United,Transform!WeLessons you can learn from C&S ElectricHow Anuj, RisHi and AdityA KHAnnA transformed their 46-year old, 200-crore family business into a 1,100-crore modern enterprise

in 10 years. Page 24

How to get explosive growtH......And tHe six tRAPs you must AvoidPage 32

ThE RiSE of ThE

RoboTiC WoRk foRCE

Page 42

YOUR EMPLOYEES WILL LOVE

Page 19

GifT WELL!GREAT iDEAS

A 9.9 Media Publication | inc.com Facebook.com/Inc @incNovember 2012 | `150 | Volume 03 | Issue 10

Un

ite

d, W

e t

ra

ns

fo

rm

!N

OVE

MB

ER

2012 The m

ag

azin

e for gr

ow

ing

co

mpa

nies

The Magazine for Growing Companies

Perfect VisionDr Mahipal Sachdev left AIIMS to start out on his own with a dream to build India’s leading eye-care chain.

on the coverC&S Electric’s Rishi Khanna (standing right), Aditya Khanna (standing left) and Anuj Khanna (sitting). Photographed by Subhojit Paul. Cover design by Anil VK and Imaging by Pradeep G Nair. Location Courtesy: Smoke House Room, Delhi.

32Speed Traps Here are the six most common growth traps, and how smart CEOs deal with them. If you’re lucky to be growing fast, these case studies can help you power ahead. by kimberly weisul

24The C-Force Anuj, Rishi and Aditya Khanna have shown change doesn’t always come out of conflict and chaos. They have given C&S Electric, their family’s 46-year-old electrical products company a mint-fresh, modern look through collaboration and consensus. by shreyasi singh

38A Reverse JourneyRachna Agarwal, co-founder & CEO, Indus League, has a business trajectory unlike most others. She’s seamlessly moved from being an employee to an entrepreneur to an employee again. by shreyasi singh

42The Rise of the Robotic Work Force Famed roboticist Rodney Brooks is back with a breakthrough invention that could revitalise American manufacturing—and automate millions of jobs.by david h. freedman

50How I Did It Dr Mahipal SachdevThis AIIMS-trained doctor has used his opthalmology degree with great focus. Centre for Sight, his chain of eye-care clinic is now looking at a ̀ 125-crore turnover. by sonal khetarpal

ConTenTS November 2012

2 | InC. | noveMber 2012

ThIS eDITIon of Inc. MAgAzIne is published under license from Mansueto ventures LLc, new York, new York. editorial items appearing on pages 11-15, 20, 22, 34-39, 44-51, 60-63 were all originally published in the United States edition of Inc. magazine and are the copyright property of Mansueto ventures, LLc, which reserves all rights. copyright © 2009 and 2010 Mansueto ventures, LLc. The following are trademarks of Mansueto ventures, LLc: Inc., Inc. 500.

PhoTogrAPh bY SUbhojIT PAUL

05 Editor’s Letter

06 Inc. India@Work An editor’s tribute to the team of people without whom the Inc. India 500 issue wouldn’t have been possible.

09 Launch A new book on decoding brand communication M&A deals go south The Inc. Data Bank A Skimmer’s Guide to The Knockoff Economy, by Kal Raustiala and Christopher Sprigman

Michael Sandel on pushing the limits of the free market

13 Get Real By Jason Fried It’s not everyday you get to meet your hero. I recently sat down with one of mine.

14 Balancing Acts By Meg Cadoux Hirshberg It’s tough to stay confident when your spouse is losing faith.

06

STRATeGy55 CASe STuDy Chi had a good family-restaurant image going for itself. Could a Twitter campaign give it a breakthrough with the youth?

58 MAnAGInG This CEO let his employees work remotely from Brazil for six weeks. Is he smart or crazy?

60 LeADeRSHIP Leading people is exciting and inspiring. Formulating strategy? Not so much. But, HBS professor Cynthia Montgomery says the secret really is in the strategy.

62 THe WAy I WoRk With more than a 12-hour-long shift in the office and no lunch, employees at Loylty Rewardz wonder where their company’s founder Bijaei Jayaraj finds the energy to carry on. His motto—let your employees be their own bosses.

