How The Optima Kart Hire: The Eight C’s

The Optima Kart

As I’ve shared previously, I came to the financial services industry with an undergraduate degree in computer science from a state school. Perhaps to compensate for my lack of “pedigree,” early on I put an emphasis on data and credentials: did the candidate have the “right” credentials from the “right” b-schools and companies? As I gained confidence and experience, I put more emphasis on the intangible skills that are intrinsic to whom a person is. So what do I look for when I hire today? Here are my eight Cs when examining candidates:

• Credible: Is this someone with integrity and sound judgment, who is believable and trustworthy, and who will act in good faith, not just to the “letter” of a law/policy, but embrace and respect its spirit and intent?
• Competent: Is this person the “real deal”? Does s/he have the requisite skills, experiences and knowledge to be successful in this role?

• Cultural Fit: Is this someone with the values, outlook and behavior that is congruent with that of our organization and team?

• Can-Do Attitude: Does s/he have a positive outlook with a bias to action? Is this someone who is resilient and results-oriented? Will s/he act like an owner and not just bring good ideas to the table, but also execute those ideas as well?

• Charitable: Is s/he singularly focused on his/her own success at the expense of others, or is this someone who uses his/her experience, knowledge and connections to elevate and benefit others?

• Change-oriented: Is this someone who embraces change and sees it as an opportunity for—or obstacle to—progress? Can s/he operate comfortably in a fast-paced, dynamic environment?

• Curious and Connected: Is this someone with a thirst for knowledge, who is willing to learn new ways and unlearn old ways? Is s/he actively engaged in industry conversations and well placed to bring fresh ideas, insights and perspective to the team?

• Communicator with Distinction: Can this person organize his/her ideas, get those ideas across and tailor the message to meet the needs of different audiences? Is s/he an acute listener who truly hears and understands the messages that others are sending?

Why your competitors star performer failed in your organization

The Optima Kart

Stealing your competitor’s star performer!! Ok!! I get it, I have done that before and chances are that some of you have as well.

Most often HR is pressured by Managers into playing all sorts of dirty games to hire the top talent from the competitors. Sitting with a new hire to get the database of top talent from his previous employer, offering an informal reward to those who refer and bring competitor’s A players and what not!

These managers think of only the easy path while deciding on to bring a rival’s talent –
He knows the industry already – Check
He has proven the competencies required to do the job – Check
He has shown such an outstanding performance – Check
He will hit the ground running without any training – Check

But yet why your competitors star performer fails in your organization! Here it is!

Not having the Support

Chances are that he was getting the right support system at competitor company that helped him shine in his profile. And it is lacking in your organization. Be it access to the resources that are required for him to do his job, having supportive co-workers, having the opportunity to work independently or the freedom to make decisions. It is not just about having the right competencies to do the job that matter but it is also about having the right environment with sufficient support that helps him perform better.

Not with the right Manager

Of course, you hired the right employee with the right skills at the right place. But is he with the right manager?! A wise question to be asked. If the manager in your organization is a snarky micro managing mediocre who takes the credit of the great work of his team members, then there is no point in bringing in any rock star to work with him.

Not a cultural fit

The competitor organization’s culture can outrun yours if their organization values were aligned with their employees personal values and interest. If it was a friendly and upbeat work environment that helped him to put his full self at work and if your organization culture is not encouraging enough for him then it might take a while for him to be productive.

Depends on what stage of growth your organization is in

It can be that your competitor is a better established player than you and their product or services are highly dominant in the market. That would have helped him attain sustainable growth at the competitor organization.

Share your experience of hiring a competitor star performer at your organization.

Infosys 3.0 needs acquisitions, stronger sales push: Analysts

BANGALORE: Infosys embarked on an ambitious drive in 2011 to get at least one-third of its revenues through intellectual property. Two years on, the division responsible for this is reporting losses and brings in less than 2% of sales. To its credit, the platforms and solutions division — excluding the core-banking software product Finacle that brings in about 4% of sales — has grown faster than the company average and has booked business worth $730 million, spread over 8-10 years.

The Products, Platforms and Solutions division, called PPS internally, is operating at -3 % profit margins at present. The initiative, part of chief executive SD Shibulal’s ” Infosys 3.0″ strategy , is meant to take about five to seven years to pay off and calls for significant initial investments to build custom software solutions for specific industries.

However, analysts said the $7 billion, Bangalore-based company must make acquisitions and have a stronger sales push for its IP-led solutions, if it is to move the needle and meet revenue targets. “To take it (PPS business) to one-third of their revenues, Infosys has to do multiple tuck-in acquisitions,” said Kuldeep Koul, analyst with brokerage firm ICICI Securities. “Eventually, when the business reaches a steady state, the margins should be significantly higher. In my estimate, a steady state is at least 5-7 years away”.

Like its peers in India’s $75-billion technology outsourcing industry, Infosys is attempting to move up the value chain at a time when their traditional, bread-and-butter business is fast getting commoditised.

Infosys is among the few to have a wellarticulated a strategy for intellectual property-led solutions. Revenues in this unit come from developing software platforms for customers such as Bharti Airtel, which took Infosys’ help to create a mobile-wallet last year. Infosys did not make its executives available for comment as the company is in a “silent-period” ahead of its quarterly earnings announcements in early October. In June, after the March quarter earnings, Shibulal had told ET that the company would look at acquisitions in this space across geographies and industry verticals.

It had also earmarked $100-million (. 630-crore ) innovation fund to incubate ideas related to the PPS business from within Infosys and outside. “Around 33% revenues from PPS looks unrealistic because no service-line in the whole of IT industry accounts for 33% of any company’s total revenues,” said Sandeep Muthangi, vice-president, research at brokerage firm IIFL Institutional Equities.

Muthangi said while revenues from PPS has not grown significantly, it is to the company’s benefit that Infosys is seen as one of the first movers when it comes to marketing its products and platforms.

Sudin Apte, CEO and research director at outsourcing advisory firm Offshore Insights, said Infosys is doing the right thing by investing in products and platforms, but the company needs to invest more on its front-end and sales to push products in this service line. “4.8% of revenue in sales and marketing is hardly anything,” Pate said.

IBM to invest $1 billion in Linux, open source technologies

IBM said it would invest $1 billion in new Linux and open source technologies for its servers in a bid to boost efficiency for big data and cloud computing.

“Many companies are struggling to manage big data and cloud computing using commodity servers based on decades-old, PC era technology,” said IBM vice president Brad McCredie.

“These servers are quickly overrun by data which triggers the purchase of more servers, creating unsustainable server sprawl. The era of big data calls for a new approach to IT systems; one that is open, customizable, and designed from the ground up to handle big data and cloud workloads.”

Linux is an open-source operating system which can be used in servers, personal computers and other devices.

IBM, which produces supercomputers as well as servers which run computer networks and manages big data for corporate clients, said it would establish a new Linux in Montpellier, France:

“The new center is among a growing network of centers around the world where software developers can build and deploy new applications for big data, cloud, mobile and social business computing on open technology building blocks using Linux and the latest IBM POWER7+ processor technology,” IBM said.

Microsoft announces $40 billion share buyback

NEW YORK: Microsoft has announced a new $40 billion share buyback as part of an effort by the transitioning US tech giant to return more cash to stockholders.

The tech giant, which has seen its stock stagnate in recent years, also said it was increasing its dividend by 22 percent, to 28 cents a share.

The new share buyback comes on the heels of another share repurchase plan announced in 2008, which was set to expire on September 30.

“These actions reflect a continued commitment to returning cash to our shareholders,” said Microsoft chief financial officer Amy Hood in a statement.

The move comes with Microsoft in transition, having announced the departure of chief executive Steve Ballmer within a year.

Microsoft, which is trying to refocus the company around “devices and services” after missing the transition to mobile computing, also recently announced it was buying the mobile phone division of Nokia.

The maker of Windows software had been the undisputed leader of the tech sector for years, but it has recently been overtaken in market value by Apple and Google.

Microsoft shares rose 0.59 percent to close at $32.93. A buyback generally boosts the value of a stock by reducing the number of outstanding shares.

Keith Weiss, analyst at Morgan Stanley, said the news was a “modest” positive for Microsoft but noted that investors may be cautious because of the “struggling devices strategy.”

Citi analyst Walter Pritchard argued in a research note that “there is much more room for Microsoft to return more capital through dividend.”

Microsoft has more than $70 billion in cash holdings, much of which is held overseas. Like Apple and some other tech firms, Microsoft has held off repatriating the cash, which could be subject to the top corporate tax rate of 35 percent.

The company has sent out invitations to a September 23 event at which it is expected to unveil new Surface tablets to challenge iPads and Android devices dominating the market.

The event to be held in New York comes as the US technology giant struggles to remain relevant as Internet-age lifestyles shift from traditional computers to smartphones and tablets.

The company was forced to take an embarrassing $900 million writedown this year for “inventory adjustments” due to a poor reception of its tablet. It also cut the price of the Surface.

Microsoft is also holding its analyst day this week, where it will discuss the strategy and rationale behind the Nokia acquisition.

“Investors remain unconvinced of the logic behind the Nokia deal, thus management should clearly articulate why a smartphone presence is critical to the long-term success of Office and Windows,” Barclays analyst Raimo Lenschow said in a note to clients.

“Additionally, with many long-only investors unsure about how the new strategy will affect Microsoft’s financial model, we expect goalposts to be provided to help investors understand how the transition will play out.”

