Archive for December, 2007

The vision / mission joke

December 27, 2007

Why so much fuss about vision/mission statements in a startup?  What purpose do they serve?  Founders never work towards a mission, the mission becomes them. Everyday new challenges emerge and inspired founders solve them as they go. Ninety percent of these statements anyway end up as a mere link in a web site, a slide in a business plan, hardly ever get executed. It’s there may be because VCs would want them.  

What’s wrong if a business is just a product of inspired improvisation? In building his company Berkshire Hathaway, virtually from scratch over the past quarter-century, Warren Buffet conjured no overarching strategic vision.  He had followed no master plan other than to buy good businesses at the right price.  Even when he erred–a rare occurrence–he enfolded his purchases in an embrace intended to be permanent.  ”We buy everything, even a stock, with the idea that we will hold it forever,” Buffet says. 

I perfectly agree.  The entrepreneur in me says this. Work towards delivering a differentiator that drives customer preference. In this light, the big challenge may not be coming up with the initial deviation—there are usually lots of good ideas in play. The real challenge is coming up with all the supporting innovations that reinforce the initial vector, aligning all the other functions and processes to it. This will catalyze new value proposition, creating a sustainable differentiation that can generate deep and lasting competitive advantage. 

I think living with a vision statement builds in rigidities. Would you agree…?

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Angel Larry

December 22, 2007

Ok. Here I said “[Angels] are so shrewd that they see right through you from a mile”.  And here I said “As you move along,  you might find the right Mentor.  With a bit of luck, the right one may even find you.”  Readers thought I was just coddling them up.  

I stand by my words. Here’s the proof.   

It was Oracle founder Larry Ellison who reportedly had called up Evan Goldberg, ex-Oracle employee, founding his startup NetSuite, way back in 2000.  NetSuite was then operating out of a Silicon Valley apartment (over the hair salon and next to a liquor shop) , and Ellison had invested in NetSuite even as it was shaping up as a potential competitor.  Not just he invested in it, he didn’t cannibalize it to save the mother brand Oracle. 

Now he’s richer by a billion and one even as the company has yet to turn in profits. NetSuite came out with its IPO yesterday and by the close of trading, NetSuite shares climbed 36.5 percent to $35.50, putting the value of Ellison’s 54 percent stake above $1.1 billion. Ellison, NetSuite’s largest shareholder, has remained a close adviser to Mr. Goldberg and Zachary Nelson, NetSuite’s President and CEO, and is expected to continue in that role after the I.P.O…. Show me a better mentor if you can !

Meanwhile, Oracle shares soared 7 percent after it announced a 36 percent increase in quarterly revenue over the same period a year earlier. The value of Ellison’s 1.17 billion Oracle shares rose to about $26 billion.  Mr. Ellison plans to transfer all of the 32 million NetSuite shares he holds to a “lockbox” limited liability company that will be managed by an unrelated third party to avoid conflicts with a potential competitor.  Did you say foresighted…?  I say, Larry is far-sighted too…I mean, he sees well into the future.

That’s what makes Ellison an angel. Isn’t he one…?  Goldberg and Zach Nelson will tell you.

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Mother’s counsel

December 21, 2007

The greatest discovery of my generation is that human beings can alter their lives by altering their attitudes of mind. 

To me, it started with my mother.  Three years back while I was working for a company, everyday I used to come back home exhausted more because of boredom than work rigors. Still I didn’t have the guts to chuck my job and start a business because it kept paying all my bills. It kept my family happy, except the two of us who quietly grieved. I, being the trapped one; and my Mother, because she knew why I was putting up with it. 

Then one day when she could take no more of my suffering, she told me this.  “To start the business you want to, you have to look into the future and pretend you already were there. You have to stop treating the gestation or no-revenue period like some necessary evil, use that time to learn skills, build relationships and trust the investment would work.”  Coming from someone with modest education and just small town exposure, I was stunned. 

If you want to do something, just do it. Minds are like parachutes – they only function when open. The only way to achieve your goals is to jump right in and get started. You don’t need instructions, and you don’t need to be an expert.  It is our attitude at the beginning of a difficult task which, more than anything else, will affect it’s successful outcome. 