55

13

16 InnovationHow a chip can minimise radiation harm from your gadgets 19 The Goods

Gift Well: Ideas for perfect employee gifts Great new all-in-one printers Taking Note: a writing tool for your iPad CarPad 5: Worth its price? Tech Trends, by John Brandon: Smartphone scheduling apps

Guidebook, no. 8How to cut your company’s spend on communication. Find the guidebook following page 22.

68 I Wish I knew Then... For Rajendra Gandhi, learning to delegate and listen to his employees was a big learning curve.

19

ConTenTSNovember 2012

noveMber 2012 | InC. | 3

Inc.com/Human-resources

Three Questions Great Job Candidates AskDuring job interviews, the best candidates are those who put as much effort into evaluating your company as you do into evaluating them. Below, Inc.com columnist Jeff Haden lists some of the questions you should hope to hear while interviewing your next potential hire.

1. What do you expect me to accomplish in the first 60 to 90 days?This shows the person wants to hit the ground running. He or she doesn’t want to spend weeks or months getting to know the organisation.

2. What are the common attributes of your top performers?With this question, a candidate seeks to deter-mine if he or she is a good fit. It also demonstrates that he or she seeks to be a top performer.

3. What are a few things that drive results for the company?every employee should generate a positive return on his or her salary. Great candidates know helping the company succeed means they succeed as well.

Is The IPO PArTy Over? Investors aren’t the only ones who were shaken up by the Facebook and Groupon IPOs. Check out Inc.com’s special report on how IPO-wary entrepre-neurs have found other ways to raise growth capital and take some money off the table. visit www.inc.com/exit-strategies.

Inc.com/HoWIDIDIT

AdAm rIChCo-founder of Thrillist, on the emotional impact of starting a business

“As first-time entrepre-neurs, Thrillist was a very personal project for us. It was a double-edged sword: The more we felt good about the success of our product, it just made the failures that much more painful.”

Inc.com/InclIveLIsA PrICeFounder of Carol’s Daughter, on the Oprah Effect

“A lot of people think that when you shake Oprah’s hand there’s a wire trans-fer taking place. That does not happen—at all.”

Top videos on Inc.com

rIGhT nOW On InC.COm

4 | InC. | nOvember 2012

year, many readers wrote in to question our decision. Could inheritors really be called entrepreneurs, they asked us. Was not the real glory in starting out, and weath-ering the early years? Of course, there is no denying the charm of a rags-to-riches story built on ideas and ambition. Yet, I wondered if it was fair to box-in business success only in those terms. Can the credit of building great companies—those that last more than a 100 years, and continually remain relevant—only be claimed by those who founded these businesses? If not, what should be the quantum of achievement the gen-eration that inherits must demonstrate to be seen as legitimate claimants?

Our cover story this time on C&S Electric, a `1,100-crore electrical product and power equipment manufacturer offers a good case study. Founded by two brothers in the late 1960s, the company has gone through a dramatic transformation in the last decade, thanks to the modernising zeal its trio of second generation succes-sors—Aditya, Anuj and Rishi Khanna—have unleashed. Under their guard, turn-over has multiplied nearly seven times since 2002. Their portfolio has seen a similar spike with 20 per cent of the company’s annual revenue today coming from products introduced in the past five years. Last year, C&S Electric hit another mile-stone when they acquired Dutch firm Etacom, their first such move; after which they set up a manufacturing facility in China. And, they’re only just getting warmed up, the younger Khannas tell me. Their journey throws up several inter-esting insights, including how family businesses can transition and transform effi-ciently. Do read this story on page 24.

Also, don’t miss our other special features including a piece on why the $22,000 robot, Baxter, can potentially revolutionise manufacturing. Plus, there’s an interview with HBS professor Cynthia Montgomery who tells us why CEOs must make sure their strategy document is the beating heart of their enterprise.