Lenschow said the buyback plan was in line with expectations, but that the time frame for the program was not clear.

In the most recent quarter, Microsoft posted a profit of $4.97 billion, held back by the writedown for Surface.

Microsoft said its results were helped by growing revenues from business services, which offset the hit from a lagging market in personal computers.

Microsoft’s Windows remains the dominant platform for personal computers, but the PC market is being overtaken by tablets and other mobile devices.

A Gartner survey showed a worldwide drop of 10.9 percent in PC sales in the second quarter compared with the same period a year ago, with PC shipments falling to 76 million units.

A separate survey by IDC projected that tablet shipments would surpass total PC shipments in the fourth quarter of 2013.

eBay plans to hire 1000 IT pros in India

eBay has announced plans to open a new development centre in Bangalore, and expects to hire up to 1,000 technologists over the next three years.

The new Bangalore facility will feature several centres of excellence and house technologists from both eBay marketplaces and PayPal. It builds on eBay’s existing presence in India which includes a global development centre with over 2,200 employees in Chennai and the eBay India business unit in Mumbai.

The company is aggressively hiring senior technologists with strong product development experience across many functions including research, platform and application development,architecture, quality engineering, product management, marketing and product analytics, user experience and design, and information security.

“PayPal is growing at a phenomenal rate globally, as we continue to execute on our bold vision of re-imagining money,” said Anupam Pahuja, general manager – PayPal in a statement.

“To support this growth, we are looking to tap into the large pool of software engineering talent in Bangalore to come innovate with us and create the future of commerce. We are committed to India as a technology hub and see India’s software engineering talent as a critical driver for the long-term success of PayPal’s global payment platform,” he added.

Said Rajesh Ramachandran, General Manager -eBay Marketplaces: “eBay’s ecosystem provides technologists a unique combination of startup culture to innovate and product excellence culture to build products that creates value to millions of customers. The India centre plays a strategic role in global product and technology innovation. The Bangalore centre will bring in significant thought leadership to drive critical business initiatives.”

25,000 Job Cuts Are Coming To HP

HP is considering cutting 25,000 jobs,

We had this yesterday, based on a tip from a source.

HR Akshay Inc is confirming much of what we heard.

The key things we heard:

• Our source said HP wants to trim its workforce by 10%-15%. Given that HP has 320,000 employees, a 10% reduction would be 32,000 workers gone. However, that would include an early retirement program. We’d guess that this would include attrition, too, where new hires don’t come in when employees leave. That number sounds high and we don’t expect HP to promise it next week, because HP will also want to shift some jobs offshore. So, HP’s total workforce numbers won’t reflect all of the cuts.
• We’re hearing that manufacturing staff won’t be hit as hard as others. That makes sense to us given that HP is more of a product company than a software or services company.
• Speaking of services, keep an eye out for HP Services results, which one insider said is expected to have another abysmal quarter. HP’s outsourcing units could be particularly hit hard with whatever layoffs come and many of their jobs moved offshore. We’re hearing that people with 8-10 years of experience—or are at the top of the salary charts — are the most vulnerable.

Employee Motivation – The Magic Spark

What is the secret to employee motivation? If you approach it from the viewpoint of production and results, you’ll win.

An employee who is “motivated” runs under their own steam. You don’t need to keep stoking them up every day.

There has been a lot written about employee motivation, but let’s look at it from the viewpoint of performance and production.

It doesn’t matter whether you’re dealing with a Sales Executive, an Accounts Person or a Warehouse Manager; if you want them to produce well, they need to be motivated.

The First Trap

The World Book dictionary defines the word “motivate” as: “To provide with a motive or incentive to act; induce to act.”

This suggests some external influence is necessary, which leads to a common misconception.

• This definition seems to suggest that you have to externally induce some magical factor called “motivation”. It sounds like you have to “give incentives”.
• From this, a lot of managers get the idea that they have to hand out freebies or organise motivational seminars in order to get their employees fired up.

The fact of the matter is, if an employee is not already motivated, attempting to boost their motivation level “artificially”, from an external viewpoint, will almost certainly fail.

The reason for this is that the best type of motivation comes from within. It is “self-motivation”. An employee who brings their own energy on the job, of course, is the optimum. Performance management is easy in this case.

Unfortunately, people who are naturally self-motivated are fairly rare. But there is definitely something you can do to improve the employee motivation level of the remainder.

The key here is the answer to the simple question: “Why does this person come to work each day?”

Think of Motivation as a Scale

At one end of this scale you have the employee who hates their job, but needs the money. At the other end of the scale is the person who gets such a kick out of their work, they can’t wait to get stuck into it.

Some people dread the thought of another “day of drudgery” and only come to work because they will get a pay cheque at the end of the week. These are the ones who take lots of “sick days”, and find any excuse to not produce the results you pay them for. These are the “non-performers” we often refer to in these articles. Their employee motivation is almost zero.

• A “top performer”, on the other hand, actually enjoys the challenge of their job.
• They get a real buzz out of achieving results.
• They get up in the morning and actually look forward to going to work.

We are not talking here about the “workaholic”. That’s someone who has such an obsession about working that they just cannot leave it alone. Some don’t even enjoy their work; they are simply unable to stop. That’s something quite different from employee motivation.

No, the top performer is generally a highly self-motivated individual who devours his or her work because they really enjoy producing the results.

Have you seen a top-notch employee who is regularly solving complex problems and leaving happy customers in his or her wake? Do they goof off, or take sick days, or come to work late?

No! The reason they don’t is that they are having too much fun doing the job. They are producing results! Employee motivation and performance management are in the right balance here.

In The Extreme

The rare case is someone who has “found their calling in life”, so to speak. They manage to get themselves into a line of work that is exactly what they want to do. And they usually dedicate their whole life to this activity.

Do you think Mother Theresa or Fred Hollows had to be pushed by some external influence to get them moving each day? Were they motivated by the money they were making? I don’t think so…

Even though these are extreme cases, we can learn some lessons here about employee motivation. The key lesson is that when a person is producing meaningful results, they are motivated. There is a definite link between production and motivation.

Production & Motivation

You can see this phenomenon very easily with sales people.

Watch a sales exec who has just made several sales in quick succession. Do they need any external push to get them going on the next sale? Not likely!

• They are up!
• They are full of confidence.
• They are eager to approach that next prospect.

 But this is also true of any job. When an employee is consistently achieving the results expected of them (or even over-achieving), their morale is high. They need no external motivating influences to get them started, or keep them going.

Consider the other scenario: an employee who is not producing any meaningful results. Think of a technician who gets the cable connections wrong, takes too long to complete the job and generally does such sloppy work that someone always has to check up on them.

These are the ones who need special performance management focus. They may even have trouble getting up in the morning, as they feel there is nothing to look forward to. Their employee motivation is almost zero.

How to Motivate

So, how do you motivate these people? How do you get employees to do, of their own accord, what you are paying them to do?

1. Offer more money?

2. Improve working conditions?

3. Increase sick leave?

4. Increase holidays?

5. Reduce working hours?

The answer is “NO”, to all of these.

And the simple reason is this: if the only employee motivation a person has (to get them out of bed in the morning) is the money, or the perks of the job; the first time they see a job with more money and better perks, they will leave you.

In addition to that, all of the things listed above are short term gains. They give only a temporary boost. None of these solutions creates an environment where the employee is continually stimulated by their job; actually looking forward to working.

Now, this is not to say that one should not strive to have the best possible working conditions for their staff. But this comes under the heading of “pride in your organizations”.

And, of course, it is a fact that your productive staff will feel this pride and, as a result, will strive even harder to contribute to the overall results.

‘Chicken & Egg’ Situation?

Ok, we’ve got two factors here. Highly motivated staff is productive. Highly productive staff is motivated. But which comes first?

Actually, there’s only one entry point to this employee motivation dilemma. We’ve already stated that, trying to motivate your staff by providing external incentives will not cut it. It’s only temporary. It will not stimulate the things that will improve their self-motivation.

Therefore, the way to tackle this is from the viewpoint of production. If you can increase their production, you will automatically increase their motivation.

Production and Motivation go hand-in-hand. Increase one, and you will increase the other.

Let me say that again: increase production and you will increase motivation!

You may not be able to externally increase motivation, but you can certainly increase their production. That’s absolutely under your motivation and performance management control. And when you do, their self-motivation will also rise!

If you want to dramatically increase your employee motivation, take a tip from those people who already demonstrate a high degree of self-motivation. They produce results!

Increasing Production

So, how do you increase an employee’s production?

Let’s break this down, because the approach is different for different types of employees. You have three types of employee:

• Poor performers.
• Average (mediocre) performers.
• Top performers.

There are three major things you can do to help these people to increase their production:

• Clarify the end-results of the job.
• Remove the barriers to production.
• Provide support.

…but it depends upon who you are talking to as to which approach you take.

1. With poor performers, you firstly need to clarify exactly what their job is. If they really knew what they were supposed to produce, this would dramatically improve their production. If you don’t have an effective Job Description for that job, it’s important that the “end result” of the job is clearly defined.
2.  For the average, or mediocre, performer, the best approach is to start by find out what’s stopping them. What barriers are they encountering that they can’t handle? They probably have a reasonably good idea of what they are supposed to produce, but they are having some difficulties. For example, a Technician can’t do his job because the job materials have not been organised in time. If you can remove some of the barriers for them, their production will go up.  Top performers generally know exactly what they should be producing and they need little help in removing barriers. In fact, don’t even try to remove barriers – solving these is part of the fun for a top performer. What you do with these high producers is find out how you can support them better so they can produce more. It might be more or better equipment, or a support person to help them out.

