals and risk-profile as an investor early on relative to goals and risk-profile of the founders & management team.  Align.
• Angels and VCs are not at loggerheads. As long as companies continue to build value in a large enough market, angel investors and venture investors are aligned.  All the media hype about the two communities being at loggerheads with each other is overdone.

(Dev Khare is at Lightspeed Venture Partners in New Delhi and invests in Internet, mobile and software companies. He has led investments and served on the boards of companies like Slideshare, Appia and Aha Mobile. The post has been reproduced with the author’s permission from his blog, NextWala.)

“VCs only need three rights: Up, Down, and Know What The F*** Is Going On”

If you’ve read Venture Deals: How To Be Smarter Than Your Lawyer and Venture Capitalist, you already know that Jason and I agree with this statement. And even though a term sheet might be four to eight pages long and the definitive documents might be 100 pages or more, other than economics, there are really only three things a VC needs in a deal.

Up: Pro-rata rights. When things are going well (up) a VC wants the ability to continue to invest money to maintain their ownership.

Down: Liquidation preference. When things don’t go well (down), a VC wants to get their money out first.

Know What The F*** Is Going On: Board seat. Beyond demonstrating that older VCs also swear in public, many people believe that with a board seat comes great power and responsibility. In reality it mainly gives one the ability to know what’s actually going on, to the extent that anyone knows what’s actually going on in a fast moving startup.

As I was writing this up, I remembered that Fred Wilson had a post about this a while ago. I searched his blog (using Lijit and the term pro-rata) and quickly found a great post titled The Three Terms You Must Have In A Venture Investment. He attributes this to his first VC mentor, Milt Pappas, and the three terms are the same ones referenced above. It’s a great post – go read it.

Entrepreneurs – don’t get confused by the endless mumbo-jumbo. If you haven’t read Venture Deals: How To Be Smarter Than Your Lawyer and Venture Capitalist grab a copy. Or read blogs. Or do both. And VCs – don’t forget what terms you really care about – focus on making it simple.

However, there are a lot of problems at Google which indicate it is not a good long-term hold for investors.  For traders there is probably money to be made, as this long-term chart indicates:

Source: Yahoo Finance May 3, 2012

While there has been enormous volatility, Google has yet to return to its 2007 highs and struggles to climb out of the low $600/share price range.  And there’s good reason, because Google management has done more to circle the wagons in self-defense than it has done to create new product markets.

What was the last exciting product you can think of from Google?  Something that was truly new, innovative and being developed into a market changer?  Most likely, whatever you named is something that has recently been killed, or receiving precious little management attention.  For a company that prided itself on innovation – even reportedly giving all employees 20% of their time to do whatever they wanted – we see management actions that are decidedly not about promoting innovation into the market, or making sustainable efforts to create new markets:

• killed Google Powermeter, a project that could have redefined how we buy and use electricity
• killed Google Wave, a product that offered considerable group productivity improvement
• killed Google Flu Vaccine Finder offering new insights for health care from data analysis
• killed Google Related which could have helped all of us search beyond keywords
• killed Google synch for Blackberry as it focuses on selling Android
• killed Google Talk mobile app
• killed the OnePass Google payment platform for publishers
• killed Google Labs – once its innovation engine
• and there are rumors it is going to kill Google Finance

All of these had opportunities to redefine markets.  So what did Google do with these redeployed resources:

• Bought Motorola for $12.5billion, which it hopes to take toe-to-toe with Apple’s market leading iPhone, and possibly the iPad.  And in the process has aggravated all the companies who licensed Android and developed products which will now compete with Google’s own products.  Like the #1 global handset manufacturer Samsung.  And which offers no clear advantage to the Apple products, but is being offered at a lower price.
• Google+, which has become an internal obsession – and according to employees consumes far more resources than anyone outside Google knows.  Google+ is a product going toe-to-toe with Facebook, only with no clear advantages. Despite all the investment, Google continues refusing to publish any statistics indicating that Google+ is growing substantially, or producing any profits, in its catch-up competition with Facebook.

In both markets, mobile phones and social media, Google has acted very unlike the Google of 2000 that innovated its way to the top of web revenues, and profits. Instead of developing new markets, Google has chosen to undertaking 2 Goliath battles with enormously successful market leaders, but without any real advantage.

