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Showing posts with label System & Process. Show all posts
Showing posts with label System & Process. Show all posts
How can one justify the burning by the startups? I don't want to mention the name of startups or B2C commerce players who are trying to bring discount war and luring consumers just for nothing. Is this an innovation?
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Take this incident that occurred in the city of Jaipur.
Four days ago, my neighborhood friend told me about a start-up that is delivering #saras and #amul milk at a discounted and below market price, providing a 7-day free milk scheme. I tried to go in to find out more about it and when he showed me the transactions it was actually there. He bought milk for 350 rupees free of cost in 7 days. and later, he continued but with a discounted price. Saras milk price is Rs. 48 per Ltr for toned milk and for fat, it is Rs.62. He is still getting Rs.2 per Ltr discount from the market price ie. price at Saras booths are selling at.
This is what the consumer is gaining from such #disruption.
Yesterday I went to a nearby Saras stall to buy milk for myself. I started the conversation just to find out what he thinks about these new milk delivery startup/e-commerce players. Suddenly he burst into great pain. He said that two months ago his daily sales were 35,000/-and about 250 customers used to come and buy milk at his stall, but now these numbers have dropped to 22,000/-per day. what was your intake? he said, due to inflation, people started consuming less milk, and that's why his daily sales numbers are going down. But he wasn't aware of the online customer drift. I told him the real reason why he is affected.
This is how the market works and there no one can control the market forces to be favorable, but at what cost are these developments happening? Saras is the milk brand of Rajasthan dairy cooperatives which has more than 5,500 milk stalls supplying milk to more than 0.7 million families in Jaipur city and more than 5,000 small retailers.
Just to facilitate or for the sake of adoption, these startups are doing quite a bit of burning. Just for the sake of offers, end consumers are buying milk from them. Even if a family has 5 members and they all have smartphones, one after the other they are using the offer in the same place. It means that a family is getting 35 days of free milk because they are offering a 7-day free milk program. Is this a way to create loyalty? or adoption or customer acquisition cost?
We all know that the Indian ecosystem is different and it is full of diversity. Amid such uncertainty of the diverse mindset of end consumers, how long do we think about customer stickiness? and at what cost by giving a big dent in the traditional ecosystem.
It would be wise if such startups are getting profit out of such activities then fine but they also know that their efforts are not real and just an act of building a funding story. I am worried about the traditional players who are there for decades and earning bread and butter for their families. 1/3 of India's population is living below the poverty line. Millions of Retailers, Wholesalers, and distributors are the backbone of our retail ecosystem. These are the 12-15% contributor to national GDP and even they are contributing up to 10% in generating employment.
The ecosystem of Indian grocery retail: Estimated Retailers 12-13 million, Wholesalers 300K+, Distributors 30+, and more than 5K national brands and thousands of regional and local brands. Altogether they are driving a retail economy of USD 800 billion and would be more than $ 1.2 trillion in the next five years.
We need to redefine the definition of #disruption. Do we really need #quickcommerce #homedelivery of milk #fruitdelivery? Is it really needed to have merchandise in 10 minutes? It would be better to walk to your nearby retailer and buy from there. This will be a healthy movement for the body, society, and for the nation.
We need to bring ideas, innovation, and efforts to empower the existing ecosystem. We should not create threats to them but tune with them and align our business model in such a way that brings efficiencies and empowerment for the traditional ecosystem players.
Being a retail professional, I am sure that the traditional ecosystem will get more wings to grow in the near future. Here the only thing is that MSME or SME needs to bring more clarity that how they are going to formulate policies for traditional retail ecosystem players. The Department for Promotion of Industry and Internal Trade (DPIIT) should also bring in some strict norms so that online players operate in a regulated environment and do not affect traditional players just for the sake of discounts and promotions. Also, all retail associations should work in the right direction and should safeguard the interest of traditional ecosystems. Organizations like #rai and #cait should act as the apex body but seems they are more inclined towards these giants and nurturing them by doing nothing for the traditional ecosystem.
Even domestic e-commerce players should also bring under the disciplinary ambit of DPIIT and they should not be allowed to start a discount war on their websites.
This also applied to brands. Brands have to bring discipline in channel management & bringing uniform PTR so that every connector in this ecosystem can earn their share of profits. This would be a red flag for national brands whose PTR is in the hands of price cutters. If they fail to harmonize channels, they will be locked out and replaced by the regional players.