When we profiled a group of young, second-generation entrepreneurs in our anniversary issue earlier this

editor’s letter

A success of change...

shreyasi singhshreyasi.singh@9dot9.in

MANAGING DIRECTOR: Dr Pramath raj SinhaPRINTER & PublIshER: anuraDha DaS mathur

EditorialMANAGING EDITOR: ShreyaSi SinghAssIsTANT EDITOR: Sonal KhetarPalfEATuRE wRITER: ira SwaSti

dEsignsR. CREATIvE DIRECTOR: jayan K narayanansR. ART DIRECTOR: anil VKAssOCIATE ART DIRECTORs: atul DeShmuKh & anil tsR. vIsuAlIsERs: manaV SachDeV & ShoKeen SaifivIsuAlIsER: nV BaijusR. DEsIGNERs: raj KiShore VermaShigil narayanan & SuneeSh KDEsIGNERs: charu DwiVeDi, PeterSon Pj miDhun mohan, PrameeSh PuruShothaman c hariDaS Balan & PraDeeP g nair

MarCoMAssOCIATE ART DIRECTOR: PraSanth ramaKriShnanDEsIGNER: rahul BaBu

stUdioChIEf PhOTOGRAPhER: SuBhojit PaulsR. PhOTOGRAPhER: jiten ganDhi

CoMMUnity tEaMAssIsTANT PRODuCT MANAGER: rajat guPta

salEs & MarkEtingsENIOR vICE PREsIDENT:KriShna Kumar (+91 98102 06034)busINEss DEvElOPMENT MANAGER: arjun Sawhney (+91 95822 20507)AssIsTANT REGIONAl MANAGER (sOuTh & wEsT):rajeSh KanDari (+91 98111 40424)

ProdUCtion & logistiCssR GENERAl MANAGER (OPERATIONs):ShiVShanKar m hiremathMANAGER OPERATIONs: raKeSh uPaDhyay AssT MANAGER (lOGIsTICs): Vijay menon ExECuTIvE lOGIsTICs: nileSh ShiraVaDeKarPRODuCTION ExECuTIvE: VilaS mhatre

logistiCsmP Singh, mohD. anSari

oFFiCE addrEssnine Dot nine meDiaworx PVt ltDa-262, Defence colony, new Delhi–110 024

for any querieS, PleaSe contact uS at helP@9Dot9.in

PuBliSheD, PrinteD anD owneD Bynine Dot nine meDiaworx PriVate limiteD.PuBliSheD anD PrinteD on their Behalf By anuraDha DaS mathur. PuBliSheD at a-262, Defence colony, new Delhi–110 024PrinteD at tara art PrinterS PVt ltD.a-46-47, Sector-5, noiDa (u.P.) 201301EDITOR: anuraDha DaS mathur

november 2012 | iNC. | 5

Gu

tter

Cr

edit

her

e

6 | INC. | november 2012

INC. AT WORKSristi Maurya:

Where would we be without her? Efficiency Optimised.

Ira Swasti: Ms. Can-Do. Always. Not

without losing that smile!

Sonal Khetarpal:

Hawk Eyes. Die double spaces

and typos!

Neha Kumra: Efficient, smart and nice. They STILL make them like her!

John Khiangte: Master Exceller. If it is not on his Excel, it probably

never existed!

Anuradha Das Mathur:

Our ideas factory! A great idea a

minute!

Pramath Raj Sinha:

Our Guiding light. (Truth about him: he lets us be us!)

Aman Shukla: Grunt Work

Central. Midnight owl and the

energiser bunny come together here.

Rajat Gupta: The brand

man.Lives it, breathes it,

loves it!

photographs by Subhojit Paul IMagINg by PEtERSoN Pj

The feedback to our annual Inc. India 500 special issue has been heartening, to say the least. While the wonderful messages and encouraging e-mails land in my inbox, bringing out a magazine is like a ballad of ideas coming together, with a great team working in sync. In this behind-the-scenes look, I would personally like to thank those people who helped think, act and put together this issue. Logistics didn’t allow everybody involved in making this picture. A big thank you to Krishna Kumar, mahesh ravi, Arjun Sawhney, rajesh Kandhari, Anshu Kumar and Jiten Gandhi. We missed you at the shoot. —Shreyasi Singh

Subhojit Paul: His shots are in

focus. His calendar isn’t. We wouldn’t change a thing!