Google has actually proven, since peaking in 2007, that its leadership is remarkably old-fashioned, in the worst kind of way.  Instead of focusing on developing new markets and opportunities, management keeps focusing on defending and extending its traditional search business – and has proven completely inept at developing any new revenue streams.  Google bought both YouTube and Blogger, which have enormous user bases and attract incredible volumes of page views – but has yet to figure out how to monetize either, after several years.

For its new market innovations, rather than setting up teams dedicated to turning its innovations into profitable revenue growth engines Google leadership keeps making binary decisions.  Messrs. Page and Brin either decide the product and market aren’t self-developing, and kill the products, or simply ignore the business opportunity and lets it drift.  Much like Microsoft – which has remained focused on Windows and Office while letting its Zune, mobile and other products drift into oblivion – or lose huge amounts of money like Bing and for years XBox.

I personalized that last comment onto the Google founders intentionally.  The biggest news out of Google lately has been a pure financial machination done for purely political reasons.  Announcing a stock dividend that effectively creates a 2-for-1 split, only creating a new class of non-voting “C” stock to make sure the founders never lose voting control.  This was adding belt to suspenders, because the founders already own the Class B stock giving them 66% voting control.  The purpose was purely to make sure nobody every tries to buy, or otherwise take over Google, because the founders will always have enough votes to make such an action impossible.

The founders explained this as necessary so they could retain control and make “big bets.” If “big bets” means dumping billions into also-ran products as late entrants, then they have good reason to fear losing company control.  Making big bets isn’t how you win in the information technology industry.  You win by creating new markets, with new solutions, before the competition does it.

Apple’s huge wins in iPod, iTouch, iTunes, iPhone and iPad weren’t “big bets.”  The Apple R&D budget is 1/8 Microsoft’s.  It’s not big bets that win, its developing innovation, putting it into the market, shepharding it through a series of learning cycles to make it better and better and meeting previously unmet – often unidentified – needs.  And that’s not what the enormous investments in mobile handsets and Google+ are about.

Although this stock split has no real impact on Google today, it is a signal.  A signal of a leadership team more obsessed with their own control than doing good for investors.  It is clearly a diversion from creating new products, and opening new markets.  But it was the centerpiece of communication at the last earnings call.  And that is a avery bad signal for investors.  A signal that the leaders see things likely to become much worse, with cash going out and revenue struggling, before too long.  So they are acting now to protect themselves.

Meanwhile, even as revenues grew 39% last quarter, there are signs of problems in Google’s “core” market leadership is so fixated on defending.  As this chart shows, while volume of paid ads is going up, the price is now going down.

Source: Silicon Alley Insider

Prices go down when your product loses value.  You have to chase revenue.  Remember Proctor & Gamble’s “Basics” product line launch?  Chasing revenue by cutting price.  In the short-term it can be helpful, but long-term it is not in your best interest.  Google isn’t just cutting price on its incremental sales, but on all sales.  Increasingly advertisers are becoming savvy about what they can expect from search ads, and what they can expect from other venues – like Facebook – and the prices are reflecting expectations.  In a recent Strata survey the top 2 focus for ad executives were “social” (69%) and “display” (71%) – categories where Facebook leads – and both are ahead of “search.”

At Facebook, we know the user base is around 800million.  We also know it’s now the #1 site on the internet – more hits than Google.  And Facebook has much longer average user times on site.  All things attractive to advertisers.  Facebook is acquiring Instagram, which positions it much stronger on mobile devices, thus growing its market.  And while Google was talking about share splits, Facebook recently announced it was making Facebook email integrated into the Facebook platform much easier to use (which is a threat to Gmail) and it was adding a new analytics suite to help advertisers understand ad performance – like they are accustomed to at Google.  All of which increases Facebook’s competitiveness with Google, as customers shift increasingly to social platforms.

As said at the top of this article, Google won’t be gone soon.  But all signs point to a rough road for investors.  The company is ditching its game changing products and dumping enormous sums into me-too efforts trying to catch well healed and well managed market leaders.  The company has not created an ability to take new innovations to market, and remains stuck defending and extending its existing business lines.  And the top leaders just signaled that they weren’t comfortable they could lead the company successfully, so they implemented new programs to make sure nobody could challenge their leadership.