EBAY Buys DECIDE INC. To Help Sellers Set Competitive Retail Prices

Decide Inc., which provides online shoppers with services like projected and guaranteed retail prices, along with ratings of products and sellers, is now part of eBay Inc., the e-marketplace announced on Friday. EBay, which did not say what it paid for the company, says Decide’s technology and staff will help its millions of sellers better compete with dynamic pricing tied to customer demand.

EBay will use Decide to “build an improved pricing tool that helps sellers better price their merchandise and sell items faster,” it says.

The announcement elicited positive comments from both analysts and eBay sellers, who say the technology will allow them to dynamically re-price their items on the e-marketplace. With dynamic re-pricing software, a seller sets business rules to automatically raise or lower the price on a given product or category of products based on such factors as the prices charged by its competitors and how well products are selling. For example, a seller might set its prices to automatically adjust to the lowest price offered by its competitors on the same product, but it may also set a rule to keep its prices higher if it’s meeting a targeted minimum number of daily sales.

“I see the purchase of Decide as being a positive for eBay sellers, and am particularly hopeful about eBay’s statements regarding using the technology to offer a dynamic re-pricing option for sellers,” says Kat Simpson, who sells on both eBay.com and Amazon.com and provides consulting services to other sellers. “If sellers get access to better data about their buyers, it can only improve our bottom line.” Simpson adds that she expects the data from Decide’s technology and analytical staff will be more reliable than what is currently available to eBay sellers.

Colin Sebastian, a stock analyst at R.W. Baird Equity Research, agrees that Decide will help eBay improve its data services for sellers’ re-pricing strategies. “I see the acquisition as part of eBay’s ongoing efforts to improve their use of data, upgrade the technology and engineering teams and provide more tools to sellers to select and price inventory,” he says.

EBay says it will retain nearly the entire staff of Decide, including co-founder and CEO Mike Fridgen and 26 staff members, among them software engineers and data mining experts. One Decide veteran not joining eBay is co-founder and chief technology officer Oren Etzioni, who is leaving Decide to become executive director of the Allen Institute for Artificial Intelligence.

Decide says it will cease operating its consumer-facing, subscription-based web site, Decide.com, on Sept. 30. The site will continue predicting price levels on featured products and honoring all existing price guarantees until that date. It stopped offering to guarantee new prices on future purchases starting on Sept. 6.

Seattle-based Decide, which launched in June 2011, says it has since raised $17 million in venture capital from Madrona Venture Group, Maveron, Vulcan Capital and angel investors.

For eBay, the acquisition of Decide follows several other technology deals in the past couple of years, including the Svpply.com product recommendation service, the social media-based recommendation technology provider Hunch.com, the mobile shopping tool RedLaser and an application for local shopping deals, Milo.

Are Tatas buying cash-strapped e-commerce venture Indiaplaza?

One of the country’s oldest e-commerce ventures Indiaplaza,which was on the verge of shutting shop after failing to raise fresh funds, might soon be bought over by the Tata Group. According to a report by NextBigWhat, the Tata Group which already has large retail operations, is working on a deal to acquire Indiaplaza.

Indiaplaza was launched as Fabmall.com in 1999 and was one of the first to enter India’s e-commerce business. However somewhere  down the line it lost the plot and has been struggling with cash flows ever since. Last month Tech Circle reported that it has already sent a notification to all its vendors for negotiating and settling their final dues. In other words, it was looking to clear all its liabilities. The last fund raising took place in  2011 when it raised $5 million  from Kalaari Capital (then known as IndoUS Venture Partners). The company was expecting to raise the next round in mid 2013, but  reports said it could not find an investor. Previously known as Fabmall.com, Indiaplaza offers products like apparel, mobiles, books, home appliances, baby products, cameras, cakes, electronics, gift articles, home decor, health & beauty and sports products among others. Even though the site is active ,  a lot of the products are  ‘out of stock’.

Ye Andar ki baat hai: Why women prefer buying lingerie online

Just plain Jane won’t do. E-commerce in India  played on ‘convenience’, ‘price’ and ‘choice’, but competition in the market has now forced start-ups to think out of the box with players betting on the  ‘privacy’ game  to  lure buyers. So while other fashion websites struggle to breakeven, online lingerie sites seem to have cracked the space thanks to a wide range of innerwear in all sizes like cellulite-controlling innerwear, swimwear and shapewear and easy access . This market is currently pegged at Rs 9,500 crore and is expected to grow at an annual rate of 14 percent. Take a look at these stats for a second:

Data by Internet and Mobile Association of India shows that India’s e-commerce market is expected to see a 33% growth by the year end and is expected to touch Rs 62,967 crore by the year from Rs 47, 349 crore as of August 2013. What’s interesting is that E-tailing which comprises consumer items such as apparels and footwear, jewellery, books etc is expected to cross the Rs 10,000 crore mark by Dec 2013 end and E&Y estimates that the Indian lingerie and nightwear market, which was valued at about $2 billion in 2011, is expected to grow at a CAGR of about 15% until 2015. That’s a huge opportunity and lingerie E-tailers would be foolish to not cash in on this. We point out that the privacy of internet shopping has drawn customers by the hordes to online lingerie retail sites. For example, online lingerie retailer Zivame, which was set up in 2011, is growing at 400 percent annually and is expected to earn revenues of about Rs 300 crore this fiscal, while others like Moods of Cloe, Peri Peri Skinwear, Under Cover Lingerie and Pretty Secrets, have also made their mark, the report said. For most of these online retailers, providing access to specialised products not available at offline stores is also helping them win customers. Buy why are retailers so bullish on this market? Firstly, demand for fantasy lingerie is growing in India even though Indians tend to be more conservative than their western counterparts. Monica Anand, CEO and Co Founder, Under Cover Lingerie that sells innerwear, sexy lingerie and nightwear told Firstpost, “People like to browse fantasy lingerie without the fear of running into someone they know. This is best done from the comfort of their own homes. Many people prefer that our products come packaged very discreetly,” she said. Secondly, shopping online bypasses any unpleasantness or discomfort one would witness in stores. Sometimes it’s hard to be a man in a lingerie shop. Online, there is no need to have an uncomfortable conversation with the sales staff while you choose a particularly erotic piece of lingerie. An in-house research by Undercover Lingerie also showed that men, who otherwise feel uneasy about venturing into a lingerie store, can now easily buy products for their partners online. A discreet delivery service which online e-tailers offer is the key to success in this market. Thirdly,  the convenience of summoning things home with a few clicks is not only luring upscale city women but also women in Tier II and Tier III cities due to the sheer variety of products that are not available in their local stores.  For instance, if you have specific tastes in lingerie or if you have found it difficult to find your size in the styles you prefer in stores, shopping online can make the process much easier. ThatsPersonal.com which sells  erotic lingerie, costumes for women, men’s erotic innerwear, lotions, lubricants, select adult games, select literature, erotic candles, body powder, body paint, arousal gel’s, etc gets 30 percent of its orders  from smaller towns and districts like Warangal in Andra Pradesh, Nanded in Maharashtra and various towns in Punjab outside Patiala and Ludhiana. And guess what?  Only 20 percent of their customers are women.

 

Plan A to Plan B and beyond – The Optima Kart

The Optima Kart, C.E.O.

In the world of business, several entrepreneurs start off with a business plan (say, Plan A) that they think can solve a big problem and delight customers. They assemble a team, raise finance and strive hard with tenacity and perseverance to make the venture successful. But what happens if Plan A doesn’t work? How does an entrepreneur deal with his various options and move on to a Plan B that may or may not work? Should he modify the fundamentals of his business model?

John Mullins, professor of management practice at London Business School and an expert on entrepreneurship, doesn’t have direct answers to these questions, but suggests a ‘process-oriented’ approach to make the transition from Plan A to Plan B and go further. His book, ‘Getting to Plan B: Breaking Through to a Better Business Model’, which he co-authored with venture capitalist Randy Komisar, explains this process to entrepreneurs.

The book is based on field studies of more than 20 ventures, most of which made drastic changes to their initial business models, used data to evaluate their business decisions and continuously made corrections to make a venture work in their (and their investors) favour. The book goes on to talk about five key elements of a business model that are critical to any business. These include your revenue model, gross margin model, operating model, working capital model and investment model. These different elements become crucial at different points in time, depending on your business.

For Google and Facebook, the revenue model kicked in much later and the investment model was critical in the early stages. For Starbucks, its pricing strategy (charging customers higher prices for the Starbucks experience), which made its gross margin model work, was crucial. But, at a broad level, for long-term success, Mullins and Komisar believe all these five models must work in tandem.

Our cover story this edition is inspired by Mullins’ and Komisar’s book. We uncover seven venture capital-funded Indian growth companies that made the transition from Plan A to Plan B (or Plan C or Plan D…) based on hard data and evidence gathered from the market. It proves that in an entrepreneur’s journey, continuously measuring the key metrics of your business and fine-tuning your model based on this data is crucial for success.

The Smart CEO caught up with Mullins to talk about an entrepreneur’s journey from Plan A to Plan B and beyond.

Why do you want to bring in ‘process’ into an entrepreneur’s journey?

