Building a software product company in India: A Perspective – Sridhar Vembu

January 12, 2011 § Leave a comment

One of the challenges of being a software product company in India is that professional services companies dominate the IT landscape. This manifests itself in many ways; indeed it is fair to say that the very word ‘software’ in India has come to be associated with providing professional services. This services-oriented industry mindset means that a product company has to cross several hurdles, starting from recruiting people to creating efficient internal processes. What we have learned from over a decade of operating as a ‘different’ kind of company in India is to be patient and pave our own path.

Let’s consider recruitment first: it is hard for a company that is so different from the mainstream to stand out and attract the required talent pool. The prevailing mindset is that a product company is ‘risky’, while a services company has a safe predictable business model. Prospective candidates generally prefer companies that, from their perspective, have proven models and shy away from companies with perceived risky models. This has forced us to be very creative in our recruitment, something that I have written about extensively in our blogs. Indeed, the sheer necessity of finding good people to work for us forced us to explore alternative paths, and our entire culture has changed as a result. For instance, we tend not to focus much on academic credentials; instead we prefer to hire people who can get stuff done in the real world. It is amazing to see how well this principle works in practice, yet how hard it is to convince people, who haven’t experienced it, about this. People seem to be so overawed by fancy credentials that they just don’t bother to look at the data supporting their real world relevance. This is even truer in India than, for example, in the U.S.

Scond, we also noticed that most of college education really doesn’t add value; so we created our own alternative program and hired students directly out of high schools. This has worked significantly well for us. We would likely never have done these if the hiring environment weren’t difficult for us. Even after hiring, until new recruits get familiar with the company and become comfortable about our business, the lingering question is always there in their mind. Every new hire-orientation I attend will have at least a couple of people asking the questions ‘Why don’t we do services? Wouldn’t that be an easier business’. So often have I answered that question that I can now answer that question even in my sleep!

The challenges continue even when employees become experienced. The prevailing social norms in India value a (perceived) stable job in a prestigious company in matters like marriage. I have heard the lamentation (half in jest, often) numerous times from our eligible bachelors that being employed in a new kind of company like ours isn’t great for their marriage prospects – we have even considered going into the match-making business to counter this!

Let’s come to the more serious issue of internal processes. Professional services companies work on fairly rigorous processes that are tuned to their business model of ensuring absolute predictability and certainty in their schedules. Their clients are typically large corporations who value exactly that. But such predictability and certainty come at a cost: the system necessarily has to slow down the pace of development. I have written about this issue in detail elsewhere, but suffice it to say that software development schedules are inherently and intrinsically unpredictable. Any fairly complex software project has exploratory elements (‘cutting the path through an unknown jungle’ is the analogy I often use) and anything exploratory in nature just eludes precise scheduling. The practical way to religiously adhere to a schedule is to slow down the system sufficiently that the probability of a miss is kept low- even then, the schedule miss probability can never be reduced to zero. There are all manners of buffers built into a schedule. In a product company, such a mindset can be wasteful, and even prove fatal. It is telling that while professional services companies tout their process certifications such as CMM Level 5 and so on, product companies world wide do not rely on such certifications, but let their products do the talking. This is not to argue that all process is necessarily bad. A certain amount of discipline in development is mandatory in order to achieve anything productive. But in a product company, there is a real danger of going too far and adopt overly rigid processes. The prevailing services oriented mindset in India makes that danger all too real. A product development environment has to foster a certain amount of creative chaos or controlled anarchy. We have to combine creative freedom while having sufficient discipline so that we actually ship a quality product on a schedule and budget that allow us to be profitable. This balance is a lot harder to strike than it appears. Embracing uncertainty and risk is intrinsic to a product company so, in a sense, people who seek perfectly safe and predictable environments are right to stay away from it. There are numerous rewards to balance that risk, there is nothing more satisfying professionally than to ship a product that gets widespread customer acceptance.

