Change tracks

The Smart Manager - - Strategy - *­par­nadutt/2016/09/13/in­dias-startup-ecosys­tem-scales-up-with-wide­spread-gov­ern­ment-ini­tia­tives/#5d7c646a5f35

The Min­istry of Sci­ence and Technology an­nounced it will be in­vest­ing $749,500 over the next few years…Un­der a new pro­gram, Pro­mot­ing and Ac­cel­er­at­ing Young and As­pir­ing In­no­va­tors and Star­tups (PRAYAS), the Min­istry will be pro­vid­ing grants of up to $149,900 to each startup to en­cour­age in­no­va­tors.* How­ever, free flow of funds alone does not en­sure suc­cess. In­dian star­tups and SMEs have to bring about rad­i­cal im­prove­ment in costs, qual­ity, ser­vice, and other crit­i­cal av­enues to stay ahead of the curve.

Times have not been bet­ter for In­dian star­tups and MSMEs. Volatile poli­cies in for­eign lands, gov­ern­ment ini­tia­tives to pro­pel growth, and an am­bi­tious young gen­er­a­tion spell good times ahead for these sec­tors. Re­duc­tion in cor­po­rate tax and soon-to-be im­ple­mented GST will add to the op­ti­mism. In­dia is also poised to be­come a $5 tril­lion econ­omy by 2025, for which the back­bone is the MSME sec­tor. MSMEs and star­tups are touted to spur jobs, en­trepreneur­ship, in­no­va­tion, and dis­pos­able in­come.

How­ever, the pic­ture is not all rosy. Over 40% star­tups have failed since 2014, ac­cord­ing to startup tracker Xeler8. The av­er­age age of these ven­tures is just over eleven months. Kishore Biyani stated that 90% star­tups he has seen have no mean­ing. Kris Gopalakr­ish­nan ob­served that around 70% star­tups will fail and 20% will re­main as small

en­ter­prises—far from promis­ing num­bers for a coun­try which boasts the high­est youth de­mo­graphic in the world.

So, where are star­tups and MSMEs go­ing wrong? We can at­tribute their fail­ure to many fac­tors. How­ever, the Pareto Prin­ci­ple can be ap­plied here too. Al­most 80% fail­ures oc­cur due to 20% rea­sons.

The gravest er­ror is busi­ness mod­el­ing, or the lack of it. Busi­nesses try adopt­ing ideas from the West with­out un­der­stand­ing what their cus­tomers want. Or they fall hook, line, and sinker for mo­ti­va­tional speak­ers who dish out moun­tains of wis­dom, but skip out on steps to im­ple­ment those. This ab­sence of a busi­ness model also causes star­tups to burn cash fast. Even­tu­ally, funds dry up sooner than an­tic­i­pated, re­sult­ing in fail­ure, ac­cord­ing to Rishabh Lawa­nia, founder of Xeler8.

What can be done to de­velop ef­fec­tive busi­ness mod­els? How can star­tups and MSMEs grow larger by de­sign, with own­ers guid­ing them skill­fully like Cap­tain Spock?

the pro­pel ex­cel­lence method

This method for fun­da­men­tal re­think­ing ad­dresses the most im­por­tant com­po­nents of a busi­ness:

01 growth plan­ning 02 prob­lem solv­ing 03 per­for­mance man­age­ment

It em­pow­ers them to set long-term goals and keep their short-term strate­gies in line with these. Here are three rea­sons why PEM is pop­u­lar among or­ga­ni­za­tions which want to scale up:

01 It en­ables busi­nesses to re­tain their com­pet­i­tive edge. It helps them re­solve glar­ing gaps in their busi­ness, peo­ple, pro­cesses, in­fra­struc­ture, and mea­sure­ment. Thus, it saves them from be­ing swept away by com­pe­ti­tion.

02 It en­ables busi­nesses to func­tion with­out the ev­ery­day in­volve­ment of pro­mot­ers and the se­nior man­age­ment. Thus the C-suite gets space and time to fo­cus on larger goals.

03 It in­creases ef­fi­ciency. Bill Gates said, “The first rule of any technology used in a busi­ness is that au­to­ma­tion ap­plied to an ef­fi­cient op­er­a­tion will mag­nify the ef­fi­ciency. The sec­ond is that au­to­ma­tion ap­plied to an in­ef­fi­cient op­er­a­tion will mag­nify the in­ef­fi­ciency.” The Pro­pel Ex­cel­lence Method is ef­fec­tive be­cause it in­tro­duces au­to­ma­tion af­ter it makes a busi­ness ef­fi­cient.

Here is how PEM helps or­ga­ni­za­tions grow by de­sign and not chance:

growth plan­ning

For com­pa­nies to scale by de­sign, plan­ning growth is manda­tory. Growth is not about fund­ing or em­ployee strength, but rev­enue and prof­itabil­ity. It does not mat­ter how much a com­pany raises through fund­ing. With­out a com­pelling growth plan, it ex­hausts its cash flow fast and even­tu­ally folds up.

