Aakrit Vaish

in India, distribution > design

There was a fascinating post this past weekend by @johnnie on “when good design is not enough” and solving the “chicken and egg” problem for well designed products. He stresses on a very important point about how distribution is as important to the success of a product as the design itself, giving some very relevant and successful examples. There has been some follow up commentary as well by the likes of @cdixon saying “distribution matters as much as product”. I thought this would make a perfect setting to get back to writing after months of being MIA, to talk about my favorite topic - in India, distribution matters MORE than product. 

I had written a similar, yet different piece at some point last year on how its all about loving your product. That theory very much still holds true, but what I’ve learned over time is that in India a well designed product is only the start. The actual effort of building a business around it is the hard part. The underlying primary reason for this goes back to the state of our country in general - developing, unorganized and still in large parts uneducated. This leads to a number of factors that make distributing both consumer and enterprise products a challenge. 

Its common knowledge that Indian people are one of the most price sensitive kind in the world. This makes it very hard to retain a customer, as they will switch easily if they find an alternate solution that is cheaper. Now, this is where design gurus will point to building engagement within design to improve retention - but this is where India is so different. People are okay compromising on experience as long as they get something that fits their needs and is cheaper. Culturally, we are used to compromising and have the “chalta hai” attitude, we don’t strive for perfection - cost in most cases is the first and usually only factor to consider. Case in point being mobile apps: most mobile apps are free, which is why Indian users have exhibited lowest retention among the Top 20 countries by active mobile app usage. 

Relative to the West, Indian consumers are still getting used to technology. The most popular Indian technology products still have terrible design, and this is what people have gotten used to. A great example of this is Tally - the number one Indian software product built for India. The experience is so basic and the design so outdated, that folks like @johnnie would be surprised how they have clocked up more than half a million customers. Yes, that is >500k! This is where the distribution part comes in - they have established an enviable 2 tier sales strategy using “channel networks” to achieve scale. 

The other issue that doesn’t help distribution is payments. There are only about 15-20m credit cards in India vs 600m in the US. People still prefer using cash for basic transactions, effect of the parallel “cash” economy. In such a situation, you need to have an offline sales mechanism, which in turn makes scaling harder and riskier - a good example is the Cash On Delivery model in e-commerce, which typically accounts for 20-30% of all transactions. Another example is Buildabazaar, a good tool for SMEs to build e-commerce stores on their own. But they don’t even accept credit cards as a mode of payment since none of their customers would ever use it. They have to have sales reps/account managers on each account. Very different from US based Zendesk, where I’ve used it for over 2 years now for more than 20 people on our team, and never spoken to a sales rep - all self serve credit card payments.

So how do you address this distribution challenge? What has worked in the past? This is something I’ve been researching on and will hopefully have more answers soon, but in general the reward/hook strategy seems to be working. Either reward the customer for using your product, or give them a hook which will make it difficult for them to leave. On the reward side, Indians love free stuff, so would make sense to incentivize them to try your product. On the hook side, get customers to give you valuable information that is difficult to migrate - Tally again being a classic example.

Every country brings its own set of challenges - with India I think sales/marketing/distribution is the biggest. What do you think? Would love to hear more success stories on companies/people who have been able to crack this. 

crack(ed)berry

Back in 2008, among my family and friends, I was the only one on the iPhone. Literally every single person I knew at the time was using a Blackberry. In fact, there were people I knew who were switching back from the iPhone to Blackberry. It was the network effect resulting from BBM. I’ll admit I was tempted for a bit too, but was so caught in the iPhone web that it was impossible to get away. As you can see from the chart above, the RIMM stock was flying high at the time. But what has happened since has been absolute <insert your choice of word for “murder”>. 

I have been an open critic of RIMM for the longest time. But even I didn’t expect their demise to be so rapid. They announced their Q1 results yesterday and their losses were MORE than expected, they are cutting jobs, their latest OS is delayed for the tenth time, etc pretty much the s*it show we have been used to with them ever since the iPhone launched. The company will be dead in the next 6-12 months, at least as a stand alone entity. 