Finally, product companies have another dimension that is usually not a big concern for services companies: marketing. In fact, marketing can be as important in the success of many products as the quality of R&D. The reason is that even the largest services companies do business with a fairly small number of global corporations (typically a few hundred) so that their sales teams can reach them easily. Product companies have to reach a much broader audience, so marketing is crucial. Yet, this is easy to overlook, particularly for people with an engineering background. I certainly have made my share of mistakes in this area, so I can speak from personal experience here. One of the hardest things about marketing is that it is so hard to measure its effectiveness. Internet traffic is easy enough to measure, but how do you measure brand perception or market credibility, which can be very important in understanding whether a product is successful or not? This lack of measurability trips up a person coming from a typical services project management background, where precise measurability is the gospel. Finally, it has taken us over 12 years at Zoho to get to where we are today. I am not very patient by nature, but we had no choice but to be patient as a company, as we figured out a lot of these things over time. We certainly didn’t have an appreciation of all this when we started. Over the years, we have matured as an organization, our products have evolved, and more than just execution of an idea it has been a voyage of adventure.  

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Does an Entrepreneur Need an MBA?

November 21, 2010 § 1 Comment

I started my career as an entrepreneur at twenty-four years old, right out of college. I ultimately built and sold a $250 million global scrap metal company, an experience I wrote about in my book Starting from Scrap. HBR wrote about my experiences in the December issue. After my book came out, I visited several U.S. business schools and met with MBA students to talk about my experiences launching a company in emerging markets. Many of the students who came to hear me speak were aspiring entrepreneurs in the process of getting MBAs. Many of them asked similar questions: “You didn’t get an MBA, nor did many other successful entrepreneurs, so if I want to start my own company, is business school a worthwhile experience? Is it worth paying all this tuition — or will my degree just be a resume-builder?”

 

I once had a conversation about this topic with Dr. John Yang, the dean of the Beijing International MBA program at Beijing University. Here’s what he had to say: “In my opinion, entrepreneurship is a matter of the heart, and education is a matter of the brain. It is difficult to teach a heart.” I share his perspective.

By definition, an entrepreneur is one who takes risk. It’s an attitude and an appetite, one which may be hardwired into one’s personality. Education can influence one’s attitude toward risk: for instance, understanding the principle of diversification or the long-term returns of equities versus bonds may make an investor more willing to create a “riskier” stock portfolio. But ultimately, can you teach someone to really enjoy taking risks? I don’t think you can.

When I think about the value of an MBA for aspiring entrepreneurs, I see a parallel with the military. Countries spend billions of dollars training soldiers so they’ll be ready for combat — they’re taught to fire rifles and operate in simulated high-pressure situations. But that training only goes so far. A Marine colonel once told me that he never knows how a soldier will respond — whether he’ll hide in his foxhole, run in the other direction, or stand and fight as he’s been trained #8212; until the bullets start flying. How someone reacts in times of great stress relies largely in instincts and the makeup of his or her personality — and training only takes you so far. The same is true with entrepreneurship. Understanding strategy, finance and marketing can be very helpful. But it’s also important to possess self-confidence, a need for independence, energy and passion, curiosity, and an ability to communicate ideas.

If you don’t have these natural assets, you’ll struggle as an entrepreneur. I’m lucky, because those are personal attributes that I have. I don’t have an MBA, but I’ve picked up many of the business skills I needed during more than 15 years running a company. (My grandfather referred to me as having an MBA from the School of Hard Knocks, whose official colors are black and blue — an expensive education that makes Harvard Business School appear inexpensive by comparison).

Many of the lessons I learned from those tough and painful experiences I might have learned in an MBA program — and if I’d learned them earlier, my company might have been even more successful. As the HBR article makes clear, if I’d understood the use and importance of financial and inventory controls, I could have prevented millions of dollars in fraud. Perhaps studying cases about companies that had grown too fast and lost control of both their finances and the quality of their products would have encouraged me to expand at a more sober pace.

We wasted years trying to re-organize after over-expanding and perhaps missed countless opportunities in the process. I could have saved or made a lot more money had I taken some courses in business law or venture capital financing. (We ended up getting strong armed by our investors, and they got away with it due to our early-stage naiveté.) I also would have benefited if I’d known more about human resources and the need for well-designed compensation and incentive systems.