The last three years were very much dynamics because of the fortified events of developments going on in the retail sector in India. Startups were getting huge funding and at the same time, Investors were enjoying the curry. Investors' big love remain with the tech startups and were ready to burn the money like crazy.
But now the scenario is changed. There is a list of eB2B players who raised billions of dollars during the last 3 years. Most of them become unicorns. Expanded to other cities like crazy. Some of them infused millions of dollars in setting up distribution centers, employing a big army of manpower, burning millions on marketing, and building up losses. Retailers were in the middle of every eB2B startup.
In this movement, more than a hundred startups are working in bits & pieces in their territories but few of them could succeed to play at the national level. If I count on fingers only three or four startups are working very closely in Grocery retail. Some of them are working in 28 locations i.e. states including 200 cities and more than 10000 pin codes, and some are working in one or two states but all have the same set of problems that they are encountering in their daily operations.
I will not mention the names of those startups working closely in eB2B grocery retail but yes you will understand who will be all about. First of all, I will try to explain the need for eB2B players in this ecosystem of grocery retail and will discuss why they are not able to provide the so-called solutions.
The emergence of Technology: Till 2012 speed of the internet was paced mildly by the broadband connections and had limitations of reach to many tiers 2 and tiers 3 cities. We can't say that e-commerce was not there at that time. Most of the B2B players were using web applications so they were sticking to their seats only and thus could not find it more aggressive. Startups like Indiamart, TradeInida, and many other e-commerce players were the pioneer of their time. Still, Indiamart is doing good. It is all about the vision of Promoters. Transactions started taking place with the availability of Chinese smartphones in the Indian market. Retailers and consumers started using the best features of these phones. Marketplace models like Amazon and Flipkart started onboarding sellers on their platforms. end Consumers started ordering merchandise through Mobile Applications. This has given a big momentum to the B2B players and they started focusing on technology. A fever of investment cartels started coming to India from Silicon Valley from 2013 onwards. VC i.e. Venture Capital funds cartel employing IIM Alumni as their fund manager and they started collaborating with Technocrats. A kind of lobby was built, however, it is not that true as the founders of Oyo, and Paytm were not from that background but yes 70-80% of startups and investors are from top B-schools. Last week I met a former founder of Payment QR fintech. He said that if you are not from IIT or IIM or from Oxford or a top funding company you will not get funding. It is sure that 99% of the chance is that you will not be entertained by investors. This is a big cartel of like-minded people. and like-minded is all about being from the same community. But, my mindset was not to take it with me so why should it happen. I am a businessman carrying a business mindset and I know how to run a profitable business so I know about it. How fresher who came from IIT or IIM know about business sense. But, I can't discuss this here as it is a different matter and thought.
Startups started working on Ideas and started disrupting the existing markets. There was only one feature that was working at that time - Technology led startup or Tech Driven founded by the IIT-ians or technocrats. The focus was given to the Retail sector keeping in mind the size of the market and opportunities. The thought behind eB2B commerce was to disrupt the market through direct reach to the retailers and that had happened only by way of eliminating the middlemen. But, what made them start these business models in India. Let's work on this.
Why eB2B players entering Grocery Retail
Indian retail market is huge in size. GDP of the entire African countries included with many European countries is equal to the Indian Retail market size. A market of USD 800 billion itself a huge amount to count and out of which 60 % market is grocery retail. As per the market sources, this size will be more than USD1.3 trillion by 2030 or more. More than 14 million retailers represent the market. Indian retail mainly in FMCG is channelized by a robust distribution system. More than 35000 distributors are working in FMCG & Grocery sector carrying brands of more than 5000+ manufacturers. The traditional system of distribution was carrying the middlemen like CFA, Super stockiest, Distributors, and wholesalers. The retailers were their customers. Indian traditional distribution system is robust and it got these wings after years of hard work and innovations. FMCG companies like HUL, P&G, Dabur, Nestle, and many more have robust distribution systems.
Now, startups started working on this segment by way of creating efficiencies. What were those efficiencies?
Reaching Direct to Retailers
Eliminating middle man
Technology-driven - Mobile Application in the hand of retailers & their FOS.