So what happened? Yes, the iPhone, but still, RIMM had a very strong foothold in the enterprise segment which the iPhone has still not fully cracked. I think it really comes down to the management and company not acting fast enough to the new kind of smartphone. The 2 CEOs at the time (case in point why there should always only be 1 clear leader) felt they were too strong to be beaten by Apple or anybody else. Innovation, Product, Supply Chain, Marketing - all terms that are synonymous with Apple, are as far away from RIMM as San Francisco from Mumbai (the two cities are literally on opposite ends of the globe). And by the time they eventually did see the iPhone threat, it was either too late, or their new Apple-like products were just not good enough. For example, the only way you could check email on the first version of the Playbook was if you had it sync’d with your Blackberry mobile device. Seriously? I have had a chance to see some features of their “company saving” BB 10 software scheduled (delayed) to release next year, and it is far from impressive and nothing different. 

So where from here? At this point, they’d be happy to get bought by anyone even at the current stock price of $7 odd. This really is the only option. I don’t think they even have a remote chance of catching up with the smartphone wars and definitely not the talent to innovate, so its better to just sell. Among the potential suitors, word is there’s Facebook, Amazon, Microsoft. I can’t imagine Facebook buying such a distressed company. RIMM’s unique selling proposition at this time is their experience in the hardware business, something Amazon or Microsoft could be interested in. Also, they still do have a bunch of engineers building some kind of mobile software, the hardest type of talent to find these days. 

She needs to dress up and put herself out on the market, and hope someone takes her to prom

move over gekko, it’s zuckerberg time

I don’t watch much TV, but happened to catch an episode of Mad Men the other day. My friends who I was watching with explained how the show portrays what the advertising industry was in the 60s. A time when advertising was the “cool” job to be in for a 22 year old, because it had most money, fame and women. It basically was akin to what became of Wall Street in the late 80s and 90s, that’s where the smartest people wanted to be. 2000s saw Management Consulting come in and make a fight of it, though Wall Street continued to dominate. And now, this current decade we are seeing a new trend -rise of the technology startup. 

In the last 2 years, I have been approached by several friends/family with ideas on web/mobile apps. These are people I would never have thought would be interested in technology. I have noticed a general intrigue from the common person about the Internet space and they now view it as a serious channel to make money. The perception that “I can’t be a techie”, “you can’t make money on a computer” is long gone. Most importantly - graduates from colleges outside the Bay Area are now passing on Wall Street and Consulting jobs with a hope to land the next hot Silicon Valley startup. 

So, why and how has this happened? There are probably a lot of factors to it, but here are 3 important ones in my opinion:

• Facebook: By far, the biggest reason for this tech mania. And when I say Facebook here, I’m not referring to the fact that people use it heavily. I’m talking about the fact that people know everything about the company Facebook Inc and how it got here. When asked what he thought of The Social Network, Peter Thiel (Facebook’s first investor) said he hoped the movie would have a similar impact on society that Gordan Gekko of Wall Street had in the late 80s. Gekko convinced people that “greed is good”, becoming a cult classic and leaving a lasting influence on the youth then. On to 2010 and imagine the 16 year old watching the end credits roll up, “Mark Zuckerberg is 26 years old and worth $10b”. And by the time the kid is 18, they go buy a 13 person company that is not making money for $1b. Yeah, I’d definitely be interested. 
• Rise of the smartphone: There’s an app for it! Apple changed the way the world consumes content when they launched the App Store in 2008. App Stores existed before, but the simplicity with which Apple executed this on the iPhone was a game changer. Android followed suit and mobile as a segment has been redefined. This presents huge opportunities as anyone can build a product and sell it through a worldwide distribution channel. Think of it this way - if I make a shirt, I have to go to a store and negotiate a deal with them to sell my shirt to the end consumer. In case of an app, I just put it up on the store myself - everyone’s welcome. This kind of an open market opportunity to sell products globally has never existed before, which is why everyone has an idea for an app. 
• Infrastructure: The resources available to build a technology product have greatly improved. Amazon Web Services means companies can achieve significant scale by putting everything on the cloud. Open source platforms/communities such as Github and Stackoverflow provide a wealth of information on coding/scaling. Various other platform players both for the web and mobile provide tools that make the process of software development a lot more efficient. You can get to product inception to build to scale much quicker now than what you could say 10 years back. 