These are just a few of the tools you can get in business school — and they’re all tools I wished I’d had. So I believe MBA programs do give future entrepreneurs valuable tools to help them mitigate risk and increase the probabilities of success.

But even with those tools, only you know whether or not you have the heart to execute on the opportunities we all recognize to launch a compelling new business.

That is when the real bullets start flying.

Greer is a senior advisor at Oaktree Capital and author of Starting from Scrap.

Market Research – Startup validation

November 19, 2010 § Leave a comment

Like to share an interesting article by Siddi in idea validation.

Here is one quick & easy way to do market research that I recently
did. Its useful when you don’t have direct access to the target market
(selling to the US for example):

– Create a landing page for the product, even before product
development starts
– Describe the vision for the product and have a form saying something
like “Enter your email for updates”
– When someone adds their email, an autoresponder sends out a reply
with a link to an online survey. I say “the product is in development,
but here is your chance to shape it”
– I have a few questions relating to what their biggest problems are,
which features they would be most interested in etc
– Promote the landing page: social media, mailing lists, google
adwords

If you do this right at the beginning, you’ll be able to collect some
data before and during development which you can use to shape the
product.

The advantages are:

– The group is self-filtered. Only those interested in the landing
page vision will sign up and take the survey
– When you are ready to launch you already have some leads who are
interested in the product

What we learned:

– We gave them a list of business problems and asked them to choose
which one was the biggest problem in their organization (they can only
choose one). A huge majority selected one particular problem. We made
solving that the focus of release 1
– We had a really cool feature in mind, which we thought would solve a
really irritating problem. But in the survey, not even one person
selected it as a big problem. So we dropped the feature.

He blog at http://siddhi.blogspot.com/

Hot Bread – Mahadevan

November 2, 2010 § Leave a comment

I feel what attracted me to the hotel industry was people; I love meeting people.

My parents (Doctors) also met people, but only those who were in pain and misery, and I want to meet people who are happy. Those who come to a bakery or restaurant are always in a joyous mood.

I was a professor during day time and a bell boy in the evening.

My advice to budding entrepreneurs is, innovate and think different. Don’t follow anyone’s footsteps; leave your own footprints for others to follow. Try to be lean and mean. Don’t take your customers for granted.

The Harsh Realities Of Being An Entrepreneur

November 2, 2010 § Leave a comment

  1. Your First Iteration of an Idea Will Be Wrong
  2. Your Friends And Family Won’t Understand What You Do
  3. You Will Make Less Than Normal Wages For A While
  4. Everything Takes Twice As Long…If It Even Happens
  5. Titles Mean Nothing. You Will Be a Janitor
  6. There Is No Silver Bullet
  7. Customers Will Frustrate You
  8. You Can’t Do It All Yourself
  9. There Is No Such Thing As An Overnight Success
  10. Building A Team Is Hard
  11. There Are Forces Outside Your Control

By Dharmesh Shah – On Startups
http://onstartups.com/tabid/3339/bid/17741/The-11-Harsh-Realities-Of-Being-An-Entrepreneur.aspx

Problem into a business opportunity – Scott Cook, founder intuit – expereince

October 21, 2010 § Leave a comment

In this video Scott Cook, Founder of intuit shares his experience / hardships of starting the startups. I can see a similar common thread among the successful entreprenures.

First the idea, then the conviction you have about the idea matters a lot.

5 Quick Pointers On Startup Hiring

September 30, 2010 § 1 Comment

5 Quick Pointers On Startup Hiring by Dharmesh Shah of Hubspot. http://onstartups.com/

I’ve been in the startup business for a pretty long time now. One of the things that I’ve found hardest to do is find and recruit exceptionally talented individuals. This is not particularly surprising, I think all businesses (big and small, young and old) have this challenge. However, I think this challenge is particularly acute for startups.