There are big fires burning at Google.  Unfortunately, burning those resources is producing a lot of heat – but not much light on a successful future.  It’s time to sell Google.

Source: deepatheawesome

Having recently moved to a new area of New Delhi, I am familiarizing myself with everything around me and trying to get the general vibe of what’s going on around my local area.

User-generated content has been quite useful in this regard.  I’m somewhat surprised (although I shouldn’t be) with the volume and frequency of locally-related updates on Twitter and the lack of services to curate these in a meaningful manner. I have made “Defence Colony” a saved search on Twitter and check into that once a day in the morning. It’s been quite useful.  I see a fair amount of posts related to local photos, crime reports, road traffic, weather, sales/deals, job openings, vendor/restaurant reviews, events etc.

While each of these categories has been targeted through stand-alone apps, many of which have uncapped upside in large corresponding markets i.e. local traffic/navigation only from Mapmyindia/Inrix/Waze or local services through TaskRabbit (a Lightspeed portfolio company) or local reviews through Zomato/Yelp, I haven’t seen the aggregate woven together in a compelling manner.

So I’m looking, as an end-user, for any small utility that weaves this togther. IMO, if a hyperlocal mobile (or web) app can classify these real-time local posts into these separate categories, roll-up the last 24 hours of posts in each category and then let me browse them at will or perhaps even subscribe to specific content as mobile notifications, that could be a useful and engaging service (perhaps notifications with geofencing as per a post I did last year on ‘Why geofencing & opt-in notifications could save Foursquare’). Local content would be drawn not only from Twitter but also from Facebook,  (perhaps) LinkedIn, Foursquare, Gupshup and other mobile local services with APIs, using aggregation services such as Gnip.

Caveat: I haven’t seen this sort of service yet but I’ve learnt to be skeptical about my own ideas as there are invariably several other people who’ve been thinking far more deeply about these problems and have already gone out and solved them. So please tell me where you’ve seen what I have described – I’m interested as an end-user.

Here’s a sample screenshot for a local search on the phrase ‘Defence Colony.’ You can see posts around restaurants/deals and local photos:

There is a depth-of-content difference between what I see here in Delhi versus what I saw in San Francisco – however, it’s not that different.  This local content is available in most of the big metros of the world today and increasingly in suburban and rural areas.

There is a disambiguation problem that needs to be solved. For example, Defence Colony is a neighborhood not only in New Delhi but also in Bangalore and Lahore, as you can see in the screenshot below.   Perhaps geo-stamped status updates can be used to disambiguate. There is also disambiguation that needs to be done between content categories (crime versus sales/deals versus job openings).

So what’s available today? You can of course use Twitter search using the modifier ‘nearby:’. There are several tweet curation services like Sulia that could provide local Twitter feeds on a whitelabel basis. There are also local Twitter feeds like from some local newspapers (e.g. Xtra Toronto here) and Schmap’s local feed network here.   I haven’t seen anything compelling from Citysearch, AOL Patch, Topix etc either.

(Dev Khare is at Lightspeed Venture Partners in New Delhi and invests in Internet, mobile and software companies. He has led investments and served on the boards of companies like Slideshare, Appia and Aha Mobile. The post has been reproduced with the author’s permission from his blog, NextWala.)

It all started with great excitement sometime in mid 2010.

The demand side has consistently grown since, and still continues to expand, backed by a very robust and strong growth thrust that gave everyone the confidence that the fundamentals were in place and e-commerce is here to thrive.

As the demand side took shape, and interesting comparisons from China & other markets panned out, the supply side saw unprecedented activity. There seemed to be somewhat of a land grab situation, and a consequent whiplash effect. Any slight positive signal from consumers resulted in a frenzy among startups and investors who bet big – the industry gathered tremendous momentum and it was a heady phase that ensured all enablers are put in place at a very fast pace, which would probably serve the industry well in the long run. In the process however, companies/ investors in the space also realized two things – (i) e-commerce would require large amounts of capital to invest in building the right operations and infrastructure; and (ii) not every company would go all the way.

While investor sentiment went through a speed bump as a result, the fact remains that there is enough reason to cheer– the fundamentals are very much in place. The bottom line – people are buying online, and online consumption of goods and services will only increase. Now it is up to e-commerce companies to figure out a sustainable business model to serve this consumption.