Data Analytics
They found that retailers are facing various issues like dealing with multiple distributors, uncompetitiveness, price discovery, ease of reordering, not getting the benefit of bulk buying, and Not getting proper credit in managing vendor Payments, expiry, and space almost they find that retailers need to be empowered in a way of giving them centralized supply solutions. This is the problem they are facing in a big way. Providing Centralise Supply to Retailers is the solution and giving Sellers/ Brands a one-stop distribution solution that they don't need to go behind traditional distributors. This way brands can save money, time, and energy working. As such, there is no issue in the business model. Technology is giving wings to it and everyone can manage their stuff. This way their target customer is Retailers.
Year 2017 onward we have seen many big names in eB2B, some of them started working as marketplace models, some started as standalone direct-to-retail models, and others started on hybrid models. Few of them were category masters. At the time of their investment pitch, they said their technology-driven business model always remains Asset light. But, later on, eB2B players started working on Asset heavy model i.e. setting up distribution centers in metro cities. I have seen that few have a DC capacity of 3 lakh sq feet in one location, they started employing thousands of salespersons to drive their DTR sales to retailers. Huge infrastructures were built in the name of the Asset Light model. I would say that investors have no idea about the business they just bet on the business model and they do believe in technology-driven models and burning. I am taking readers to the actual scenario which is the backbone of any company working for a profit. following calculations will give some light on the factual status of business these eb2b players are doing.
We can understand this through an example: This study was done taking one eB2B model in the center of my study. I was closely watching the whole operations of an eB2B marketplace startup. They started their business in 2017 and later on after receiving huge funding they moved to other cities very aggressively. An average 50000 sq feet distribution center facility is built up in one city and today they have more than 40 cities where they have physical warehouses/ DC. Setting up their own DC has a different cost and taking them with 3PL has another cost as some go fixed and others go variables.
Let's have tentative figures: I will try to explain them through the below-mentioned table.
(Capex taken higher side, which includes verticals shelves, Pallet Trucks, etc)
The above calculation will give a visual clarification that why eB2B players are not making money. This calculation I have worked out for one location i.e. One city like Delhi or Indore or Jaipur.
If you talk to them you will find that they are working on 11% -15% opex cost/revenue and in return generating GP 3% to 6% if we take benefit of business growth.
Now, Let's bring some light on critical things which are hampering their growth as well as profitability.
The problem faced by eB2B Players
eB2B startups have huge coverage, they have thousands of retailers on-boarded on their Applications, also thousand of Feet on the Street ( FOS) visit retailers daily. They have competitive pricing, availability, and convenience in providing timely deliveries but still, they are not making money. Why?
Every eB2B startups claim to have millions of Retailers on their Application, having a presence across 10000+pincode, and for attracting investors, they are dividing States into Cities so that they can show their milestone in a larger prospect. But again what is wrong with their financials. Few challenges are there which is choking their bottom line irrespective of having million-dollar top-line numbers. Let's put a light there:
High Operating Cost
Product Mix Issue
Restrictive Behaviour of FMCG companies
No Credit Facility to Retailer.
High Operating Cost: eB2B startups or any startups who want to scale their business, need to go with the system and process. And when any organization goes with the system and process there is always a cost associated with it. Proper functional departments must be in place which in turn stamps with a heavy cost. However, operating cost is a business element and business has to leverage it but due to the improper projections, they are employing manpower in a big way and paying them high salaries. cost of retaining every employee is high as has to give other benefits too and also infra cost is too high. Most of the infra is managed by 3PL but is not able to use full capacity. Only 40-50% capacity is being used but fixed cost is there to make it high operating too. The cost of delivery is too high as MOQ is not adhered to by the retailers. In the above calculation, I have taken 50/- per order selling & distribution cost which is too low but again they are not getting sales to the MOQ.
Product mix issue: No doubt they have sitting on a very high operating cost. However, it can be covered if revenue to the tune is generated but again improper product mix is melting the bottom line. If you can analyze the product category mix you will find that retailers are using them only for main staples like Oil, Ghee, Sugar, Pulses, etc which is again a convenient buying to retailers because they are getting everything under one roof. Staples is only contributing to the top line so having up to 80% contribution in their revenue, but if you go by the gross margin level you will find that staples in bulk or in a popular demanded brand are very thin. like Oil and Ghee for a popular brand, no one can earn more than 2% except for market volatility. The same is with Sugar and Pulses. Majorly traded in bulk packaging. If one has 70-80% contribution of Oil & Sugar in their revenue then you can imagine the bottom line. Apart from this 2% is the RTV cost including the in-transit damage to the merchandise.