Like anything else in life, if you do something with discipline and systematic intent, you will probably do it better. Empirically, we have found that Plan A (for a business venture) doesn’t work most of the time. Therefore, entrepreneurs have to get to some other plan.

There is widespread belief among entrepreneurs and investors that entrepreneurship is about tenacity and perseverance. They think if you only keep trying hard enough to make Plan A work, it will eventually work. We think that is wrong.

Additionally, if you carefully measure the results from Plan A, data can show, unambiguously, that some of your assumptions were wrong. Based on this data, you can identify additional leaps of faith (new assumptions for which you don’t have evidence) and metrics you need to measure while implementing your Plan B.

The book suggests that entrepreneurs should carefully gather data from analogs (data from other businesses you’ll copy in some way that provide a foundation for your assumptions) and antilogs (data from other businesses that you’ll explicitly NOT copy), which will help them in formulating their business model. Please explain this.

There are two ways you can formulate your business model. You can pull numbers out of thin air and hope, or, you can base your assumptions on some kind of evidence. Our advice to entrepreneurs is that most ideas are not completely unique.  When Steve Jobs invented the iPod, he had data from Sony’s Walkman, which had sold more than 300,000 units. You gather that data and it will give you some insights.

Let us take the story of Jeff Bezos of Amazon. Bezos raised money really early with the assumption that he could sell books online. It hadn’t been done before, so he didn’t know for sure if it would work, but as soon as he launched Amazon, he started measuring. Are people willing to pay for shipping? What kind of discounts do they expect online? There were a whole bunch of metrics he vigorously tracked and this was crucial for him.

I want to discuss a little bit about two very different potential businesses in India: one entrepreneur wants to build a quick service restaurant (QSR) chain in India (say, a Subway clone in India) and another wants to build a local-language voice-input search engine for rural India (say, a voice-Google for rural India). How does he go about gathering evidence?

 The ‘process-driven’ approach really helps in both cases. If you are trying to start a QSR in India, there is data out there from McDonald’s India, Subway India and several others. One can probably make assumptions on some aspects; say labour costs and gross margins, from another QSR player. But the entrepreneur still needs to measure some other aspects. Say, he wants to sell French quiche; he needs to measure if Indians will buy quiche in a QSR format in the first place. He could start a store or he could experiment by setting up a one-time stall in an exhibition. The data from this experiment will give him some insights.

In case of the technology entrepreneur who wants to build a voice-search engine, it is an innovative idea, but there are some aspects that have been done before. Data on how many man-hours it will take to develop the product can be gathered. Observing initiatives like ITC’s e-Choupal might give some insights on how many customers will be attracted to a service like this.

Overall, some assumptions are made based on data available. Some leaps of faith have to be tested by evidence gathered from experiments. A process-driven approach works in both cases.

Finally, should entrepreneurs be worried that the startup they are working on might be in an industry that is going through a bubble?

The answer is yes. However, it depends on what you are looking to build as an entrepreneur. If you are looking to run a long-term, sustainable business, raising several rounds of financing, eventually the bubble is going to pop and that will be bad. However, if you exit the business before the bubble bursts, you as an entrepreneur would have still made money. But what if the bubble pops a few days after you raise money? That is the risk associated with running a business in a segment that might be in a bubble.

Inventor. Entrepreneur. Investor.

Vinod Dham, who is acknowledged as ‘Father of the Intel Pentium’ and currently founding-managing director at Indo U.S. Venture Partners, has constantly reinvented himself to stay on top of the global technology industry

 b Vinod Dham

He is the co-inventor of Intel’s flash memory and is acknowledged as the father of the most famous and widely used engineering product in the world  – the Intel Pentium. He has over 30 years experience in Silicon Valley’s global technology industry and had the privilege of working for Intel when it was still a comparatively small, hot technology company. He is a technologist turned entrepreneur and venture capitalist. He is Vinod Dham and his career in Silicon Valley and beyond is like a road map for many budding entrepreneurs.

Over the years, Dham has reinvented himself several times. While at Intel, he co-invented flash memory and then went on to lead Intel’s flagship Pentium product. He then held senior management roles at two semiconductor startups, NexGen and Silicon Spice and led both these companies to successful acquisitions by AMD (acquired NexGen for U.S. $857 million) and Broadcom (acquired Silicon Spice for U.S. $1.2 billion), respectively.  Through my in-depth conversations with him, we have tried to bring to you, his learnings from numerous experiences over the last three decades.

Dham started his career at a startup when even the word ‘startup’ was not coined. It was the early 1970s and right after his undergraduate degree at Delhi College of Engineering, Dham joined Continental Devices based out of New Delhi as a hardware engineer. At the time, Continental Devices was the only silicon semiconductor startup in the country. After four years of working there, Dham moved to the U.S. for his Masters in Electrical Engineering in 1975. After a brief stint at NCR, then a leading “cash register” company, he started working for Intel in the late 1970s.

In his latest avatar, like several of his Silicon Valley colleagues, Dham is now a venture capitalist at Indo U.S. Venture Partners (IUVP) with a focus on funding early and mid-stage growth companies in India.  Through his career, Dham has been a game changer of sorts. Whether it was at Intel, NexGen or Silicon Spice, Dham focused on the job at hand, delivered a top-class outcome and then moved on to his next big assignment. And, this next assignment was usually very different from the previous one.

Phase 1: The Intel saga

“In a way, in the 70s, Intel was still a very hot startup, just like Facebook is today,” reminisces Dham. In his early years at Intel, Dham worked on the flash memory team before moving to the microprocessor design division that gave the world the Pentium. He honed his skills for leading the Pentium project by working on the two earlier generations of microprocessors, Intel’s 486 and 386 in various capacities.

Like it is often believed, it was not as if Intel’s Pentium microprocessor, which is the underlying engine for a bulk of the world’s personal computers (PCs), had no competition. In the 80s, PCs had become mainstream tools for productivity enhancement at the workplace and had begun to find great acceptance amongst home users as well. By the time he took over the Pentium project, a large number of established and new players, including the AIM consortium (a consortium led by Apple, IBM and Motorola) and a consortium led by Sun Microsystems (which comprised companies like Sun, Fujitsu, Philips, Tatung and Amdahl), had begun aggressively working on their big idea for the PC industry and these projects seriously threatened Intel’s dominance in the segment.

The Optima Kart

Dham believes that Intel’s ability to “focus and execute” while maintaining full compatibility of application software with its previous generation microprocessors was the key reason for its success over dozens of these big competitors. From product development teams in California and Oregon to factories in Penang and sales and marketing teams all over the world, the entire company was focused on the success of Pentium. “For each and everyone at Intel, the success of Pentium was top-most priority. Pentium was Job 1 for Intel,” says Dham. His role as a senior executive and project leader of the Pentium chip was acknowledged world over.  From the ‘Intel Inside’ brand building campaigns to delivering a top-notch product – the whole marketing mix worked brilliantly for Intel.

While I can feel the excitement in Dham as he narrates his Intel experience, I draw him back to my original question about how he compares Intel then vs. Facebook now. While both entities are not directly comparable, Dham believes there is one major difference.  “At Intel, to design a microprocessor chip, the process would take years. The cost of failure was extremely high, which meant discipline and attention to detail were crucial,” explains Dham.  At Facebook, developers add and remove features overnight and new applications can be coded in a jiffy. The other aspect, of course, is that when Intel was in its early stages; the entrepreneurial revolution in Silicon Valley was just getting started. The ecosystem was in its nascent phase. Says Dham, “Computer software was really at the beginning of its commercial debut. The hot area then was electronics.”

In 1995, at the age of 45, after spending 16 years at Intel and reaching the top management of the company, Dham had a “mid-life crisis” and was itching to do something different. “If you live in Silicon Valley and have not experienced life as an entrepreneur in a world of start ups, you have missed out on a very exciting learning experience!” he says.

Phase 2: Leadership at startups

By the time Dham quit Intel, he had already built a tremendous brand for himself.  It was also the time when the entrepreneurial revolution in the Bay Area was at its peak. He came across a company called NexGen, a boutique processor design company that was about eight years old. He joined the company as its chief operating officer (COO). While NexGen had been operating for several years, the company lacked strategic direction.

While the design team at NexGen was very good, the company did not have a vision as to where it would fit into the overall PC industry. Dham, with his wide-ranging Intel experience, turned around NexGen’s strategy.  He knew NexGen could not beat the big guns in terms of manufacturing capabilities and advanced technology. He had to build intellectual property (IP) that would piggyback on the infrastructure that had already been created by the rest of the PC industry. The features in its technology product had to be above and better than those that already existed.

The Optima Kart

Dham convinced the NexGen management to find a process technology and manufacturing partner for building its chips competitively with Intel’s. Meanwhile, Dham discovered that AMD’s (Advance Micro Devices was Intel’s main competitor in the computer hardware industry) microprocessor product, called K5, had failed to deliver on its promise. Dham convinced the NexGen management to explore what appeared to be a perfect synergy for merging the two companies – NexGen had a product but no factories and AMD had a factory, but, no product. His insights proved right and AMD acquired NexGen’s product and team for a tidy sum of U.S. $857 million. AMD’s next product, K6, was built using NexGen’s core. For a short while, it was the fastest microprocessor in the world. It was the first time ever anybody beat Intel at its own speed game.