The industry is looking solid. There are many good players investing to further develop the infrastructure for e-commerce, there is clear consumer value and increasing internet penetration across India. Also, the industry is seeing innovation across the domain and a strong focus on fundamental value creation.

The current phase is seeing a big focus on fundamentals – a great sign for an industry moving towards maturity. If you get down to the nuts and bolts, e-retail works this way: Companies invest marketing dollars to acquire a customer -> The customer transacts multiple times over a lifecycle -> The aggregate margins from these repeat transactions justifies the cost to acquire the customer.

While the initial phase did focus a lot on removing all barriers to get consumers to transact, and web development/ online marketing seemed like key differentiators, the current phase has seen investments to build a sustainable model on a customer-by-customer and on an order-by-order basis. A few areas hold the key to making the equation per customer work and we are seeing interesting innovation across these dimensions.

Customer Acquisition: The mantra is to get more customers to come looking for you, and maximize the bang for your advertising dollar. Word of mouth is great! You get customers who already know good things about you. To get word of mouth, referrals work a bit, but nothing beats a great experience for a customer to talk about it. So well worth it to invest in customer delight and operations. Also, free traffic over a long term comes through investing upfront in building quality destinations where people come – based on content, user communities, forums and often as a result – solid search engine optimization (SEO). Affiliates also help drive sales at lower costs: Find the right partners and help them be successful.

Increase margins per transaction: Focus on costs – deeper vendor relationships for better margins on products, efficient supply chains, lower transaction costs and a good inventory management model hold the key. Also, picking the right products & categories where unit economics actually work is critical – smart product portfolios need to be built. Products sold online have to have enough margins to bear the expenses of shipping/ packaging and collection. There is an opportunity to cross sell and up-sell through intelligent merchandizing and recommendations; multiple players are looking at private label opportunities to expand margins. Quite a few are also looking at sale of services that can be delivered online  (web based counseling, training/ learning modules/ lead generation, paid content etc) which are high margin opportunities to monetize a customer further online. This area is bound to get very interesting soon.

Ensure more repeat transactions: CRM and customer loyalty can make or break this business! You may have got a customer once, but you sure do not want to buy a transaction. You want to acquire and retain a customer. So invest in everything that helps to bring a customer back again and again. Good service, proper recommendations, and customized offerings driven by a deep understanding of customer behavior will go a long way.

So, all in all – e-commerce today has moved well beyond a few tech guys setting up a website, supported by lots of capital to spend on Google and Facebook ads or to just sell below cost. It is now a serious retail operation and it is about investing in everything fundamental that makes the model work over the long term. The good news – there is a working model and we are seeing great investor appetite to back the firms that are going about it in the right way. In the meantime, the consumer party continues.

I grew up believing that there was something called a “business gene” which has somehow missed my cumulative gene pool (No one in my direct gene pool for the last 100 years had got into business) and therefore I had to join the government (now that was certainly in my gene pool).

When I broke tradition and started a business with my own money and no real “business plan” apart from wanting to get RICH and break the “middle class” barrier in 1996 I took the first step of challenging this “acumen” stuff that I had heard about for the last decade or so.

Post struggling with success and failure with 2 start ups for 4 years, I finally hit upon my business calling and sold my 3^rd business within 6 years of starting it.

After having done that and reached what I can now call the 1^st base of entrepreneurial success I have still been baffled by this “business acumen” or “entrepreneurial gene” concept.

So what made me start a company at the age of 25 ? Where did I get my gene pool from? I mean I am supposed to belong to the “no business sense” part of the evolutionary cycle !

Steven Pinkar’s book “how the mind works” asks us a very simple question. If we meet an alien how would we figure out that the alien is “intelligent” (this intelligence is not to be confused with IQ) ?

He goes on to describe that the only 2 things that this alien should exhibit is that

-He should act in a rational manner which means that he should not jump of cliffs, bumps into rocks while walking which would tell us that “self preservation” is on this beings charter.

-He should act based on a certain purpose ie if he were to jump of cliffs then it should be for the attainment of some  goal.

In a nutshell , here I quote Steven Pinkar “intelligence, then, is the ability to attain goals in the face of obstacles by means of decisions based on rational (truth obeying) rules”.