Restrictive behavior of FMCG companies: Since FMCG companies have a robust traditional channel in place so their FMCG brands do not want to disturb the GT market for these players, however, they want to sell on eB2B but they never compromise on pricing. In one incident, Parle company fought a case with one B2B startup and denied giving them their products. It is their helplessness to buy at their Price and then through a discount from their end, they sell on their platform. demanded product is the requirement of these startups because there is something needed that shows engagement with retailers otherwise, retailers will not entertain or will use its limits. They need FMCG national-level brands so that Retailers give space to salesman to stay at their counter and can cross-sell other merchandise. How they will sell new brands having high margins or can build a healthy category mix. You can see the contribution of such products.
Credit to Retailers: Since startups are working on systems and processes and they are more dependent on technology-driven stuff so they have limitations somewhere. May be from the business model side as they got funding on it and they can't let open the credit in the market. All are selling their stuff against COD or through some fintech arrangement like channel funding. But, it is true that Retailers will not buy any products except demanding one against cash. Even FMCG distributors are providing credits to retailers. Local Mandies especially for staples are providing 5-15 days of credit to retailers. Retailers are buying stuff from eB2B players. This is one big factor that they will not be able to generate more revenue from retailers without giving open credit. Open credit means based on trust. Like local distributor and mandi traders has for them.
Above are the pinch of problems I tried to figure out. But, I have a concern that without disturbing the existing distribution system startups from eB2B will not scale their business but they will not make money. For making money they have to work on a different scenario. Still, they will remain eB2B but few things will be aligned otherwise they will never make money.
Last year remain investor dry weather in India. They understood the fact that burning will not bring earnings even in the long run. Retail will only use these eB2B platforms for their best selfishness but never contribute to scale. Disturbing the existing ecosystem is a costly affair for them and if they don't take them with their journey, they will be finished mid-way.
eB2B startups have to adapt a few things which will help them to sustain themselves. My best advice for them is to pivot the business model in the right direction and don't think to disturb the existing channels. If possible think about how you can associate with them and take them on your journey.
I am working on this, creating a scalable and profitable business model.
How we treat friends and who are our friends. This is not a difficult question to ask. We all have friends. Love for animals in Europe and US is mostly seen for Cats, for them, cats are their best friend but for a few of them not all. for many, they treat dogs as their best friend. This goes with living creations but there are some amazing things about non-living things like cars, Phones, TV, bikes, houses, etc.
Yesterday, I was watching a famous TV serial " Tarak Mehta ka Ulta Chasma". You must know about the Poppet Lal. He is in the character of a journalist. He always carries an Umbrella with him. He is treating his umbrella as his best freind. In one episode, Poppet organizes a birthday party for celebrating the tenth birthday of his umbrella. At this event, Poppet was mocked by his guest as it was suspense kept by him and guests were of at no clue whom birthday Poppet is celebrating, but when a member of Gokuldham society came to know that this birthday party is organized by Poppet for his Umbrella they laugh at him saying how an umbrella can be a friend of someone. Strange for those who take it as a kind of psychological imbalance. but for normal people it is fact. Friends are friends, we can't compare them with their shape, and size. We like their sentiments and belongingness. The same is with our mindset.
In the same reference, we must have heard many times that Books are our best friends. I can say that they were right. Books are best friends because it helps us to learn new things about life and life behavior. We learn academics from these books, learn spirituality and read stories of our past, and history. Books help us make our future the best we want.
There are a few books which I like the most :
Think and Grow Rich
Rich Dad Poor Dad
As a Man Thinketh
The Power of Your Subconscious mind
Here is a little library of my choice.
During covid time I bought many books and in fact, I got time to read them all. I never read books 5 years back but when I first read the Book " The Power of your subconscious mind, I learn and understand the importance of books in my life. When you sit in your chair and take a book soulfully, you will see the magic. You will feel that someone like a teacher is sitting in front of you, guiding you on the subject and you are following his instruction. This way Books are the silent Guru, the mentor.
I am managing my books in my way in the following tabular form. Stating the name of the book, its author, MRP , Nos of Pages, and Number on the book. I put numbers on each book so that I could know if any books is not on the shelf. This is my way of keeping. Maybe your way is more systematic and IT-driven.
The purpose of demonstrating the books here is to show how important they are to me and how I used to keep them on my reading table.
