Notes From An Unrepentant Dotcommer
LESSONS FROM FAILURE
| For those not fortunate enough to be able to claim direct lineage from Bill Gates and Larry Ellison, the Internet was the final El Dorado; the mother lode of opportunity, the portal to dotcom millions. The eBusiness tsunami raged through people's minds and made them throw caution to the winds. And yet it was done intelligently, logically, scientifically and analytically. We had "pundits" from Wall Street, fund managers, incubators and the Big Six consultants all out in full force. All the seers and crystal-ball gazers heralded the New Economy. |
| Those were the heady days of a rocket propelled Nasdaq. Ideas were king. Never before had the humble "dot" influenced global thought so much, creating paper millionaires seemingly out of ether! The only way was up, and we were all in it for the ride - old and young, mums and dads, corporations and governments. There was no time to stop and think that perhaps we were at cross-purposes with nature yet again! |
| This is my story. I have lived through intoxicating times, peddling knowledge and creating castles made of mythical bricks called "Level 4 listings" and magical mortar called "VC placement". I have reigned supreme in this kingdom, the Mogul of E-Business. I have ridden the wind, from the dotcom boom to the gloom to the final ignominious doom. I have done it all in a little over a year. Now battered, bloodied and broken, I live to tell the tale of jaldi.com. |
| I will begin by telling it like a fable, and these are the characters. Maverick is a friend, and Technology Nerd. Two other friends are the Fester Brothers. Friend four is a stockmarket king "� let's call him Iceman. Yet another friend is a US-based VC/Angel - Guru. As for me, I'm Jester. Here's how it happened. |
| It's early 1998. My friend Maverick is in a Blue Mood. He had the tools, the people and the vision to do what amazon.com was doing, but who was to run the business? As for me, Jester, I wanted to be God, bring about a revolution in the way goods were sold. |
| One of the foundations of the Modern Economy is the premise of customer delight and satisfaction; its hidden purpose is to educate the masses about their latent dissatisfaction; to create perceived needs which can be fully satiated by irrelevant products or services, creating, of course, another unsatisfied need and so on. This time the customer should really be king, I thought. |
| Why could the tables not be turned? Could we not predict the colour of the shirt that Satish Kumar of Tirunelveli wants to buy tomorrow and actually offer it to him? Could we not let Shanti Devi know why she need not buy Dolby Surround if she opts for Bose speakers? Could Rani Mukherjee not have TV manufacturers compete to give her a personalised blue, 39-inch television with green speakers? Could Mohamad Abas not get his split airconditioner before next year's winter. Megalomania inspires great revolutions. |
| Maverick and Jester decide to turn the whole buying and selling process upside down. Consumer empowerment through knowledge, mass customisation, ability to promise, elimination of the middleman, Versace in Vasai! "In six months", said Jester, "we shall be cruising the Aegean seas in our 235 Bugatti yacht with Britney Spears." |
| At which point, enter the Fester brothers with 15 years of experience in the consumer durables market. Enter Iceman; he would get us the money. Enter the Guru, with "gyan" from Mary Meeker, Goldman Sachs, a hotline to the "in" folks in Palo Alto and San Jose. He would sell the company for some zillions - give or take a billion US dollars! We reached critical mass by mid-99. The Nasdaq, Wired, Red Herring, Fast Company and 336 books by American authors on the Internet reinforced our thinking. |
| By the third quarter of 1999, www.jaldi.com was up and ready for testing. Maverick buys a washing machine for his mother, Jester buys a television for his daughter. The Fester brothers, Iceman and Guru don't buy. But we're ready to rock and roll! Killer mode is on; all we need now is to get the teeming hordes to buy online. |
| Meetings, presentations by the advertising artistes; master dream-sellers. We need to create a brand advertising campaign coupled with education and product campaigns. And let's not forget the promotional campaign and the inevitable launch events. Things get hot. Bring on the advertising agency! |
| THE MANTRA |
| Maverick, the Fester Brothers and Jester are struggling; a bevy of exotic account managers haunt the office. Guru is shouting, and sets threatening targets: if we don't launch with at least $10 million in ad spending and don't get at least two million hits, have more stickiness than an armpit in Saigon and more page views than Playboy next month - we are all dead. The next day Guru raises the ante - we should spend at least $28 million dollars in the next 12 months - or we are history. |
| Our investment bankers go crazy. We better move at Internet speed, they say. There's this thing about the First Mover Advantage (remember the guy who proposed to the girl you were infatuated with in school?). Jester is writing to Bugatti for a quote; Maverick is talking to the Greeks for an Island, the Fester brothers are keeping all their limbs crossed. |
| D-Day arrives. There's a big launch; full page colour adverts with a half-dressed model brooding about eShopping; there are TV interviews. A zillion guys are hitting the site. What a party! Let the festivities begin - a thousand tickets of the latest Shah Rukh Khan starrer for jaldi.com users, the best VJ's to entertain them; 20,000 roses shipped to jaldi users. Nothing is good enough for our jaldi patrons. |
| Guru is pleased. Now all we need is a CEO. The investment bankers are already making the information memo for investors who are queuing up. We must get sales, we must have three digit growth every second week. My mother-in-law wants to invest! |
