The Reluctant Entrepreneur: Business cycles

Any one watching the price of a barrel of oil dropping will be amazed not just at the speed at which the price is falling but at the fact that just a few months ago, it looked like oil prices could only go up. The very fact that there is not a single story off any entrepreneur hay or any analyst predicting this amazing fall, shows once again the glorious uncertainties of being in business. Business it seems is a lot like cricket, you have to keep your eye on the ball all the time.

Rising oil prices put nearly all business in a spin, transport costs spiraled. This meant imports, exports local buying or selling would take a hit in terms of transport, this automatically pushed prices upwards, and sales took a hit with dampened demand. Nobusiness that would have been laughing all the way to the bank except petrochemical companies. It looked like they were on a roll that was never going to stop. However, today the situation is simply the opposite, oh yes transport costs are yet to come down and no finger pointing to Goa's tourist taxi's, no one is reducing their transport cost, in effect now the shoe in on the other foot.

This brings me to the point that I want to make, every business undergoes these cycles and every entrepreneur has to make a judgment call. More so when the tide is turning against the business. What kind of call. Take and example of a manufacturer of black and white TV's, if he looks at his falling sales graph and believes it is the effect a slow economy he is only fooling himself. This may be very straight forward, but consider the example of a bulb, is the falling sales graph a result of a slow economy or is it the effect of substitutes like CFL or LED lights?

Alternative energy sources would have seen a lot of activity in terms of R&D, setting up of manufacturing facilities for say solar panels and also sales of these products would have zoomed as the cost benefit or payback given high oil prices would be pretty good. Now, that oil prices have cooled customers will relax and defer decisions to buy or replace conventional energy sources. Should entrepreneurs here sell out, shut shop. No, but they will have to be innovative and ride this slump because we do not know when but we know it will happen, oil prices will rise again.

We started selling SHAKTI water tanks way back in June 1996, we had just missed the boom in the real estate sector, added to that was the fact that for the next 4/5 months we would be in the traditional lean season, better know in India as the monsoon. It was only later after spending many a day sad or despondent that we had missed the high season that we realised that it was a good thing.

Missing a high season and good? Well imagine our launch coinciding with the start of the high season (Sept to May) . Within 2/3 months we would have had orders pouring in and the teething trouble that all entrepreneurs have to go thru would have kicked in. Once that happens, and a Company fails to deliver right at the start it is a recipe for disaster. By starting at the fag end we were able to ramp up our production, take control of teething issues and deliver consistently what was ordered. We were battle ready when the next high season came along.

Every business cycle comes with its pro and cons, like a surfer, the important thing is to figure out how to ride it safety to the shore and then head out again to catch the next wave.

The reluctant entrepreneur: Legacy Building

Congratulations Business Goa on your sixth anniversary. It is another milestone on your way to creating a legacy. This is an ongoing process, we live and learn. Keeping it going month after month year after year is an achievement by itself, we wish you luck and blessings as you go into a new year. We at GMI Zarhak just completed 20 years and as usual it is a time to look back, refocus and rededicate ourselves to the task at hand, creating a legacy.

The most obvious lesson that comes to mind is actually better explained by the glorious game of uncertainties, cricket. Most great batsmen say that the secret of their success is the fact that they play every ball as if it is their first ball of the innings. They actually practice what the financial ads publish as a disclaimer, the fact that you hit a four of the previous ball is no guarantee that the next one will be a four. So also for any Company. Just because the firm had a good year is no guarantee that the next year will be great. It will be only if a review was done and attention was paid to those areas where problems faced and corrective action taken.

A classic example is brought out by the saying “When Good Sales Hide Poor Performance”. There are often times when sales rise without any effort on the part of the company or despite rude or poor service. This could be due to non availability of competitors products, withdrawing of a competing model etc. This situation could lull the company into a false sense of security and once the competition gets its act together, the customers will switch and it will be too late.

When we entered the market 20 years ago we pushed a new delivery model. We offered dealers an opportunity not to stock. They could call the factory, order the material required, with no minimum and we would deliver directly to their customers. This meant they did not have to carry inventory and that they could use the godown space for other material. This model we developed based on the finding that every manufacturer had a minimum lifting quantity to deliver free to the dealer. If the dealer ordered less than the minimum he had to pay for the delivery. This offered us a gap, an opening, we grabbed it with both hands and this was born our delivery model, JIT no minimum. As orders increased we had to make additions, changes to our process after review to ensure our 24 hr delivery commitment.