Every day read 10 pages of your favorite book and share your views on Linkedin, blog, and Facebook. Send your story to me on my email " parjakalyanm@gmail.com or send me Whatsapp on my phone: +91-9968313005. I would love to hear from you and write back to you.
India is heading toward a $5 Trillion dollar economy. I am confident that under the leadership of Hon'ble Prime Minister Mr Narendra Modi India is going to shine in all respect. Industry plays a big role defining in development which is visible everywhere in the country. Every sector is growing exponentially but the rate of growth is slow but steady. It was the bad time during covid19 that slowed down industrial growth but now the pace up is there. Here I will talk about the development & growth going on in the Retail sector. Let's have a glimpse of the story.
Since 2016 retail sector is disruptive by promising startups, more than 100 startups turns Unicorn which is $ 100 bn in the business sphere so far opened. 60% share of the Food & Grocery segment is in the overall retail out of which 90% is still unorganised. The total retail market is going towards $1.497 Trillion from Its present $800bn market size. This shows the speed of consumption by the large public of India.
Retail 4.0 still is in its nascent stage, post covid we can see dramatic changes in consumers' buying habits. Consumer preferences are changing due to many reasons of which credit goes to organised retail which somehow made a funnel for new brands, brand awareness, and presence up to tier fourth towns.
Corporates are there in the market who are serious to open their stores in remote cities too but the still big question is how they will meet the operating cost. The cost of reaching directly to Retail or consumer is huge. There are many ground-level challenges that we have to understand.
eB2B startups like Udaan, Jumbotail, Shopkirana, Maxwholesale, Apnaklub, Elasticrun, and many more are reaching directly to Retailers. However, there is nothing wrong or right but the approach should be taken into account after evaluating the fundamental and ground realities of the business.
Are there any new ideas on which Indian startup is working? I don't think so. They are copied either from Western countries, China or other developing countries. I don't want to criticize that they are not workable in India but before that, we have to evaluable minutely and should take into account the ground realities, percentage of margins, execution hurdles, mindsets, and most important the dynamics of Indian economics. A model of Direct Retailer is successful in Europe and UAE because of the centralization of the Supply Chain & uniformity in distribution channels. FMCG distributors are selling more than a thousand brands from one centralized system so reaching retailers and making them dependent is easy as supply of such brands is only connected with the said distributors
Al Gurg is Uniliver's sole distributor in UAE so it is a kind of monopoly of the group where Retailers have to depend on them. Same way here in India HUL has city-wise distributors who directly bill Retailers. P&G is working on state-level distribution and accordingly appoint distributor who takes the supply chain for the entire state like DB Distributors in Rajasthan state and some part of Gujarat State.
I've been witnessing the growth in eB2B retail since 2014, a kind of disruption being created by eB2B startups since then. They work directly with retailers through their technology intervention (DTR = Direct Retailer). There is no doubt that they have been able to create a stir in the ecosystem and have created a void in the traditional supply chain where retailers are at the centre of all such disruptive ideas. But, why does the retail ecosystem need these horizontal distribution channels? Do they not have confidence in their traditional distribution system or do they want to increase the capacity of these channels? But if it's a matter of increasing the capacity in the funnel then why? Because on the contrary, FMCG companies are creating competition for their old distribution channels.
FMCG companies came to know about such blunders when existing distributors started agitating that their stake is been liquidated by eB2B startups who are selling similar products at a discount, however, those offered by eB2B provide an advantage to retailers through service level excellence. These players are again putting pressure on these traditional channels. There are always good and bad and there are inherent characteristics of any system but some fundamentals always work when we do business.
FMCG companies have to evaluate whether traditional distributors are a key component of the entire supply chain, and are the entities that helped them brand their products. I met many high officials of national-level FMCG companies and asked the same question why are they killing their old distributors? Do you have any feelings for them? Or put a blanket over them entirely without evaluating the ill effects on business volume and the stability of their traditional distribution system.