| Enter the CEO. CEOs need an army of seconds-in-command, but there's no problem. The best of the best in Indian industry are dying to work for us. We hire an eclectic mix of MBAs, engineers, artists, journalists, college dropouts and, of course, advertising people. The business plan starts to take shape. Census and market research reports fed into Excel spreadsheets prove conclusively that we are heading into the very big league. Our potential sales stand at about Rs 150 crore in the first year and will grow to a couple of thousand crores by year three. |
| Seriously, we had a great business plan, and we actually implemented it. People came to our site, many stuck around and a few even bought things. But jaldi.com didn't rake in the shekels. Where did we go wrong ? Did we really have a business model? Would we really achieve something meaningful? Let me share the lessons we learnt. I really don't know where we stand today; but something in my gut tells me we are shooting in the right direction. |
| Our mantra is knowledge empowerment, mass customisation. Today the consumer is offered a variety of goods satisfying basic needs as well as luxuries. Manufacturers benefit from economies of scale and stand to gain the most by producing many items of a single model, size or colour of a product. |
| On the other hand, the consumer would rather buy a product totally customised for his needs. Rani Mukherjee wants a blue, 39-inch TV with green speakers. Unfortunately, neither Sony nor Panasonic will make it for her. Today we have a situation of compromise where the manufacturer makes just enough variety to stay competitive and to satisfy a wide enough palate of consumer choice. |
| As manufacturing and distribution systems get more agile with technology we are moving into an era in which suppliers will be forced to offer customised goods. The Internet is the meeting ground for consumers and manufacturers in a virtual marketplace that will ensure that this happens. And once it does that, the marketplace would create value and, therefore, become an irreplaceable link. |
| Today, to attract the consumer's attention, manufacturers have to allocate a large percentage of the sale price (ranging from 5 per cent to 50 per cent) to advertising. This mode of communication is akin to shooting in the dark, and the time span for the consumer to catch your silver bullet is literally nanoseconds. |
| As a result, advertising, instead of empowering consumers with knowledge on the product ends up creating a brand image to differentiate the manufacturer. For example, Aishwarya Rai dancing on a televison equals great television. Another problem with this sort of advertising, which of course is technology related, is that the consumer cannot ask Aishwarya Rai any questions or even complain. The communication is one sided. Technically there is a high noise to signal ratio resulting in customer confusion and post-purchase dissonance. |
| Jaldi.com allowed free access to information "� on product features, and through comparisons with other products in the category through buying guides. An online consumer behaviour software tracked and predicted what an individual customer's preference would be if a customised product was available. |
| What jaldi.com could not do in the 15 months of its existence is create an online link between the consumer and manufacturer whereby a bid could be set up to deliver a customised consumer product. Such a step requires massive reorganisation and awareness in the market, a complete change in manufacturing and distribution systems, in fact a paradigm change in the whole process. |
| What jaldi.com has been able to do is act as a catalyst for this to happen. How long will this take? I personally feel about two to three years. Could well be less or more, though. But one day during my lifetime, anyone will be able to go online and create a customised green, 40-inch TV with seven speakers and 243 channels and have Sony and Philips bidding for the business in real time, with a guaranteed price and delivery. When that day comes, I would not be surprised if prices are substantially lower than they are today. |
| Traditionally, the customer has been miles away from the manufacturer and there was no way to transact business other than through the distribution riyasats that manufacturers have created. A very complex layered structure of middlemen, intermediaries, logistics and warehouse companies are a part of this riyasat. Estimates are that about 25 per cent to 70 per cent of the cost of a sale goes into feeding this flab. Over time there shall be a structural change. And e-tailing will bring it about. |
| LAST MILE WISDOM |
| With about eight million small and medium-sized organisations, India has the largest, but also the most disorganised, retailing industry in the world. Due to low overheads, negligible investment in working capital, virtually no employees and self-owned real estate, the retail sector has worked on low margins. |
| In the short run this has delayed the entry of organised retail chains. Though superficially it would seem that the consumer has saved on expense, he has also lost out on choice, quality, after-sales service and lower prices due to bulk buying by retail chains. |
| As incomes increase in India, the consumer in Meerut and Moradabad is demanding what his countrymen in Mumbai have. There is clearly a divide between Rich and Reach. Jaldi.com fulfils that with minimal investment. It would take a few thousand crores and a decade for the consumer in rural or semi-urban India to get the benefits of organised retail chains. Through the Internet it can happen in a few manhours. |
| From all economical viewpoints, jaldi.com has a sustainable and profitable business model. What is needed now is the time it takes for consumers to see the inherent value and bring about a change in buying behaviour. The manufacturing and distribution systems in this country will in turn respond to that change. |
| But, meanwhile, we have learnt lessons from initial failure. These are: |
| Revolutions don't happen overnight: We expected the consumer to change in Internet time. We have to cross the chasm between early adopters and the critical mass. This will take two to three years. |
| Some rules never change: It is one thing to change with the times, and adapt archaic practices to suit our needs "� and another to discount years of learning and create rules that negate acquired wisdom. We created a new set of management rules in jaldi.com. |