The success of K6 was critical from one more angle – microprocessors were pricey and that meant PCs had to be sold for over U.S. $1500. Dham pursued the top management at AMD to price AMD’s K6 in order to create a sub-U.S. $1000 PC. This positioning forced Intel to respond with a truncated Pentium under the brand name Celeron. Of course, today desktop computers are priced at less than U.S. $300, but, AMD’s ability to give relevant competition to Intel has played a key role in this price reduction. And, knowingly or unknowingly, Dham played a critical role in the success of K6, which triggered off the rivalry.

After spending a year at AMD post-acquisition, Dham was ready to get back into, in his words, “the extreme sport” of working in a startup. In April 1998, he joined Silicon Spice, as its president and chief-executive officer (CEO). Silicon Spice was initially experimenting with using an innovative “reconfigurable” technology to design chips. It turned out that the chips designed in this fashion lacked the necessary performance and cost to be of much use.  Meanwhile, Dham learnt from dealing with several customers that there was an emerging need for developing chips that could effectively transfer voice over the Internet.

Dham explains, “The Internet protocol was being used mainly for data and delivering voice over the Internet, which was designed primarily for data transfer was a tricky problem in terms of technology.” Dham redirected the company to build this new chip to support VoIP (Voice over Internet Protocol), among the first in the world at that point of time. In a little over two years (in August, 2000), Broadcom acquired the company for a whopping U.S. $1.2 billion in an all-stock deal. “I must say we benefitted from high valuations created by the dotcom boom. The deal was Broadcom’s largest ever (at the time of acquisition) and its seventh acquisition in the year 2000. “One of the biggest lessons I learnt was that it always helps to start defining your product with very early involvement with customers,” says Dham.

Phase 3: Betting on entrepreneurs

Sometime in 2001, Dham made a trip to India where he met several business leaders including Azim Premji of Wipro. He was intrigued by the success of India’s information technology (IT) services industry and was wondering what it would take to recreate the U.S.-India model for hardware and chip design companies. His first fund, New Path Ventures, raised around U.S. $125 million from other venture capital funds in the Valley. After officially launching in April 2002, it operated on an incubator-like model. The idea was to fund three or four ideas in the hardware design space with development teams in India and product definition, sales and marketing teams in the U.S. It invested in companies like Telsima (WiMAX chips for broadband), Montalvo Systems (low-power chips) and InSilica (chips for multimedia and digital printing processors).

Dham, with his partner at the fund, Tushar Dave, was extremely hands-on in helping these companies in day-to-day operations. The timing was right, with Silicon Valley looking at reducing expenditure in the chip development space. The experience highlighted the challenge of finding top quality talent for hardware design in India. With so much focus on software, India had not yet developed the critical mass of skills for chip design work to meet global standards. Larger established corporations subsequently acquired these portfolio companies.

Having learnt that the opportunities for venture backed startups in India will revolve more around services required to meet the needs of India’s growing consumer class, Dham founded a cross-border India-focused fund, IUVP, in 2006. Currently, Dham runs IUVP with his two Bengaluru-based investment partners Vani Kola, a serial entrepreneur, and Kumar Shiralagi, an ex-Intel Capital Group executive. IUVP’s focus has been on investing in Indian companies across sectors including mobile technology, knowledge process outsourcing, Internet, education and healthcare. Dham also believes that the model of outsourcing that is fairly large scale in IT services and software can be recreated in other value added ‘knowledge sectors’ like finance, healthcare, education and legal fields.

So, is Dham having more fun on the other side of the table as an investor? “Investing is fun, but, it was lot more exhilarating being an entrepreneur” says Dham. “The amount of energy that goes into making just one idea a success, in a do or die situation, is that much more exciting.”

What next for Vinod Dham? For now, he is focused on the near-term. “We have deployed most of the capital from IUVP, it is now time to harvest that investment. We are working towards getting our portfolio companies bought or ready for an IPO,” he says. The lessons on “focus and execution” that Dham learnt at Intel are ingrained in his mind. He refuses to make his next move, without delivering a great outcome in his current role.

Entrepreneurs Get Better with Age

The Optima Kart, C.E.O.

When my mother turned forty, we threw her a tongue-in-cheek funeral-themed surprise party, festooning the living room with paper tombstones engraved with Rest in Peace. That party theme is now a laughable conceit — forty then was older than forty now. Almost. In today’s world, there is still a bias against older people — employers in particular often think (in their mind) what Shark Tank’s Kevin O’Leary is fond of saying to entrepreneurs he doesn’t like, “You are dead to me.” If we’re being honest, we probably agree with O’Leary. Who of us hasn’t said, “I’m looking for someone young and hungry.” The implication is clear: If you aren’t young, you have nothing to contribute.

According to famed developmental psychologist Erik Erikson, as we grow older, hunger for meaning animates us, making us more alive. His theory explains that each healthy human passes through eight stages of development from infancy to adulthood. The seventh stage of development typically takes places between the ages 40-64 and centers around generativity, a period not of stagnation, but of productivity and creativity, including a strong commitment to mentoring and shoring up the next generation. Individuals in this developmental stage are supremely motivated to generate value, not just for themselves, but for others, asking the question: What can I do to make my life really count?

There are loads of both anecdotal and empirical data to support this idea of accelerating creativity in our middle years. Take Cheryl Kellond, for example, one of forty women we recently profiled in 40 Women Over 40 to Watch. Kellond, 43, founded Bia Sport, a GPS sports watch that records time, current heart rate, sending the data straight to an online profile. It also comes with a panic button that gives women who work out alone peace of mind. With traditional sources of financing unavailable, Kellond raised her first round of capital ($408,000) on Kickstarter — the ultimate in creative financing. Then there’s Linda Avey, who at age 46 started breakout company 23 and Me, a direct-to-consumer company that gives people access to their genetic data. At age 53, Avey is on her second start-up, Curious, a tool that gives people tools to ask questions about their health through data aggregation and sharing.

Research suggests Kellond and Avey aren’t one-offs. “The average age of a successful entrepreneur in high-growth industries such as computers, health care, and aerospace is 40. Twice as many successful entrepreneurs are over 50 as under 25. The vast majority — 75 percent — have more than six years of industry experience and half have more than 10 years when they create their startup,” says Duke University scholar Vivek Wadhwa, who studied 549 successful technology ventures. Meanwhile, data from the Kauffman Foundation indicates the highest rate of entrepreneurship in America has shifted to the 55-64 age group, with people over 55 almost twice as likely to found successful companies than those between 20 and 34.

The over-40 crowd is also more likely to do work that matters not just for themselves, but also future generations. For example, Jacki Zehner, 47, the youngest woman to become a partner at Goldman Sachs, is pouring her post-forty life into philanthropy on behalf of women and girls as CEO of Women Moving Millions. Carol Fox, 69, has devoted her golden years to the China-U.S. Philanthropy project, teaching Chinese billionaires how to extend their circle of caring beyond family. While photojournalist Paola Gianturco, 73, igniting an activist grandmother movement, inspiring grandmothers across the world to become involved in education, health and human rights. In learning about these inspiring individuals, it’s easy to see why research indicates that a 55-year-old and even a 65-year-old have more innovation potential than a 25-year-old: innovators really do get better with age.

Just as larger businesses provide economic stability to society in the form of higher pay, better medical care, and retirement, experienced workers provide intellectual and emotional ballast in the workplace including innovation expertise. Think about it — disruptive innovation is about playing where no one wants to play (low-end), or has thought of playing (new market). As individuals move into Erikson’s seventh developmental stage, creating something new isn’t just a “nice thing to do” — it is a psychological imperative. The urge to create, to generate a life that counts impels people to innovate, even when it’s lonely and scary. Data notwithstanding, some of the companies among us will continue allow these individuals to fall into the arms of independent work, if we don’t give them the boot first. The smart companies — and my money is on you — will harness this hunger of the underserved, ready-to-serve corp of talent, and upend the competition.

How to Have the IT Risk Conversation

The Optima Kart

I run a course at the MIT Sloan School called Essential IT for Non-IT Executives. Every time my colleagues and I come to the end of the course, we ask people what they considered the most important thing they learned. Surprisingly, many people say it was “how to have the IT risk conversation.”

As one CFO told me, the phrase “IT Risk” contains two dirty words. The word risk makes him feel uncomfortable. And the word IT makes him feel incompetent. Not a good way to feel ready for a productive dialogue. But being able to talk about IT risk is essential if you are going to make the right decisions about how you use technology in your business.

Fortunately, there is a way to talk about IT risk — and understand risk — in terms that make sense to every manager. If you can remember four A’s, you have the framing for a productive conversation with your IT counterparts. You can come to common understanding about what IT risks are most important, what causes them, and what you’ll do about them.

From a business standpoint, IT risks affect four key objectives:

• Availability: Keeping business processes running, and recovering from failures within acceptable timeframes

• Access: Providing information to the right people while keeping it away from the wrong people

• Accuracy: Ensuring information is correct, timely, and complete

• Agility: Changing business processes with acceptable cost and speed

If you’re like managers in most companies, you tend to have conversations about these four A’s in silos, if at all. You never talk about all four together. That means experts in each risk silo tend to focus on optimizing their own risks, not optimizing across risks.

For example, ask yourself: do your security people think about agility risks? When security people veto your requests, they really mean that you’re introducing unacceptable or unnecessary risks. But their veto can slow or stop the changes you need. If you don’t talk about all four risks, then how do you know what risks are really acceptable?