Later, they realize that they will face huge agitation from the existing channel if they continue to push on the same product line with eB2B players, so they come up with a product-level strategy that differentiates at the SKU level will be done. It is all about product level and ToT level strategy which they are working on since 2012 in the market. Product SKUs and grammars differ in many respects for modern trade (MT) and are of different sizes for general trade (GT). Also, this has abused the system by and large by the MT players. Later on, with the emergence of E-commerce, things went in other directions and price discrimination start happening across formats. Flipkart & Amazon started their own pricing, Modern trade was on its edge with the GT. Such a Battle is going on in Indian grocery retail since 2015 and now the intensity is increasing. It is hard to control the price cut basis markdown. In this kind of battle, FMCG companies are the winner. Despite channel conflicts, they are able to sell their products and grow YoY. Now they are playing a diplomatic role, and don't want to oppose either channel but to deal in a diplomatic way. Is it a good strategy?
But, who are the most affected? Is it an eB2B player, offline supermarket/hypermarket, or e-commerce marketplace under MT channel? The most affected stakeholders are the traditional distributors who are losing their business day by day. Traditional distributors are only associated with retailers, they do not have any other channel where they can sell their products.
On the other hand, eB2B startups are not able to sustain themselves due to low product margins and high operating costs. So burning money is the only way for them to stay in the fight. For e-commerce marketplaces,s they are least bothered as sellers will think about the outcome, however, stability is also a question for e-commerce marketplaces but they will be in the market.
My big question is who is going to survive in the retail ecosystem despite such low margins. Will heavy burning by the startups will help them to create their customer base in the long run? A value chain of 18% compared to 35% in Western countries is not enough to carry the burden of all such disruptive ideas.
As far as I have a little knowledge and experience of 22 years in this ecosystem, I must say that the cost of disturbing the existing ecosystem is huge but empowering them is economical, scalable and profitable.
At the same time, there is a big question for venture capital firms. On what basis are they investing in this segment especially in grocery eB2B players? The "skill set" in my previous post will only help grow the business temporarily, but will not help make it sustainable and profitable. "Importantly in the business mindset is a vital tool to make a business sustainable and profitable".
Let's brainstorm on this topic and share your valuable feedback.
I have seen many start-ups growing from their initial stage to the stage of recognitions and status, however these stories were not written in the study room but executed on the ground, thus witnessing many ups and downs by many startup founders. Despite all this, we can say that those who got good traction they became unicorns like gems of luck.
The Indian startup ecosystem produced 100+ unicorns across different segments which shows strong traction in terms of getting funding, making the enterprise scalable and creating valuations. All is happening because there is a bond between founders and investors which shows trust that both will be benefited if the venture scales the business.
More than 85 unicorn built a large sphere in the following sector and many more are in the line to touch the unicorn status by end of September, 2022.
Sector wise: Broad Level
1.Enterprises Tech
2. Health Tech
3. Educational Tech
4. Financial Tech including Equity market
5. Retail Tech more onto b2b side
6. Consumer Tech – E-commerce
7. HR Tech
8. Tour & Travel
9. Real Estate Tech
10. Media & Entertainment
11. Advertisement & Marketing
12. SCM & Logistics (Transport Tech)
13. Other sectors
14. Biotechnology
Sector wise – Micro Level
Just to refresh the current knowledgethere are three sectors which has produced more Unicorn in India and those are in Enterprises Tech, Financial Tech and Retail Tech including E-commerce, about 62% of total startup in India comes from the said sectors.
Let’s figure out the sectors where they got a good status and further more they will be profitable apart from scalable point of view. They are purely basis on adoption where startup has to burn money to bring the adoption in long run so that they will have more top line and bottom line to make themselves sustainable. I will put such startups in Business skill category where each entrepreneur is committed to bring sustainability in the company and accordingly working on it by taking ample risks. Business skill always comes through experience, and it teach us to handle the situations in wiser and it helps us to understand it in more responsible way. Sometime we assume that business sense will come with the experience, yes it is true but more likely it is inherently god gifted within us that cannot be replaced easily by any management trainee or technocrat. To some extent it is true but we can’t ignore the modern way of management lessons which is being taught by the renowned institutes and those are aligned with the modern techniques of technologies.
You can figure out that 99% of unicorn startups were built by the Technocrates or masters of management from top management institutes. So, the fact of business skill is taken over by the Skill set is true that Skill set is stronger.
Facts of Skill set is technology that is helping them to think beyond periphery. 80% startups are working on IT driven solutions so they are from skill set i.e. technocrats. They are most trusted by the investors because they are master of management where they have analysis and gut feeling that skill set will take over the Business skill.