Employee engagement or team building is another area that one has to constantly review. Anyone starting will have a very hands on approach. This will mean that the Boss will be in close touch with the employees on a daily basis. As the business grows and spreads, the day to day activities are taken over by others and that contact is lost or weakens. In addition there is attrition and additions as an on going process, that personnel touch/ contact can get lost. For us at GMI, it is the monthly Kaizen meeting where interaction with every employee happens. Team building is an ongoing and continuous process.

Talking of engagement, over these last twenty years one way of giving back to society, a much talked about concept is “INTERNSHIP”. We keep cribbing about the fact that those who pass out are nowhere near the required standard. Yet what do we do about it, easy way out is blame the education system. If we have stated the problem, can we become part of the solution. That solution is to hire INTERNS. Interns are students who come and work in our organisations and when working get a feel of the real world and how it connects to the theory they are learning. This process effectively contributes to making the student a better product once he/she actually finishes school and therefore the hiring organisation has added value to society, given back in a way.

But only charity will not motivate us to hire interns, the question is how will the organisation benefit. It will benefit. Everyday our people focus on day to day activities, there is really no time to stand back and study data generated various activities. Eg while we know what is the rejection level do we hav time to study the rejections and attack the one cause that is generating the most defects, Pareto's analysis or do we have time to do a fish bone analysis to find the root cause. Interns are the answer, they are not concerned by day to day work, they can study the data, make observations on the ground and give the concerned department heads better information to take corrective action, win-win for both.

Old customers do not die they fade away. Just as employee turnover happens in your company, it is also happening in your customers Company. The new purchase manager may not be aware of your relationship as a supplier and having his own connections from a previous experience, he will shift his business elsewhere. It helps if a review is done and old customers are reminded of your presence regularly just in case they have forgotten or the new hire does not know about your product.

There is something we have not done but it is surely on our wishlist. I recently attended the 10^th anniversary bash of Sethu. It was not just a bash, it was a birthday bash with a purpose. It was a great way to connect with the stake holders, and get feedback. Often we get feedback through a survey, in this case the feedback was in the attendance, they are doing a great job and they are doing it right. Maybe at 25 we will have a bash and that will be a fun way of doing a serious job.

Last but not the least is keep scanning the horizon. Is there anything out there which will put you out of business, colour TV's blew B& W's out of the water, as did Maruti to Premier Padmini. The owner of an aluminum tube mfg, believed that lami (plastic) tubes would never replace aluminum tubes. He felt that due to the fear of fakes, cosmetic companies would not switch because lami tubes could be reused. Today, it will be hard to find an aluminum tube being used to package toothpaste. These threats do not have to be another competitor, but it could be another process, another material.....

You could add your own areas to review on your anniversary, but do review so that you will be around at the next anniversary. Happy legacy creating.

The Reluctant Entrepreneur: Intellectual Property

IP is can be also applied to Intellectual property or IP as it is commonly called. Just two words but in today’s business they play a significant role. Recently at a program done by Stanford in Goa, 50 innovators were being taken thru the finer nuances of business in a crash course, and I was pleasantly surprised to see an entire session devoted to this important subject. A big change from when I attended business school.

Twenty year back when we started doing business, we had made an application to register our trademark SHAKTI. It was more by chance than design. One could say it was a positive aspect of the otherwise wasteful activity “waiting for permissions”. While waiting at some Government office, I met a gentleman who today can be called an angel in disguise. He mentioned I should look at registering my mark and even provided me with a reference. We did begin the cumbersome process and finally SHAKTI was registered. However, looking back we overlooked registering our tag lines, SUPERIOR BY DESIGN and PROUDLY MADE IN GOA.

A few years back we heard that one of our suppliers was refusing to accept delivery of a 5000lt tank. The driver called me and told me that despite our company buying our requirements from this customer he is refusing to take delivery. After discussion we realized why. He was delivered a imitation SHAKTI tank which split into two after it was filled. Now, seeing another SHAKTI tank he did not want it. Further investigation revealed that the dealer had supplied a JAL SHAKTI tank where the JAL had conveniently got wiped out. After clarification and confirmation from dealer the customer accepted the real SHAKTI.