WOW, if I was not reading a book about “how the mind works” I would have easily explained an entrepreneur by the same sentence. What hit me was the further explanation that “intelligent” life as we understand it is basically an interplay between attaining of a “goal” by “taking decisions” which are based on our “beliefs’.

So now I started questioning as to why ANYONE would not become an entrepreneur as the above sentence or definition (of all intelligent life as we humans are classified under) told me that ALL of us are in the same category of wanting to achieve our goals against obstacles by taking decisions based on our beliefs.

Then it hit me….it is about “beliefs” . That is the only thing that separates an entrepreneur (and here I am defining it in a broader sense to include everyone who follows an ‘unconventional” path) from fellow “intelligent beings’

End of the day there are some people whose belief in either themselves or in the adversity /lack of opportunity around them doesn’t allow them to go down this road of being an entrepreneur. It is not about any business sense/nose/gene pool but only about “belief” or if I can sound slightly more dramatic then I would use the word ‘faith”.

As I look back at the last 16 years of meandering between success, failure, super success , disaster and confusion the only thing which stands out as a common thread is “belief’. If I were to isolate only 1 attribute that an entrepreneur needs to have then this one would be it.

We all live our lives based on certain beliefs and for a lot of us these “beliefs” stop us from living our dreams . I am not suggesting that every person who starts a business will succeed as along with belief there is a hard practicality of cash flow.

However, there is no doubt in my mind that if for some reason that cash flow can be “provided for” then there should be no reason why a person will not succeed in his/her endeavor provided there is unshakeable belief and the person conforms to the above definition of an “intelligent being”.

Think about how many times you thought that you were good at something (belief) and then held back or introduced diffidence in yourself because of what someone else told you OR what you read in some book. This shook your belief and you allowed doubt to creep into your thought process. This is the beginning of the end . Suddenly you stop focusing on that “one” thing and obviously your performance drops and then the self fulfilling prophesy of “defeat” kicks in and by the end of it you feel that person or that book was right and actually you would have never done well if you had followed your dream!

We spend approximately 35-40 years of the most productive part of our lives engaging in some “economic activity” . What a waste it would turn out to be if we were to fritter it away because we didn’t follow through on our beliefs about ourselves.

Next time you are fully awake ask yourself “what do I believe I am the best at” ? That would pretty much give you an indicator of your next business idea!

The last week 3 big announcements showed just how damning the “strategy” of building on historical momentum can be.

Start with Research in Motion’s revenue and earnings announcement.  Both metrics fell short of expectations as Blackberry sales continue to slide.  Not many investors were actually surprised about this, to be honest.  iOS and Android products have been taking away share from RIM for several months, and the trend remains clear.  And investors have paid a heavy price.

Source: BusinessInsider.com

There is no doubt the executives at RIM are very aware of this performance, and desperately would like the results to be different.  RIM has known for months that iOS and Android handhelds have been taking share. The executives aren’t unaware, nor stupid.  But, they have not been able to change the internal momentum at RIM to the right issues.

The success formula at RIM has long been to “own” the enterprise marketplace with the Blackberry server products, offering easy to connect and secure network access for email, texting and enterprise applications.  Handsets came along with the server and network sales.  All the momentum at RIM has been to focus on the needs of IT departments; largely security and internal connectivity to legacy systems and email.  And, honestly, even today there is probably nobody better at that than RIM.

But the market shifted.  Individual user needs and productivity began to trump the legacy issues.  People wanted to leave their laptops at home, and do everything with their smartphones.  Apps took on a far more dominant role, as did ease of use.  Because these were not part of the internal momentum at RIM the company ignored those issues, maintaining its focus on what it believed was the core strength, especially amongst its core customers.

Now RIM is toast.  It’s share will keep falling, until its handhelds become as popular as Palm devices.  Perhaps there will be a market for its server products, but only via an acquisition at a very low price.  Momentum to protect the core business killed RIM because its leaders failed to recognize a critical market shift.

Turn next to Yahoo’s announcement that it is laying off 1 out of 7 employees, and that this is not likely to be the last round of cuts.  Yahoo has become so irrelevant that analysts now depicct its “core” markets as “worthless.”

Source: SiliconAlleyInsider.com

Yahoo was an internet pioneer.  At one time in the 1990s it was estimated that over 90% of browser home pages were set to Yahoo! But the need for content aggregation largely disappeared as users learned to use search and social media to find what they wanted.  Ad placement revenue for keywords transferred to the leading search provider (Google) and for display ads to the leading social media provider (Facebook.)