Growth plan­ning in­volves eval­u­at­ing a busi­ness’ of­fer­ings. Those who im­ple­ment the PEM in growth plan­ning have an as­tute un­der­stand­ing of why their cus­tomers buy from them. They also track met­rics like cost of ac­qui­si­tion, cost of value de­liv­ered, and mar­ket size. As a re­sult, they set re­al­is­tic prices which their au­di­ence ac­cepts and which main­tain their prof­itabil­ity.

prob­lem solv­ing

Most or­ga­ni­za­tions tackle prob­lems based on their present cir­cum­stances. But this method is highly in­ef­fec­tive since it just sweeps those prob­lems un­der the car­pet un­til they reap­pear.

PEM, on the other hand, pro­vides tested and proven tech­niques. It first ac­cu­rately de­fines the root cause of a prob­lem in­stead of skim­ming the sur­face. Next, it dives deeper to iden­tify in­flu­enc­ing fac­tors and gaps—whether in peo­ple, per­for­mance, in­fra­struc­ture, man­age­ment, or all of them. This saves busi­nesses from wast­ing pre­cious time and re­sources on ad­dress­ing frus­trat­ing prob­lems which arise re­peat­edly. In­stead, they chan­nel­ize those re­sources to­wards busi­ness growth.

One of our clients wanted the CRM soft­ware to be able to pro­vide an­swers to the cus­tomers call­ing to know the sta­tus of their or­ders. By de­ploy­ing PEM we re­al­ized, that a CRM would not solve their prob­lem. In­ef­fi­ciency ex­isted in the time it took from re­ceiv­ing an or­der to dis­patch­ing it and that was the rea­son why cus­tomers kept call­ing. De­ploy­ing a CRM would have sim­ply helped man­age the prob­lem bet­ter but not ad­dress it. We ad­dressed the in­ef­fi­cien­cies in the sys­tem. The re­sult was an in­stant im­prove­ment in the or­ga­ni­za­tion’s lo­gis­tics and the calls to our client re­duced to zero.

per­for­mance man­age­ment

The sig­nif­i­cance of peo­ple in an or­ga­ni­za­tion can­not be un­der­stated. Most busi­ness ex­ec­u­tives and ad­vi­sors con­sider per­for­mance man­age­ment as an­other term for a tra­di­tional ap­praisal sys­tem. But it is much more.

Through the PEM, busi­nesses can set up a sys­tem to de­fine a role and mea­sure its ef­fec­tive­ness to align it with or­ga­ni­za­tional goals. This is done through a score­card which gives each role a clear idea about their goals.

Per­for­mance man­age­ment is the process of cre­at­ing a cul­ture in which peo­ple do not de­velop a prod­uct or ser­vice di­rectly. In­stead, they con­trib­ute to a sys­tem which de­vel­ops it. The sys­tem is sim­ple enough for a per­son with min­i­mum re­quired skills to con­trib­ute to it and achieve the de­sired out­come. It also drives in­di­vid­ual per­for­mance in the right di­rec­tion, ie, one which is aligned with the needs of the or­ga­ni­za­tion. If per­for­mance does not move in that di­rec­tion, the sys­tem raises a red flag. To a large ex­tent, this is how the PEM stream­lines per­for­mance man­age­ment. These red flags are then ad­dressed and re­me­di­ated us­ing the prob­lem-solv­ing tech­niques men­tioned in point 2.

A busi­ness con­tacted us and stated that one of their key em­ploy­ees had quit un­ex­pect­edly. Upon in­ves­ti­ga­tion, we re­al­ized the em­ployee was suc­cess­ful be­cause he was sell­ing only one of the many prod­ucts in the port­fo­lio. From be­ing a su­per per­former, the em­ployee be­came a non-per­former when the prod­uct lost its de­mand and man­u­fac­tur­ing stopped. We de­vel­oped a ro­bust score­card that mo­ti­vated the em­ploy­ees to de­liver on all prod­ucts equally to make in­cen­tives. This made sure no em­ployee de­pends on the sale of one prod­uct to be­come a star and move in the op­po­site di­rec­tion with his/her per­for­mance when things go south with that prod­uct line. Now, they can hire qual­ity can­di­dates on short no­tice, and bring out the best in their em­ploy­ees.

The time is right for In­dian busi­nesses to be on par with global ones. They can turn their unique ar­eas of ex­per­tise into ad­van­tages by de­ploy­ing the Pro­pel Ex­cel­lence Method. They can pivot swiftly when needed and in­no­vate quickly, which in turn will keep them ahead of com­pe­ti­tion.

All they need is to em­power their peo­ple to trust a sys­tem. This will help them de­velop ir­re­sistible busi­ness of­fer­ings and turn their busi­nesses into global su­per­pow­ers. ■

Through the PEM, busi­nesses can set up a sys­tem to de­fine a role and mea­sure its ef­fec­tive­ness to align it with or­ga­ni­za­tional goals.


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