This we found out was not an isolated case. Either some unscrupulous dealers simply wiped out the JAL or they informed customers this was a cheaper cousin. This is not limited to water tanks, fakes with deceptively similar logos are the bane of legitimate industry.

We decided to enforce out rights protected by the trade mark registration. This is easier said than done. We sent letters to the concerned Company who was infringing on our IP. They simply ignored the notices. To send more notices, one has to pay the IP lawyers for every notice and of course their time.

How come then we read of music companies being able to enforce IP of artists by raiding restaurants playing copyrighted songs without paying user fees. Microsoft officials regularly visit companies and get them to pay for legal copies if they are found using pirated software. These raids are conducted with the official help of the administration. How can a SME get similar assistance and protection? What does one need to do? What can be done if the notices are not issued? So many questions but very few answers.

We are pursuing the matter and hopefully we will have good news for you soon, till then do not get disheartened and take the road most traveled, it is no use, let us not register our brand name or other IP. Yes IP is not related to trade names, tag lines, it can be trade secret, a patent etc. Go back to the opening line and act on the second best time, now. Start protecting your IP by getting it registered.

The Government is apprised of this problem and on the anvil is the new National IP policy which is expected to to oversea implementation and regulations in India. It is also time business schools added this subject into their curriculum and industry organisations wake up and spearhead the drive to protect legitimate business, just like is done in the music industry.

The Reluctant Entrepreneur: Advertising, A Boon or Bane

“The purest taste of Quality” screamed at you from giant billboards across Goa, accompanied by a picture of a few milk pouches in a fishng boat on a beach. The brand name was circled with orange drops. The pouches in the boat signified the arrival of the brand on Goan shores. Beyond that there was nothing to suggest why or what “purest” meant . It could have been an advertisment for orange juice. The large orange drops surely did not signify pure milk. A classic example of advertisment money wasted.

At the Goa Chamber seminar which included a business plan competition, four veterans discussed advertisting and more at length. One reasoned, “half the advertising budget is wasted, till date we do not know which half”. This confusion is compounded for owners of small business. They generally have no time or inclination to take decisions on advertising. This is because they are either ignorant of the long term effect or genuiely believe they are not important.

How and how much should one spend on advertising ? The answer lies between “word of mouth” to over the top. No use advertising a great mango pickle, it is much better to brand it so that when you next launch a brinjal pickle you do not have to convince the customer who had a good experience with the mango pickle all over again.

When choosing a Brand name for water tanks manufactured by us, one possible option was a name easily recognised in Goa, for eg: PALM or SEASHELL. We chose SHAKTI, recognisable Pan India. Had we not taken the long term view then, today a branding execise would have been expensive and meant we are only at square one. Smaller companies run the risk of missing out on building a brand from day one.

The other aspect of advertising is drawing attention to product features. When we launched our tank against established national players we had to get the customer to experience our product. One, relatively cheap way used, was to approach near complete constructions and show them our product. We requested them to check if any other product offered them better features.

As sales picked up and we realised where our strength lay, we put up two hoardings, which were novel and eye catching. Rather than paint the tank on the hoarding we had a real product up there on one half of the hoarding, and on the other half, we listed out the BRAND’s three key features which were based on our door to door selling feedback.

We progressed to wall paintings and finally newspaper advertisments. We did try radio but did not follow up. Not because of any issues with radio but because like all small business’s we got involved with production, finance etc and left the advertising and brand building to later. The fact that creative advertising work by professionals is not a tangible benefit most small business owners find it hard to accept the pricing for services and eventually baulk at using professional help in this critical area.

The brand building possibilities offered by the internet are huge, apart from what is now traditional website exposure to highly interactive social networking sites. This is the future space where brands will be built.

All said and done a Company that does not make its presence felt to its target customers is surely going to find the competition walk away with the customer. How much you spend is not important, what and how you communicate is.

Suggested reading: read the advertisments in the newspapers/internet and analyse a few, like was done at the start and decide if the advertisment is money well spent. Then apply this learning to your product and see if you can create a good advertisment for your product.