But Yahoo steadfastly worked to defend and extend its traditional business.  It enhanced its homepage with a multitude of specialty pages, such as YahooFinance.  But each of these has been outdone by specialist web sites, such as Marketwatch.com, that deliver everyhing Yahoo does only better, attracting more advertisers.  Yahoo’s momentum caused it to miss shifting with the internet market. Under CEO Bartz the company focused on operational improvements and efforts at enhancing its sales, while market shifts made its offerings less and less relevant.

Now, Yahoo is worth only the value of its outside stockholdings, and it appears the new CEO lacks any strategy for saving the enterprise.  The company appears ready to split up, and become another internet artifact for Wikipedia.  Largely because it kept doing more of what it knew how to do and was unable to overcome momentum to do anything new.

Last, but surely not least, was the Dell announced acquisition of Wyse.

Dell is synonymous with PC.  But the growth has left PCs, and Dell missed the markets for mobile entertainment devices (like iPods or Zunes,) smartphones (like iPhone or Evo) and tablets (like iPads and Galaxy Tab.)  Dell slavisly kept to its success formula of doing no product development, leaving that to vendors Microsoft and Intel, as it focused on hardware manufacturing and supply chain excellence.  As the market shifted from the technologies it knew Dell kept trying to cut costs and product prices, hoping that somehow people would be dissuaded from changing technologies.  Only it hasn’t worked, and Dell’s growth in sales and profits has evaporated.

Don’t be confused.  Buying Wyse has not changed Dell’s “core.”  In Wyse Dell found another hardware manufacturer, only one that makes old-fashioned “dumb” terminals for large companies (interpret that as “enterprise,”) mostly in health care.  This is another acquisition, like Perot Systems, in an effort to copy the 1980s IBM brand extension into other products and services that are in like markets – a classic effort at extending the original Dell success formula with minimal changes.

Wyse is not a “cloud” company.  Rackspace, Apple and Amazon provide cloud services, and Wyse is nothing like those two market leaders.  Buying Wyse is Dell’s effort to keep chasing HP for market share, and trying to pick up other pieces of revenue as it extends is hardware sales into more low-margin markets.  The historical momentum has not changed, just been slightly redirected.   By letting momentum guide its investments, Dell is buying another old technology company it hopes it can can extend its “supply chain” strenths into – and maybe find new revenues and higher margins.  Not likely.

Over and again we see companies falter due to momentum.  Why? Markets shift.  Faster and more often than most business leaders want to admit.  For years leaders have been told to understand core strengths, and protect them.  But this approach fails when your core strength loses its value due to changes in technologies, user preferences, competition and markets.  Then the only thing that can keep a company successful is to shift. Often very far from the core – and very fast.

Success actually requires overcoming internal momentum, built on the historical success formula, by putting resources into new solutions that fulfill emerging needs.  Being agile, flexible and actually able to pivot into new markets creates success.  Forget the past, and the momentum it generates.  That can kill you.

Recently I have noticed two physical trends in and around Bangalore, and that could be a proxy for what’s happening virtually throughout India – first, all parts of tier 1 and 2 cities are being graced with some variation of concrete skeletal outlines of everything from hotels, apartment buildings, educational institutions and of course transportation infrastructure; and second, for every billboard/hoarding that is torn down due to road expansion, there are multiple that actually pop up leading to a proliferation of multi-storied digital and analog signage across the nation. Since it is hard to avoid the latter, I have found myself spending more time noticing who is selling what and how. Almost all are targeting domestic consumption which, of course, is growing rapidly. The usual suspects include real estate, automotive, banks, telecommunications, electronics, jewelry etc, with the IT companies thrown in for good measure, which is not all that surprising. What did surprise me, however, is how they sell or what subjects are used in their advertisements to sell a particular set of products or services.