In the best companies, security people think about all four A’s. They consider agility as well as access risks. They will suggest ways that you can do what you want more safely. They’ll even work with other silos — IT operations, application development, compliance, legal, HR, etc. — so they’re ready for you when you want to do new things.

When your security people focus on all four A’s, you can move quickly to adopt new mobile devices, launch digital businesses, or exploit social media. But unfortunately, too many security people focus only on the risks that matter to them. In protecting against access failures, they fail to help the company move forward.

Getting Started on the Risk Conversation

When you don’t explicitly talk about the four A’s, people make assumptions about what’s most important. Those assumptions will vary from person to person. Conversely, when you talk openly about the four A’s, you can fix false assumptions, and you can make better decisions. But you have to start the conversation.

Try the following exercise: Find your favorite IT person. Tell him how important each of the four risks is for your part of the business. Tell him how you think he’s doing at managing those risks. Then listen. I guarantee that you’ll both learn something.

If your experience is typical, you’ll find that you and your IT people place different importance on the four A’s. For example, in a global survey of 258 executives, IT and business executives agree on the relative importance of availability and access risks. But business execs put far more importance on agility and accuracy risks than IT execs do.

What’s going on? Why don’t IT people share your love of accuracy and agility? It’s easy to think it’s an incentive problem. IT people get the blame when systems go down or hackers succeed. But when projects move too slowly or you don’t have a unified view of your customers, you may feel more pain than them. But this incentive answer is only partially correct, if at all.

The real cause of this misalignment lies much deeper; a legacy of risk-unaware decisions and poor communication across silos. Improving agility and accuracy typically requires cleaning up a spaghetti-like mess of systems and processes built up over decades. They can’t be fixed just by buying a new device or devising a new procedure. When your IT people seem to value agility and accuracy less than you, they may have simply given up hope of fixing them. The solution may lie beyond their sphere of influence. Or they may be so busy keeping things running that greater agility feels like a pipe dream.

This is where communication matters. You can only fix the legacy problem by jointly understanding the risks that matter now, the risk tradeoffs in each decision, and the actions required to resolve your risks. Discussing IT risk does more than help you make better project decisions. It also helps you understand when it’s time to rework some of the mess your organization has accumulated over the years.

So, make IT risk part of your conversations every day. Discuss the four A’s whenever you make a big IT decision. If your security people talk only about security, they’re missing important risks — and useful opportunities. But when you ask for unnecessary exceptions, or ask your IT people to move too fast, you’re inappropriately favoring agility over the other three risks— and setting yourself up for trouble later.

One thing is sure. If you don’t talk about IT risk, you only make your risks worse. How do youmanage your IT risk conversations?

When Your Start-Up Should Walk Away from a Deal

In the early years of a company’s life cycle, an entrepreneur’s ambition can be a double-edged sword. The drive to align quickly with marquee customers to establish credibility can sometimes cloud your judgment. At my company, TransPerfect, we have mostly been served well by our mantra of 20 years: “Listen to the clients and respond to their needs.” But we have also learned that the desire to please a potential client at all costs can actually be a setback if you fail to fully evaluate all potential outcomes.

In our formative years, one of the vital lessons I had to learn was how to recognize when an opportunity was not a good fit for us. Signing the wrong deal can cost you time and money — two things entrepreneurs can’t afford to lose. How can an entrepreneur eager to build their firm recognize when a deal is a bad idea? Here are some lessons I’ve learned to keep in mind.

1. When there’s no escape clause in the contract. When we were a smaller company, a major retailer approached us with the promise of $15 million in business from a huge translation project. At first, our team viewed it as a way to put our company on the map, and we wanted to show how committed we were to winning the business. We formulated a plan to scale quickly, adding new personnel and even a new office location to cover all the work that would be coming in. Not long after incorporating all of these changes, the retailer pulled the plug on the entire project due to economic reasons. We realized that the contract we signed hadn’t included any volume guarantee or kill fee, and as a result, we were not able to recover the lost revenue or the expenses involved with the staffing actions. That experience was a cold dose of reality, not only because of the revenue at stake, but also because it brought to light our own naiveté as an eager startup. But looking back, I can say that we learned a valuable lesson about preparation, caution and responsibility, and as a result, our company is stronger.

2. When you don’t have the resources to complete the job to your standards. A major news publication approached us with the project of Spanish language translation for its largest magazine title. The speed needed to turn around a completely translated project on the publication’s timetable would have required us to commit a full-time team of linguists to the project. After some serious analysis, we realized that taking the business on those terms would have meant compromising our high-quality translation standards. We thanked the publication for considering us and wished its team the best.

3. When it involves a bidding war. Years ago, a law firm asked us to translate a large international project. We wanted to work with the company because it was a major firm, so we offered our best price for the scope of work. However, the firm informed us that it had received a much lower bid from a competitor. We had carefully examined the level of work required and found it hard to believe that another company could handle it for such a small budget. As much as it pained us, we expressed our concern about the quality of work produced for such a low fee and wished the firm luck. The firm ended up returning to us a week later with a horror story: the less-expensive competitor had botched the job. At that point, we began the project on our terms. Since then, the firm has become a regular client, and we’ve been conducting increasingly larger volumes of translation on a regular basis.

4. When taking the deal might compromise your reputation. Compromising for the sake of a potential client’s happiness is one thing — but yielding your principles to the point that your quality of work is impacted is quite another. For example, if a potential client wanted us to provide translation and localization for an international ad campaign using only machine translation without a team of language experts, we would have no choice but to walk away from the opportunity. Our experience tells us that the technology of machine translation just hasn’t progressed to the point where we can deliver a finished product that the end client would find acceptable. It might be tempting for a start-up to accept a large, lucrative project if they only consider the dollar amount and the boost that would give the business — but that is a short-sighted decision. If you expect your company to have staying power beyond this one deal, remember that your professional reputation is worth protecting.

How Anoop Bhaskar Led the Rise of UTI Mutual Fund

Anoop Bhaskar weathered managerial uncertainty and weak markets to turn UTI Mutual Fund’s stocks into category outperformer…

Anoop Bhaskar

Picture this scenario: You work for a public sector fund house, where stakeholders cannot agree on who should head it. You have high-level manoeuvring to nominate the relative of a key finance ministry official, which the principal strategic investor is resisting. The sector regulator is not amused, and declines to allow the fund house to launch new schemes till it appoints a boss. And finally, a temporary acting CEO is appointed just to break the logjam.

In such a climate of uncertainty, you would expect a fund manager to play safe and not do much. More certainly, you would not expect him or his funds to appear at the top of the performance table. But Anoop Bhaskar appears to have insulated himself from all the chaos around him.

Last month, rating agency Crisil ranked UTI Mutual Fund, of which Bhaskar is head (equities), as the best performing fund during the March 2013 quarter. Five of the funds looked after by Bhaskar, including two that he manages directly, outperformed their categories by a wide margin.

UTI Opportunities Fund saw compound annual returns of 11.41 percent, beating the category performance of 4.49 percent over a period of three years; UTI Equity Fund returned 10.38 percent and outperformed the category by a similar margin for the same period. Meanwhile, UTI Opportunities Fund also topped rankings released by Morningstar, another close tracker of mutual fund performance.

PICK STOCKS; MOVE ON

Picking the right stock is, of course, important. And Bhaskar has had his fair share of right picks at the right time: ITC, Crisil, Sun Pharma and Tata Motors (when it was still the flavour of the season). But what makes Bhaskar different is that he does not make concentrated bets. When he sees his best picks performing, he starts lowering his exposure to them such that his portfolio is insulated from excess shocks.

“Anoop Bhaskar is a top-class fund manager with an eye for detail and goes through the grind to understand a company thoroughly. That’s what makes him a great stock picker,” says Soumendra Nath Lahiri, head of equity, L&T Mutual Fund.

Bhaskar himself says he follows a few simple mantras to pick the right stock: Buy companies with high returns on capital employed; avoid promoters obsessed with size instead of performance; buy companies where the promoters own at least half the stock; and spot companies with strong cash flows.

But stock-picking is only half the story. The other half is that he does not push his luck too far by staying overexposed to a high-performing stock. This may mean short-term underperformance, since returns keep rising when a stock is on a winning streak. But fortunes change when a stock reverses to the mean.

This strategy ensures that over the medium- to long-term, many of the UTI funds have generated higher returns with lower risks. Jiju Vidyadharan, director, funds and fixed income, Crisil Research, reckons UTI’s outperformance is the result of investing in defensive sectors that have traditionally yielded lower risks.

Consider ITC: Around three years ago, the stock hit a purple patch and swelled to 7 percent of the UTI Opportunities Fund, which has a current size of Rs 3,610 crore. But the fund manager chose to divest a part of the holdings as the stock price increased. The stock has risen by 110 percent since January 2011, and had Bhaskar kept the original weight in the UTI Opportunities Fund, the stock would have accounted for around 9 percent of the portfolio.

But Bhaskar started selling the stock. The fund’s overall holding in ITC is now at 5.8 percent. Sebi allows funds to invest up to 10 percent in a single stock, but Bhaskar is not keen to push that limit. “I don’t want to run concentrated portfolios because you become a prisoner of it over a period of time,” he says.