Later today, Facebook will start trading on the NASDAQ at a valuation of $104b. To put it in context - that is half the current market cap of Walmart, the biggest retailer in the world. This IPO will be the biggest ever in tech, and the 3rd biggest overall in US history. The company has been around for 8 years and was started in a college dorm room by a 19 year old. The IPO will make him worth $30b.

End credits.

facebook-instagram and what matters

A few hours back, Facebook made what is by far their biggest acquisition till date. They bought the company that makes the popular photo sharing app Instagram for $1 billion. Yes, that is 1 billion US dollars. A transaction this big and significant is usually followed by a lot of commentary around the why/what/how/what next. I am going to list 5 facts about this deal that I find most interesting and subsequently why they matter.

1. Instagram has been around for about 1.5 years and they have a total of 13 full time employees at the company. 
2. They are barely generating any revenue, forget about bottom lines.
3. This is the first Facebook acquisition where they have bought a company for more than just the team and product. They have bought a company for its user base. Facebook, that has 900m monthly active users, has bought Instagram for its user base. 
4. A bold move by Facebook in what is normally a “quiet period” for a company going public - the period between S-1 filing and listing of the stock. 
5. Sequoia, Thrive, Greylock, Benchmark (VC funds) invested in the company at a $500m valuation a week earlier. A 100% ROI in 7 days. 

its all about loving your.. product

Earlier this year at a mobile conference in Bangalore, one of my fellow panelists talked about the importance, or rather lack of, product design in India. He talked about how fundamentally we just don’t think about design first when building something. He gave a simple example of how, when the government is looking to build a flyover, all they care about is how the traffic will be diverted rather than how the actual thing will look and work. Based on what I have seen in the first few months back here, I couldn’t agree more with his theory.

The issue lies culturally: we have always been a cash flow first country, rather than product first. When we want to build something, we first think about profit/loss. The general thinking is, “If Estimated Profit > current income, lets do it. We’ll figure the how part out later.” We pride ourselves on our ability to develop relationships and sell anything. Being a developing country, this strategy has been successful for a whole lot. But these are usually shrewd business people who are probably trading rather than innovating.

Where this can become a big problem is the technology industry. People are applying the same cash flow concept, and outsourcing product development. In fact, it seems that is the default option here when building a website/mobile app. I have had at least 5 instances where when asked “who is your CTO?”, the common response has been “we’re getting it built from outside for now, and will figure it out later”. This is precisely why we have ended up being an IT services country. Why we are known for Infosys and Wipro, and not Google and Facebook. Great technology products are usually only built by true innovators who are 100% vested in the success of the business.

Unfortunately, due to poor product design, it seems like even Indian consumers have gotten used to bad design - and this bad is actually good to them. For example, if you don’t put a bunch of ads on a classifieds website, consumers might not take it seriously and think that it is a school project. Case in point being Makemytrip - a very successful business (one that every Indian should be proud of btw), but a home page so cluttered you may think it was Diwali and Xmas both today. Thank God for Cleartrip, which incidentally has grabbed significant market share mainly due to simplicity and design of product.