Lately, I have been noticing a lot of “white” subjects in offline ads, billboards/hoardings, from jewelry and apparel to eyewear, health and beauty etc. What came as real surprises were two sectors where blonde/blue-eyed men, women and children are commonly used as subjects, but are actually completely unrepresentative of the customer set that these sectors are targeting. One set of such advertisers are the real estate developers who occupy close to 25% of all ad inventory (my guesstimate), I am not sure why a nice European family is representative of a typical customer for a new 1-2 bedroom apartment in the heart of traditional south Bangalore. More surprising was when I saw India’s very own Life Insurance Corporation of India, using smiling blonde women and kids in their ads. My assumption is that a negligible percentage of LIC’s business comes from non-Indians, if at all.So, why not use Indians who, by the way, are among the most beautiful people on earth, no matter what one’s definition of beautiful might be. The fact that Titan, LIC and many of the real estate brands use non-Indian, and typically “white” characters to push their products or service, is indicative, unfortunately of an underlying fascination, admiration and aspiration for the fair skin.

I have noticed that fascination for fair skin among the domestic help network of drivers, cooks and maids. FMCG companies have entire product lines targeting consumers who want to look more “fair” (the irony is that those with fair skin effectively burn themselves to try and get darker by getting the right tan). Interestingly enough, there is a pyramid of sorts when it comes to who the domestic staff prefer to work for. Again, based on my experience (which readers may consider atypical), the sequence goes something like the following: the top of the pyramid are whites (British, Europeans, Australians and Americans), then the non-white foreigners, followed by local south Indians (my experience living in Bangalore), and then comes yours truly (north Indian). In this case, I find myself truly at the bottom of this pyramid. By the way, the same is true for shopkeepers, hotels etc, who seem to bend over backwards as soon as a white American, European or Australian walks in the door versus a “not so white” local.

Bottom line: In my opinion, India has the most beautiful people with exquisite features that ought to be (and increasingly are) subjects in marketing materials, especially for products and services targeting the Indian consumer (I can understand, for example, why Lufthansa might want to use German father/daughter theme in their ads). But the fascination with the stereotypical blonde/blue-eyed look remains fairly strong across the social strata– whether it’s some of the largest companies in India with their advertising themes, the common person who directly associates fairness with beauty in India, or the preference for the drivers, cooks and maids to work for white foreigners as a status symbol. I, for one, certainly hope that the thought process changes.

Kodak is a company that couldn’t handle the innovator’s dilemma and recently filed for Chapter 11 bankruptcy. As crazy as it sounds, Kodak actually invented the digital camera. However, it did not commercialise the technology because it couldn’t look past the highly lucrative camera roll and printing business. Those revenue streams would have been killed but it potentially could have made a killing with its latest innovation – the digital camera.

Another recent example is Cisco. Since the early 2000′s Cisco has been selling internet telephony products which were complex and required a lot of expensive equipment. In the meantime, Skype was building a consumer product that was easy to use and cheap. Ideally, Cisco should have bought Skype but it couldn’t look past its enterprise customers who were buying expensive equipment. And remember, back then, Cisco was looking to be a consumer-focused company by acquiring brands such as Linksys and Pure Digital, the makers of the Flip camera. Instead, Microsoft saw an opening and eventually acquired Skype. Now Cisco is challenging the Skype/Microsoft merger because it fears its own video conferencing solution may be blocked and enterprise customers would opt for a Skype/Microsoft solution.

This brings me to India, which I believe, is stuck in its own version of innovator’s dilemma. Inefficiency, middlemen and leakage are all words for the same thing – corruption. When technology is pitched as a solution to curb corruption, people come out of the woodwork and say how the proposed system is too expensive or too difficult to use or politically motivated. The reason for the bad press is because no one really wants to change the way they work.

One example is the government’s plan to move to an electronic system of government subsidies and social welfare payments using Aadhaar-linked accounts. Initially, it would appear that the middlemen would be completely cut out from the process. However, by having the money go directly to bank accounts, many other industries/services might benefit from it. Services such as micro insurance, micro payments, micro financial services, etc… The dilemma is that the middlemen will have to do more work to benefit from these new opportunities and usually, that is not taken very well. Hence, all the trash talking about how bad Aadhaar is for the country and people’s privacy will be at risk.

This is a classic case of innovator’s dilemma – the middlemen are happy with the status quo because they can’t think beyond their current revenue stream.

The above example is par for the course all over India. People don’t like technology because it speeds up everything, makes people accountable and introduces transparency. People are afraid of technology because they feel they will become irrelevant, but you become irrelevant if you ignore technology.