5 Quick Pointers On Startup Hiring Here are some of my thoughts and ideas on the whole startup recruiting process. [Side note: I prefer the word “recruiting” instead of “hiring”, but hiring is more widely used and I’m ranked #1 on Google for the term startup hiring and want to maintain that].

 1. Help The Best Find You:

I’m not a particularly big fan of the classic recruiting channels for one simple reason: they are not that effective. It’s very inefficient to go out into the world “looking” for that perfect new person for your startup. The odds of you finding them and convincing them to join you are slim to none. Instead, I prefer the reverse. Instead of spending a lot of time going out there looking for the perfect person, invest in activities to help that perfect person find you. For example, for my current startup, HubSpot, I haven’t been particularly good at going out and finding people. I have been good and having great people find me. This is a result of a limited set of activities: this blog, the HubSpot blog on Internet Marketing, and local startup activities I participate in. In short, in order to get the best people, you have to help them find you. This is particularly challenging, because many of the best people are not looking.

2. Skill vs. Talent:

I generally don’t advocate hiring for skills (which seems to be the way 95% of companies approach the problem). Instead, I prefer leaning towards talent. So, although the HubSpot platform is based on ASP.NET and C#, I don’t necessarily look for people that have those skills. I’d prefer finding developers that have talent whereby the actual language/platform is incidental. The best people are problem solvers and like to build elegant solutions and are not hung up on specific languages or technologies. Of course, there’s a line in the sand somewhere. I wouldn’t recommend anyone work for a company that is writing consumer Internet applications in COBOL. But, as long as the underlying platform is reasonable for the problem at hand, you should be able to find great people. In HubSpot’s case, I’m sure there will be people that will refuse to join us based solely on the fact that we are using ASP.NET (instead of Ruby On Rails, Java or whatever their learning is). That’s ok. My guess is that most (not all) of these people would not have been a particularly good fit for us anyways. I’m looking for talent, not skills.

 3. The Idea Will Change:

 You probably don’t want to recruit people based too strongly on the idea you are pursuing now. As passionate as you may be about the idea, chances are, it’s going to change. The right individual will continue to be the right individual even when this change happens.

4. What Can You Do For Them?

Too many companies hire based mostly on what they think the new recruit can bring to them. This is the “what can they do for me” line of thinking. This is not totally wrong because part of the goal of bringing new people on is clearly to “create value” for the company. But, I think this is short-sighted. In addition to asking yourself “what can they do for me?”, also ask: “What can my startup bring to them?” Now, many of you may jump to the conclusion that this is “big company thinking”. Only big companies can afford things like career paths, training programs and other benefits to help develop their employees. That’s not what I’m talking about here. What I’m driving at is that you need to find ways that the new team member can benefit from your startup that they may not be able to get elsewhere. Things like greater responsibility, broader use of their capabilities (perhaps they want to do technology and marketing), expanding their personal network should they want to start their own company some day, etc. At some level, you are playing a passion arbitrage game. You don’t have the resources to give new hires all the benefits of a larger company. You shouldn’t try to. Instead, find people that are passionately looking to get an experience that only you can deliver. Then, deliver it.

5. Specialists vs. Generalists:

My co-founder and I have this ongoing debate/discussion on whether it is better for startups to hire specialists (i.e. people that are exceptionally good at one thing) or generalists (i.e. people that are pretty good at lots of things). I don’t have a good answer for this because a lot depends on the stage of the company and the specific circumstances. All things being equal (which they never are), I tend to lean towards really smart generalists in the early days because they can wear multiple hats and “specialize” in whatever the company needs at that time. As the team grows, specialists tend to be more necessary as roles start to crystallize.

If you’re a startup that is recruiting, would love to hear your thoughts on what has worked for you (and what hasn’t). On the other hand, if you’re an exceptionally talented and passionate individual that happens to be in the Boston area, I’m always looking. What I desperately need right now is a designer (part developer, part designer) that is passionate about building great web applications that delight users and makes them happy. Just send an email to passionatepeople [at] hubspot.com and let me know what I can do for you.

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