FIRST MOVES

Forty-six-year-old Bhaskar’s stint with UTI began in 2007 when current Sebi chief UK Sinha was the chairman of UTI Mutual Fund. He had a reputation to live up to, as he had already built up a fan-following with his performance in the Sundaram Select Midcap Fund. (The fund returned 61 percent annually when the benchmark index had risen 44 percent over a four-year period from July 2003 to April 2007.)

His appetite for challenge was whetted at Sundaram in Chennai. But Bhaskar sought bigger opportunities by moving to Mumbai. The UTI job offer gave him that big break as he was handed three flagship schemes: UTI Equity, UTI Master Value and UTI Mid Cap, apart from being asked to oversee all the equity funds.

PICK STOCKS; MOVE ON

Picking the right stock is, of course, important. And Bhaskar has had his fair share of right picks at the right time: ITC, Crisil, Sun Pharma and Tata Motors (when it was still the flavour of the season). But what makes Bhaskar different is that he does not make concentrated bets. When he sees his best picks performing, he starts lowering his exposure to them such that his portfolio is insulated from excess shocks.

“Anoop Bhaskar is a top-class fund manager with an eye for detail and goes through the grind to understand a company thoroughly. That’s what makes him a great stock picker,” says Soumendra Nath Lahiri, head of equity, L&T Mutual Fund.

Bhaskar himself says he follows a few simple mantras to pick the right stock: Buy companies with high returns on capital employed; avoid promoters obsessed with size instead of performance; buy companies where the promoters own at least half the stock; and spot companies with strong cash flows.

But stock-picking is only half the story. The other half is that he does not push his luck too far by staying overexposed to a high-performing stock. This may mean short-term underperformance, since returns keep rising when a stock is on a winning streak. But fortunes change when a stock reverses to the mean.

This strategy ensures that over the medium- to long-term, many of the UTI funds have generated higher returns with lower risks. Jiju Vidyadharan, director, funds and fixed income, Crisil Research, reckons UTI’s outperformance is the result of investing in defensive sectors that have traditionally yielded lower risks.

Consider ITC: Around three years ago, the stock hit a purple patch and swelled to 7 percent of the UTI Opportunities Fund, which has a current size of Rs 3,610 crore. But the fund manager chose to divest a part of the holdings as the stock price increased. The stock has risen by 110 percent since January 2011, and had Bhaskar kept the original weight in the UTI Opportunities Fund, the stock would have accounted for around 9 percent of the portfolio.

But Bhaskar started selling the stock. The fund’s overall holding in ITC is now at 5.8 percent. Sebi allows funds to invest up to 10 percent in a single stock, but Bhaskar is not keen to push that limit. “I don’t want to run concentrated portfolios because you become a prisoner of it over a period of time,” he says.

FIRST MOVES

Forty-six-year-old Bhaskar’s stint with UTI began in 2007 when current Sebi chief UK Sinha was the chairman of UTI Mutual Fund. He had a reputation to live up to, as he had already built up a fan-following with his performance in the Sundaram Select Midcap Fund. (The fund returned 61 percent annually when the benchmark index had risen 44 percent over a four-year period from July 2003 to April 2007.)

His appetite for challenge was whetted at Sundaram in Chennai. But Bhaskar sought bigger opportunities by moving to Mumbai. The UTI job offer gave him that big break as he was handed three flagship schemes: UTI Equity, UTI Master Value and UTI Mid Cap, apart from being asked to oversee all the equity funds.

The first thing he noted was the funds’ heavy concentration in some sectors or companies. Not only that, the funds seemed to follow their own stock-picking rules with no benchmark to measure performance. They were often driven by the preferences of their fund managers, which meant that individual preference outweighed processes.

To the outside world, these funds were amorphous, and could not be categorised easily into large-cap, mid-cap or small-cap. Net result: Fund watchers would end up comparing UTI funds with all kinds of benchmarks, resulting in poor performance metrics.

Bhaskar went back to the basics: For example, he benchmarked UTI’s Master Value Fund against peer groups and clearly defined the kind of asset allocation it needed in terms of large- and mid-cap exposures. He also defined the concentration limits in stocks and sectors with simple norms. He re-categorised the funds on the basis of their volatility and concentration in stocks and sectors, so that they could be compared with the right indices.

This helped UTI funds to make the right calls in order the beat the index. If, for example, it was felt that a sector’s weight was heavy in an index when the prospects were weak, UTI would have a lower concentration in this sector compared to the index, and vice-versa.

In December 2010, Bhaskar’s team decided to buy consumer stocks and reduce their weight in banks as they felt the sector was overvalued. The Opportunities Fund thus went overweight (22 percent) in FMCG when the index had only 12 percent of such stocks. On the other hand, against an index weight of 24 percent in banks, UTI reduced it to 12 percent based on relative sectoral outlook. These moves helped the funds deliver returns against the indices.

FROM THREAT TO OPPORTUNITY
But top-level turbulence lay ahead just when Bhaskar was getting into his stride. In February 2011, UK Sinha was nominated to head Sebi, and the government failed to appoint a new head at UTI as the finance ministry and UTI Mutual Fund’s main stakeholders (T Rowe Price, LIC and three public sector banks) could not agree on who should head the fund.

Omita Paul, the powerful advisor of then Finance Minister Pranab Mukherjee, was said to be pushing for the candidature of her brother Jitesh Khosla for the role of UTI chief. T Rowe Price, a global investment company which holds 26 percent in UTI, objected to this and the resultant stalemate ensured that UTI had no regular CEO for more than two years (the organisation is about to get one only now).

Staff morale plummeted as UTI operated like a headless chicken, and many officers sulked over low pay and top-level uncertainties. Harsha Upadhyay, a key fund manager who was managing the UTI Opportunities Fund then, resigned in June 2011 to join DSP BlackRock, a rival mutual fund.

Suddenly, UTI Opportunities also fell into Bhaskar’s lap in addition to the three funds he was already managing. Another one, the UTI Transportation and Logistics Fund, also went his way. But Bhaskar insulated himself from the uncertainties by focusing on picking the right stocks and sectors at a time when markets weren’t doing too well.

As the financial sector went downhill, his Crisil pick turned out to be a lifesaver. With a gain of 51 percent, it helped him outperform the category. His other bets on Tata Motors and Sun Pharma also paid off. Crisil was a stable non-cyclical stock; Tata Motors was stable then and yet to be roiled by the domestic slowdown; Sun Pharma was a good stock to own in a defensive sector.

Until September 2011, UTI Opportunities was a mid-sized fund with a corpus of Rs 750 crore. The UTI Wealth Builder Fund was merged with it to nearly double the size of the fund. Today, Opportunities is the biggest fund in the UTI stable, having doubled its size again. “He has this ability to adapt to various market conditions. Bhaskar can strike a balance between benchmarks and still follow his convictions at the same time, which is very rare,” says Vicky Mehta, senior research analyst at Morningstar India.

2003: THE TURNING POINT

Bhaskar’s life began revolving around stocks sometime in 1986 when he, along with his father, started buying shares through initial public offerings (IPOs). They got allotments in Hero Honda [now Hero MotoCorp], but failed to make money even after four years.

They hit the jackpot with HDFC in 1990 around the same time when Bhaskar was completing his MBA from Symbiosis in Pune. They held HDFC for nine years, and serious money led Bhaskar to take stock-picking seriously.

He got his first break with Brisk Financial Services in Delhi as a research analyst. He then moved to Siel Financial Services, then to Kothari Pioneer (India’s first private mutual fund) and to Franklin Templeton (which took over Kothari in 2002). His job largely involved doing research for stocks. But his heart was set on becoming a fund manager, and this break did not come until 2003.

In 2003, he decided to move out of Chennai to a big broking house in Mumbai. But 15 days before the shift, he learnt about a vacancy in the Chennai-based Sundaram Mutual Fund. “I had this overwhelming desire to be a fund manager and to test whether one’s potential was the same as one thought,” Bhaskar says.

When Bhaskar met N Prasad, then chief investment officer (CIO) at Sundaram, he was presented with a stark proposal: Yes, he could become fund manager, but he would not be called one; and, worse, he would have to take a 50 percent pay cut. He took the offer. The rest, as they say, is history.

He became the fund manager of Sundaram Select Midcap Fund which had a small corpus of about Rs 15 crore when Franklin Templeton’s Prima Fund had a size of Rs 1,700 crore. But fortunes were set to reverse in the boom markets of the mid-2000s; by April 2007, the Select Midcap fund grew to Rs 2,500 crore while Prima Fund fell to Rs 1,500 crore.

“What makes Bhaskar interesting is the fact that he was a very successful midcap fund manager who actually moved on to manage large caps. That takes a totally different kind of learning but he has done it successfully,” says the CIO of a leading Indian mutual fund.

LUCK MATTERS

Bhaskar himself is more circumspect in claiming credit for his success, and says luck was in his favour. “I think what really worked for me was the fact that I was in the right place at the right time. I was plain lucky. Had I become a fund manager two years earlier, I would have been exhausted.”

The luck factor cannot be ignored. Anyone who picked stocks in 2003 would have looked like a genius in 2007, because the markets took off vertically. In 2003, the BSE Sensex was hovering around 3,250 points and good companies were available at rock-bottom prices. For example, Bhaskar bought 1 percent of Blue Dart at Rs 70 and sold the stock at an average price of Rs 1,600 over the next three years.