| The organisation changed daily. Leadership and direction were acquired by the person who was more Internet savvy and we tried to do umpteen things in parallel. We forgot that even today humans need organisations to work in. The principles of command and control are still very much in existence. The New Age Economy need not be run by New Age Management. |
| Logistics and customer satisfaction: Customer satisfaction was the other count on which we could have done better. We used the Internet for all its worth to make our customers happy - every fancy technology that empowered our customers or enabled us to provide a better virtual service was implemented. |
| Yet, customers weren't happy, they were not banging at our doors, extracting every bit of value we had to offer "� there was a disconnect. In our zealous attempt to embrace and leverage the virtual world, we forgot that customers are real, their needs are real, and they can be fulfilled only in the real world. We ignored the need for that last mile link "� the offline fulfilment mechanisms show we had lots to learn. We were dependent on rickshaw-wallahs to deliver the 650 air-conditioners we sold in April and May last year because they cost only Rs 100 as against Rs 750 charged by a DHL or a SafeExpress. We could write a book on what we learned about the last mile. |
| Never has incumbency been worthless: It is a commonly acknowledged fact that three calendar months make one Internet year, a testament to the rapid change to which this industry is susceptible. It is how we adapt to those changes and move on that determines our success. We learnt that this industry requires technological, strategic and tactical innovation to take place every single day. Business models not only need to be refined, but sometimes even redefined 180 degrees. |
| An inflexible business does not even have a fighting chance on the Internet. For us, every day was a new learning experience "� we have tried almost every trick in the book and were probably the first to embrace any idea with potential that came along. Of course, we've had to take the flak for our seeming lack of direction and our fuzzy business model. |
| The stories of my death are highly exaggerated: Pick up the latest opinion pieces by industry soothsayers and I can guarantee you, that 80 per cent of these will predict the death of the dotcom industry. We, of course, do not believe this prediction "� as a matter of fact, we have stopped believing what industry watchers have to say, period. There was a time, a short while ago, when things began to look a little shaky. |
| The stockmarket had crashed; venture capitalists and Internet gurus who had egged us on in the early days were now going back on their prophecies and words of advice; and, of course, we were beginning to reel under the pressure of continued investment with no returns. They say, reality bites "� and it did. There were moments when we would doubt our reason for being here. But that's all they were "� moments. |
| What did the venture capitalists have anyway? A second hand look at what we did "� that's all. Nothing could dampen our spirits, no pill could suppress the rush that surged through us every time we thought of how close we were to our dream. |
| We have a dream "� a dream to make jaldi synonymous with shopping. We believe that the Internet and its inherent attributes and strengths are perfectly suited to the e-tailing model, especially in India. As the world moves towards globalisation and the Indian middle class becomes every capitalist's dream "� the riches and reach awarded by the Internet make it the ideal medium to tap this huge potential. For those in metros, e-tailing provides a range of options so rich that traditional retailers can only try and match; while for the rest, it reaches areas across India untouched by the upmarket retail revolution. |
| FACING CHALLENGES |
| There are constraints though "� such as the lack of basic infrastructure. People are quick to dismiss e-tailing and other models which depend on the ideals of ubiquitous access, high bandwidth and the like. And while we acknowledge that the success of these models depends on how fast we as a country are able to provide these basics, we don't support such a hasty dismissal. |
| We are confident that what we want jaldi.com to achieve is not unrealistic. It may be a distant dream, but then a vision is a guiding force for the future, and if we thought we could achieve it in one financial year, it would have been a business goal. There are several others like us, people with great ideas, ideas that may not be the flavour of the week and have been written off by industry watchers. But these ideas have merit, deserve a lot more credit and are definitely here to stay. |
| The fact is it is still too soon for any of us to predict what shape things will take as we move along. Some of us may actually turn our fortunes around to re-emerge and plod along comfortably. But one thing we can safely say is that unless we have a dream, are ready to take risks for the sake of an idea we believe in, and are willing to innovate and mutate as we go along, there will be others who succeed. |
| In the meanwhile, we could do one of two things. Make steady progress, implement changes that strengthen our offering, while helping us stay afloat through minimal investments. Or we could use that time for radical innovation - develop new ideas, markets and customers to stay ahead, while we catch up with our dream in the background. We chose the latter. |
| We have added on new revenue streams to our business, and have strengthened or abated investments in areas depending on the priority they deserve. So we have, jaldi in a Box, one year of technology development, infrastructure capabilities and our experience cut into a CD and available to anyone and everyone who wants to become another jaldi. I can proudly say that we were the first in India, to think of the idea and deliver on it. This could be our opportunity for attaining stardom - giving birth to an e-tailing revolution that mobilises thousands "� who knows? |
| This article was published in the May 2002 issue of Indian Management |