In support of the above fact, let’s take example of Flipkart, BYJUS, PayTM, Swiggy, Polygon, OYO Rooms, Dream11, RazorPay, Ola Cabs, CRED, Postman, PharmEasy, PhonePe, Zomato, Icertis, Ola Electric, Pine Labs,
Above mentioned startups have created great valuations and are in the club of over $5 billion valuation. If you take a look on their founders and co-founders, you will understand why they built an empire in a few years. They were not from a business background, so I would say that most of their business mindset was not in line with the original and not naturally formed, but they built unicorns.
And more than 15 tech based startups are in line to become unicorns in the coming months. The founders of these unicorns are either masters of management administration or they are technocrats. The same is with investors. VC funds are owned by the network management administrators of LPs, PE funds or angel investors. Overall they are driving by the skill set in the industry they are in. But one aspect is more relevant which I will mention in the following way, and that is the business mindset. Business mindset is very much needed in business where the movement of goods is directly managed by the founders of the startup. Here more emphasis will be with the fundamental side and the market conditions.
Why Business mindset is important?
Entrepreneurs are more refined word when we talk about building an organisation by a person because he uses skill set wisely with business mindset. He is the man who find certain problem in the business ecosystem and through great ideation they build an organisation. Certain parameters of industries have to be complied while working on the solution side. Now a days we are giving these organisation new name “ Startup”.
Two years ago the co-founder of a B2B marketplace came to my Jaipur office. When I asked him about business thesis and fundamentals. He said with confidence that I really do not know the business and about its mindset. We are technocrats so we know our technology better that it will do business. I was astounded to hear the answer that responded so quickly how could anyone say "I don't know business". The said founder was from a large funded eB2B Seller platform. With due respect I said, you are doing good in B2B retail. In this reference would like to say about Ofbusiness, a startup. OFB is a tech-enabled platform that facilitates raw material procurement and credit for SMEs with focus in the manufacturing and infrastructure sectors. Founders of OFB comes in the skillset group but the way they gave directions to their business, I must say that they are using business mindset somewhere to align the executions. When physical movement of goods directly comes into business then one must go with business mindset approach. That's how I'm trying to understand.
Again, I met some investors in LPS from Sequoia, Accel, Tiger Global and several VC funds and I asked the same question. Is the business mindset worth them or are they part of a cartel of skillset? I asked them why they are investing in such and such sectors and what cartel they are part of? They said, we don’t know the business what startup is doing, we are only concern about the solution they are providing, is it scalable a technology driven. They are concern with the returns and risk they are expecting. I am highly inspired by Mr. Sanjeev Bikhchandani, founder of Info Edge, a successful VC fund in the ecosystem because he is a successful businessman who build naukri.com and many other ventures. He is full of business mindset. Investor should learn from him that how to find a business mindset founders and when to invest.
I am sure that founders of startup & LPs of investor fraternity will oppose my thoughts on business mindset or skill mindset because most of them is using skillset to drive their business.As per them they are building a business empire so they are business people, True, those are running businesses are business people.A layman will have this thought and agreement.But, I am taking about business mindset that is something different which has many dimensions.We cannot expect that a fresh graduate of age 20 or 30 will have those thoughts and mindset. Just check the following and then compare it with your skillset.
Entrepreneurial mindset is only important factor that will make or break a venture’s success
·Understand the market trend & forecast
Know himself and market as a domain expertise – Business side
·Dare to face failure – Risk Appetite - Resilience
It is imperative to say that business owner should have business mindset first and skill set he /she can get through taking higher /professional education or can have it through experience.Few characteristics are making difference in the above statements.Business mindset has some inherent tools in his/her mind that he/she use while making decisions. It should be like that.
Two #equation = purpose is same , what is best suited for entrepreneurs.
Startup with Business mindset + Skill set = Entrepreneurs =Enterprises = Profitability =Sustainable business (Medium Term, ration of Success is 85%)
Empowering Bharat through One Nation, One Rule. Advocating UCC, NRC, and CAA in Bharat, and also supporting a two-party political system democracy instead of multi-party system
Startup with Business mindset + Skill set = Entrepreneurs =Enterprises = Profitability =Sustainable business (Medium Term, ration of Success is 85%)
Startup with Skill Set = Scalable = Negative EBITDA (if+ Business mindset join) = Entrepreneurs=Enterprises =Profitability =Sustainable business ( Long term, ration of success is 15%)
#business #startup #mindset #entrepreneurs #sustainable #success
#retail #retailers #businessanalysis #skillset #grocery #kirana