Mohammed Ali once said “To be a great champion you must believe you are the best. If you’re not, pretend you are.”  Boxing has hardly been the sport my Mother loved. I am sure, she wouldn’t have heard him either….

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Ego-system turns ecosystem

December 21, 2007

Looks like VC firms have shed their ego-system affinity to blend in better with local ecosystems. 

Earlier these very guys, recently Jet lagged, used to say, “we will invest in areas where we have specific domain and strategic expertise. We don’t invest in companies outside our area of core competence.”  I took them for a disciplined lot.  It’s their investors money and they know best to deal with.

But later they realized they are not getting very many investible ideas.  Even as they felt the need to look outside IT sphere, they couldn’t easily let go off that elitist talk, let alone admit to their late blooming. So conceited were they, I had felt even in restaurants they don’t even look at the menu — just tell the poor waiters what they want to eat, and the chef will have to make it for them. 

Now sample this. Srini Vudayagiri, of Lightspeed Advisory (India arm of Lightspeed VC), says the company now plans to start investing in companies outside the technology business in India. He said “40–50% of our investments in India will now be diverted to the non-tech sectors. This has been prompted by local market needs. We will mainly invest in consumer-driven sectors and allied infrastructure-led companies.  Srini says, Lightspeed is aggressively looking at non-tech investment in India because of strong economic growth, rising consumer demand and growing spending power. 

What a change?  During those days, I had a tough time telling these guys why they should look outside tech in India because that’s where the opportunity lay.  A couple of companies that badly needed capital then had to take the difficult debt route but today their shares are quoting 20 x their prices then. In the end, VC’s loss was the founders’ gain… 

Mine too, to a small extent that I owned their stocks… -) 

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Long list to thank

December 15, 2007

So it’s thanksgiving time again. Repay your debts.

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If you are in the same business as I and happened to be in India, you can’t afford to take a vacation now.  Such good times for businesses – big and small. 

So this is what I do for a living. Besides advising an occasional startup and mostly expansion stage businesses on their organic / inorganic growth alternatives, what I love most is my proprietary and commissioned research on grossly undervalued companies. For my clients in the PE/VC/I-banking/Strategic investors circle, what I do saves a lot of random research and early due diligence. The deal is pretty straight, they pay me only if they bite. I am ok with that since that makes me one of a kind, erects a high enough entry barrier for competition that looks for its nickel from the word go.

The process of research is indeed exhausting but is illustrative to sustain my interest. In some cases the value that underlies some businesses is so huge that you would really wonder why they aren’t growing.  Then I talk to their customers, suppliers and even its employees to get the picture.  But I still won’t call my task complete, until I talk to the managements to get a hang of things. I find my way to the top without much difficulty since it is in their interest that their business gets maximum visibility besides an objective coverage. A lot of these companies have fascinating stories attached – the earnings could be doubling next year or that the land value is three times the market cap.

 First I was a bit unsure to approach managements. Will they drop their guards?  How much will I have to discount from what they say?  How do I phrase my questions to get what I want? These were concerns at the beginning, but then after a couple of lively exchanges, I found they do ease up. People do talk if you look in their eye and ask straight questions.  I can do that easily because I tell them what I am up to when I ask for their time. Some of them liked my approach so much that they offered me a job right away to fix their corporate planning department, to design systems and lay down processes.  I just smile and tell them they’ll have to first stock up on their pink-slips. I am so sold on direct, in-the-face, break-all-rules-but-get-results approach that I’ll corrupt an otherwise compliant organization.  Darn, aggression in right doses works, yields results…!    

I use blogs, email, internet and scour every piece of news on the company, research reports and back check every piece of information with its source as well as others-in-the-know before I sit down to compile.  Several drafts and so many sleepless nights later, my output is graven in my mind and I tell the client “this looks like it, let’s talk…”  Then we go through the motions, client’s due diligence follows and if they bite, checks get cut.

As I look back, it’s like a dream. But I do wonder, what would I’ve done for a living had technology not developed as it has today?  Would I’ve settled for anything less exciting?  I doubt.

So who all should I be thanking…? 