He also got into sugar stocks and construction companies like IVRCL; he even went into real estate and was one of the very few fund managers to do so. He booked Rs 100 crore in profit in the sector. His fund made 10 times the money invested in Ansal Properties & Infrastructure and 100 times on Unitech shares. Bhaskar says he was fortunate to have got out of real estate before its shine went out. (He ran a portfolio with 20 percent cash which was still giving returns.) “From 2004 end, we started raising cash to 10 percent, and had 20 percent cash for a year to ensure that the fund didn’t fall faster compared to the peer group,” recalls Bhaskar.

So who did Bhaskar learn his tricks from? His answer: Siva Subramanian, his fund manager at Franklin Templeton who managed its Bluechip Fund and Prima Fund. “In this business, one of the biggest issues is to be able to retain a sense of proportion and balance, especially during good times. You have to have some humility about your performance. You have to maintain some equilibrium in your way of behaviour. I think Siva has shown me that,” he says.

India’s Top Business Districts to Invest

A look at the hottest pre-leased office destinations, based on investor returns forecast for 2013 to 2017

the optima kart

the optima kart

Report highlights

• Mumbai will continue to be the fulcrum of banking, financial services and insurance activity as far as fresh investments for new offices, expansion and relocation are concerned. It will be followed by
• Bangalore, National Capital Region (NCR), Chennai and Hyderabad.
• Business districts of NCR and Bangalore, the largest office markets in the country, lag behind other cities in terms of investor returns.
• While the IT/ITES industry will continue to remain the largest occupier of office space, it will not ensure superior investment returns.
• Demand for office space from manufacturing and other service sectors is expected to  grow at 12% and 13% respectively per annum over the next five years.

Why Facebook Should have bought Facebook Waze

The social media giant has a mobile problem. Navigation startup Waze could have been the $1 billion answer.

Mark Zuckerberg in early April held a flashy press conference to launch Facebook Home, a new app for Android that turns a phone into an always-Facebook device. Its Cover Feed takes over the phone’s home screen with wall updates. Its Chat Heads messaging system has photos of your friends in cute circular icons that can be accessed from other apps.

Facebook Home was drubbed immediately by reviewers, earning 2.3 out of 5 stars in 17,000 ratings on the Google Play store. Zuckerberg has a problem on his hands if the initial Home flop signals a struggle ahead at amassing more mobile real estate and users’ attention spans.

Facebook got 30 percent of its $1.25 billion in ad revenue in the first quarter of 2013 from mobile, up from 23 percent in the prior quarter, but its arsenal is pretty much just its original app; a Messenger app and Poke (which don’t have ads); its mobile site; and Instagram (which also has no ads). It needs more tendrils into smartphones to reach younger users who are increasingly opting to hang out on newer social apps like Snapchat, Whatsapp and Path.

On mobile, Facebook’s ability to wring ad revenue from users is hemmed in by Apple, which doesn’t allow Facebook or anyone else to conduct digital transactions outside the App Store, and by Google’s widening footprint of apps such as Maps, Hangouts, YouTube, Google+ and mobile search.

The law of large numbers is catching up, too. Now at more than a billion users, Facebook grew 23 percent in monthly active users in the first quarter, down from 32 percent growth a year ago and 53 percent in June 2011. Most of its growth is coming from Asia and other developing markets, where monetisation is much lower.

That’s why the news of Facebook’s potential acquisition [which didn’t happen] of social navigation startup Waze made complete sense. Waze is a free, ad-supported social network with more than 40 million highly engaged drivers who switch on the app for GPS turn-by-turn navigation. The service ingests streams of road condition data and spits out real-time traffic and road alerts. Facebook and Waze were meeting almost daily to discuss a deal that was valued at up to $1 billion, according to sources close to the companies. Neither Facebook nor Waze, based in Israel, commented.

Drivers who join Waze have profiles and can message each other, but they’re also tracked and can be fed targeted ads for nearby destinations, helping Facebook in its thus-far unsuccessful game of catch-up with Google in the local ad market. Waze is the kind of must-have service that Facebook needed if it was going to extend deeper into users’ lives. A commuter in downtown Los Angeles is going to be more worried about how long it will take to get home on the freeway than about his high school friend’s fishing trip photos.

If Facebook had ended up buying Waze, it would have likely treated it in a hands-off manner, just as it has done with last year’s $740 million acquisition of photo-sharing service Instagram. That deal was also motivated by Facebook’s appetite for a huge base of users it didn’t own. Waze could have just been another way of buying friends.

The Most Overlooked Part of Your Data Security

Organisations constantly replace outdated computers, servers, laptops, copiers, and countless other types of electronic devices to keep up with technology and enhance worker productivity. This rush to upgrade, however, creates a challenge: large numbers of excess electronics must be managed and disposed of properly.

During a recent IT asset disposal project for a large New York bank, a chain-of-custody audit revealed three computers were untracked. An IT director was suspected of taking them.

When first questioned about the missing systems the IT director — let’s call her “Robin Hood” — denied any knowledge. Next she blamed the disposal vendor for taking an inaccurate inventory. Then she accused a truck driver of stealing the systems en route to the recycling facility.

Finally, when confronted with evidence, Robin admitted that her daughter’s elementary school was in desperate need of computers — but insisted that, as a 12-year veteran of the firm, she would never intentionally harm her employer. She said she had ensured the hard drives were erased, and pointed out that the bank had historically donated used computers to nonprofit organizations. But what she viewed as a trivial act was in fact a serious data security threat that created massive liability for her company.

A Rising Threat

Securing sensitive data is a daunting task for any business. Today more than 550 US laws now affect IT asset disposition. Data security laws mandate that organizations implement “adequate safeguards” to ensure privacy protection of individuals. And the penalties for data breaches are tough. Under a proposed data protection law, European firms could face fines of up to 2% of their annual turnover for a breach. The HITECH Act enacted in 2009 extended provisions surrounding information handling and increased penalties for HIPAA violations. Today, American companies are subject to unprecedented sanctions following HIPAA security violations.

Governments are not the only ones eager to punish violators. The effect of a punitive privacy class action lawsuit can be far worse than a government fine. Following the loss of a backup data tape in 2011, US healthcare benefits provider TRICARE was hit with eight separate privacy lawsuits, including one seeking an astounding $4.9 billion in damages. The company was accused of “intentional, willful, and reckless disregard of plaintiffs’ privacy,” and for failing to respond to “recurring, systemic, and fundamental deficiencies in its information security.” Similarly, Sutter Health was hit with a billion dollar suit, and Emory Healthcare faced a $200 million suit.

Historically, privacy class actions have faltered due to the plaintiffs’ inability to prove recoverable damages; however, this provides little consolation for a company being sued. The cost of defending privacy suits can cost millions. The average litigation defense now exceeds $500,000 and the average settlement is over $2 million. Moreover, corporate risk managers should take note of recent decisions in the US Eleventh Circuit Court of Appeals that bring punitive class actions closer to becoming big payoffs for plaintiffs (and, of course, their attorneys).

Savvy plaintiff attorneys are also shifting legal tactics. In addition to defending themselves against claims for damages, violators must now defend against claims that they unjustly profited by skimping on security safeguards that could have prevented a breach in the first place.

Soft Underbelly of Data Security

Without question, most large organizations take data security seriously. Corporations will spend an estimated $68 billion worldwide this year on IT security measures including firewalls, network monitoring, encryption, and end-point protection. When an organization spends millions guarding against hackers, it is tempting to feel confident.

But the most overlooked aspect of corporate data security may be simple IT asset disposition — in part, ironically, because so many businesses now rely on expert assistance. The fact that certified electronics recyclers are transporting retired IT assets to vendor facilities to be processed and sanitized can create a false sense of security that blinds executives to the biggest threats. First, there is still the possibility that assets can be lost or stolen in-transit. (Increasingly, companies are learning to destroy data in-house, prior to disposal; that way, any loss or theft, while unfortunate, won’t result in the financial disaster that would come from an actual data breach.) Second, there is the threat we saw with our Robin Hood IT director: Trusted insiders can take retired assets any time before the handoff to the outsourcer, and before data is destroyed.

For the past eight years, Retire-IT has been tracking how effective security-conscious organizations are when it comes to accounting for retired assets.

At a high-level, organizations might seem to do an adequate job with chain-of-custody. On average 97.2% assets were tracked.

Detailed tracking data, however, reveals a troubling fact: four out of five corporate IT asset disposal projects had at least one missing asset. More disturbing is the fact that 15% of these “untracked” assets are devices potentially bearing data such as laptops, computers, and servers.

The Optima Kart

 

Chain-of-custody is not a catchphrase: It is the foundation for indemnification and transfer of liability. It only takes a single missing item to cause a breach. Only a careful, objective examination of tracking data can confirm chain-of-custody — or reveal potential liability.

How can a business keep a Robin Hood from taking retired computers, and potentially making a plaintiff attorney’s dream come true? Acknowledging the risks and inherent conflicts-of-interest surrounding retired assets will result in more effective ITAD policies and adequate safeguards. Applying established incident-response procedures to the process of ITAD can help raise awareness of unappreciated vulnerabilities. Educating senior management about the risks will hopefully secure IT asset managers the resources needed to prevent an ITAD-related breach.

A critical aspect of every major data security law is that organizations must minimize segregation-of-duties conflicts that create opportunities for theft and fraud. Treating IT asset disposal as a “reverse procurement” process will deter insider theft.

There will always be people and places, like Ms. Hood’s local elementary school, that could use free computers. Make sure the way they obtain them doesn’t cost your company billions.