The Bangalore panelist mentioned a specific incident that day. In the early days of his company when there was not much capital, he was generating about $4,000 in monthly net profit. He interviewed a talented mobile app designer/developer (his company makes mobile apps), but the guy would come in at $2,000/month. He hired him. Says it was his best decision till date. Hard to disagree, considering the company is now valued at about $50m.

no, i cannot fix your internet

Situation #1:

Its a regular weekday and I get a random call from one of my dad’s friends. My dad and he have been friends for their entire lives and this is maybe the 3rd time he is calling me. I am pleasantly surprised to hear his voice and some small talk ensues. He then goes on to state his purpose for the call, saying, “Beta, I have forgotten my Yahoo email password and security question so can’t recover the account. I mentioned this to your father and he said maybe you could help given you are in technology.”

Situation #2:

A fine Sunday afternoon, a bunch of family and friends at lunch. In the middle of the meal, one of my uncles walks across the room to get to me. He hands me his Blackberry and says that he can’t open some file in a text message, and asks if I can help. I have never used a Blackberry in my life and have no idea how those things work, so I return it back. The uncle goes on, “You are a mobile software guy, and you can’t even solve such a small problem for me?!”

I don’t write code. I have never hacked anything. I am not into gadgets and devices. I do business related stuff in mobile applications and advertising. But, in the above situations, the fact that I work in technology means that I am the God of all things internet and mobile, and not knowing something means a severe loss in my reputation as that God.

The truth is that when it comes to consumer products, I am just like you. And most of my colleagues are just like you. We might know just as much or as less as you about the product. Its like a camera or a television set. Same thing applies to internet and mobile products. We build these businesses, but they could be as different from each other as your business is from mine. The only thing common across technology businesses is that there is software programming involved - but that’s like saying a shirt business is same as a towel business because both involve the manufacturing of textile. 

So, the next time you need to decide which anti-virus to get, please don’t call your wife’s sister’s son because he recently started working at Google. You rather Google it. Or ask on Facebook. Or Quora. Or Tweet about it. You get the point. 

sharing is caring

Some time in 2009 while at dinner at a Thai restaurant in SF (yeah very unique I know), a buddy and I were talking about how at some point we would like to start our own companies. I mentioned to him about how I have some ideas, but can’t talk about them as it is too early. Of course, the true reason I didn’t want to tell him was because I thought he would “steal” it and go do it on his own. Turns out, he guessed my thoughts and went on to say

“Remember, if an idea is truly yours, no one else can ever do it” 

Over a period of time, I have become one of the biggest proponents of this philosophy. The problem is, as Indians, culturally there is and has always been a trust issue. We are told to be careful of what we share with others, because people will “steal” what you have. The uncle who manipulated the property papers and took the family estate, the business partner who defaulted on his share of liabilities - we are raised in an environment with such stories. We are trained to be cautious because the world is a bad bad place, and everyone out there is looking to dupe you. And one cannot lay blame to this theory given the experiences and stories you grow up with. 

However, as an entrepreneur, probably the best way to validate your idea is by sharing it with others. But unfortunately, due to the cultural issues mentioned above, this is not a normal practice in India compared to say Silicon Valley. There is often talk of the lack of a mentoring ecosystem in India. That the unavailability of good mentors is one reason startups cannot scale up as quickly as the Valley. What folks don’t realize is that even when there are mentors available to help, the entrepreneur is very careful about what he or she shares. And that makes the whole mentoring exercise useless. 

I agree there should be some sense of caution - don’t go tweet what you want to build when you don’t even have a prototype. But share your thoughts/vision with close friends, family (your potential customers) and industry experts (been there, done that). Make the select few you like a stakeholder in the business so they truly have a personal interest in it. Get a co-founder (or even two) and stamp your authority over your idea that was dreamt up while at dinner at some Thai restaurant. 

“If Facebook was your idea, then why didn’t you build Facebook?” - Zuckerberg to the Winkelweiss twins in the Facebook movie

welcome to my blog

I hope you enjoy some of this and it makes sense, somewhat.