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Being Tiger

December 13, 2007

Look at Accenture. It has more than 133,000 personnel in 48 countries, has no official headquarters and branches. Its CFO in Silicon Valley, its CTO in Germany and the head of HR in Chicago. Furthermore, it leases various offices at more than 100 locations around the world, though it is incorporated in Bermuda. William Green, CEO and Chairman of Accenture, says: “We don’t get to go down the hall to the coffee pot, ask someone how their weekend was and then ask a business question. We spend time together in the countries where our clients are, which is more important if you’re running a global company. I meet more CEOs of big companies in China or India these days than at their headquarters.”

Innovative organization structure. Or is it organization un-structure? I love that bit, comes pretty close to how I work. But then I learnt how the name Accenture was derived. It’s from “accent on future”. Truly, it is. Future is hardly static.  So why the hell we bog down to an HQ – goes my argument.

“Go On. Be a Tiger!” That’s Accenture’s strong message in all media. The campaign utilizes the modern day personification of high performance: Tiger Woods, the world’s most iconic golfer. Yeah, be a tiger.  Sounds great !  Sensible economics too.

Then I think of my own work format.  I operate with no HQ either.  At best, it’s just my cell phone and my laptop.  I love the way it is. No overheads. No supervising required. I make all mistakes myself and then correct them. Simply put, no worries and I am on my own.  Yet always-on for clients across the globe.  My only employee is my driver that acts as my office boy, runs errands and delivers stuff besides driving me around in this no-parking-available city. (Confession : Can’t imagine life without a driver in Mumbai) All made possible since my associates – law firms, investment banks and corporates have been making huge investments in real estate and plush offices. 

In return, I just drive deals to them. That’s why they love me. Fair enough… 

Who can grumble?  Now that I’ve Accenture to point 🙂

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Managing leadership transition

December 4, 2007

Some of my clients have evolved from startup to growth stage.  They underwent a quiet turmoil in the process and are now grappling with a new set of issues. The prime issue being founder giving way to professional CEOs – some on their own initiative, others have been mandated by VCs that came on Board. Just as the business evolves, leadership too will have to. Some like it, others don’t.  But once you have broad-based your Board and let in other investors, you ain’t got too many choices. Founders may have to make room for successors in the larger interest of the enterprise. 

Such transitions are not always easy; in fact they are far too complex. Exchanges of responsibilities contain any number of challenges, primarily because they happen in real time with no pause in the or­ganization’s activities. The exiting executive is in the best position to direct events so that newcomers can avoid the usual “perfect storm” of tests: an overly stimulated imperative to jump into the job with both feet, ready for action; a sense that the appointment carries a change mandate; and an insufficient appreciation of company challenges, culture, and constraints. 

Indeed, the last 90 days of the outgoing executive’s tenure may be as critical to a successful transition as the first 90 days are for a newcomer.  In some of the companies where I’ve been associated with, a productive exchange between the two executives significantly diminished the factors that could have derailed the successor’s performance. 

Here I list out some of the imperatives. 

  • The former CEO should provide sufficient space for the new top gun to fully assume his or her responsibilities. Never second-guess or “hover” the incumbent because that erodes his authority.  

  • Let newcomers be clumsy in their first steps. An elevation to leadership roles (from within) often is unsettling to many, especially if they are replacing someone of stature. They are nervous, can’t let go of their old responsibilities or fully take on their new ones, perhaps out of a fear that they’re not worthy of the job. Make it easy for them to fit in.

  • Transition protocols may work well with tangibles like documents, keys, codes, petty cash etc.  [How else HR managers show performance 🙂 ]  The trick is in transmitting the talent assessment, culture, attitudes, inferences and tacit knowledge of each hub and spoke in the wheel the leaving CEO has pictured.  I am yet to see a format for that. 

  • Help the incumbent form his own ideas.  Never impose what you felt was right.  Let him form his own opinion on gaps that needs fixing by adding talent or developing it from ground up.  Exchange notes for the first few weeks or even months.  Let him recognize the “power nodes” or “the chart behind organization charts”.  Have him forge relationship with the company board all by himself.  Handhold him only by exception and strictly on demand. 

Have you ever gone through the motions of leadership transition in your enterprise?  What unique aspects did you notice?  How did you manage it?  I would love to hear from you.

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