Anil VK: The

disciplinarian—calm and

composed. Even Adobe Photoshop

falls in line!

Shigil Narayanan:

Sketch Master. Cool customer. Mural painter.

Anil T: Fitness junkie.

Brings the same rigour to our magazine

covers.

Jayan Narayanan: The BOSS.

No questions asked. Period.

Manav Sachdev:

Our resident Frank Miller

Peterson PJ: Dodging balls,

elephant rides and great illustrations

come naturally to him.

launch News. Ideas. People.

Q: You say the word “brand” is much used, but also much abused in business. Why do you say that?

a: In one of my research studies, I asked sev-eral CEOs of large organisations—who owns your brand? Not surprisingly, 90 per cent of them said their companies owned the brand. Companies look at brand to mean all sorts of things—your stature, your company image, your product, but it is sim-

ply the idea that your business propagates. So, the owners of your brand are the people who can best propagate this idea, such as your customers who buy your product, or your employees who can tell others about the great workplace you offer. Remember, you’re not the owner of your brand; you are only its custodian.

Q: unlike other functions like finance,

Is your brand built inside out?cEOs must drive their brands by first understanding what they stand forIn his new book, Decoding Communication, N. Chandramouli, a communications consultant to global companies like Henkel, DHL and J&J, says “great brands” can transcend time and geographies only if they’re built on ideas and soul. Chandramouli decodes mantras CEOs must imbibe to do this, in a discussion with Ira Swasti.

n. chandramouliAuthor, Decoding Communication

november 2012 | Inc. | 9

PH

OTO

S.C

OM

launch

marketing and manufacturing which get the cEOs’ close attention, communication is mostly left to the “communicators”. Why do you think that is?

a: It’s due to a lack of understanding of their brand’s vision. See, the main motive of any business owner is to make more profits and achieve higher growth. So, she just tells the communication wing to do anything it can to achieve that. Mostly, CEOs believe it’s enough to communicate that they want to grow. They believe that communication is the panacea to help them make more money. But, communicating the brand’s core is what is really important. When you focus purely on profits, and running your business on revenue targets, the company’s vision gets limited to just that. The brand’s messaging does not take into account the longer-term objectives. Changing the focus from making money to propagating an idea, and considering money as merely a by-product leads to smart branding.

Q: how involved do you think cEOs need to be in their company’s branding initiatives?

a: Having an intermediary communicate orients the conversation into a focused direction, so it does help to have a specialist agency work with you. But communication

should occur at every level of the organisa-tion. So if you can articulate your vision directly (via social media, blogs) not just to your customers, but to the world, your brand will automatically command a lot of credibil-ity and confidence since you’re the chief cus-todian of your brand and people both internally and externally look up to you.

Q: Which is the one mistake you think brands most often make when communicating with their audience?

a: Sometimes, it seems to me that compa-nies speak in a foreign language. They’re not true to who they are, or what they do. Branding is often used to become, or show something they are not. For example, many

companies are out to woo the youth because of the buzz around the demo-graphic dividend. They believe this will bring them future growth. But, they forget that they are looking at a completely new audience without the brand’s personality being suited to that audience. That is disas-trous for a brand, and it does not lead to growth. It confuses the company internally, and confuses their audience as well. Com-panies need to look inside out—what do you stand for, what does your brand mean? Only after you understand that can you communicate it effectively.

Q: If you could offer advice on the right way to approach this, what would you tell cEOs?

a: A lot of brand communication these days is based on the negative emotions of a human being. Companies are selling their brand by fueling envy, fear or greed in poten-tial customers. These are brands which will try and make you happy but the subtle con-text in the background almost warns—if you don’t buy this, uh oh! The right approach is just the opposite—it should focus on culture, values and vision. Communicating the sto-ries around these is the best way to reach customers, and build a brand.

According to a survey conducted by advisory firm Grant Thorton in the last quarter of 2011, this calendar year was supposed to be the year of mergers and acquisi-tions for India. Things haven’t quite played out that way though. While the early months did see some action (deals worth $15.4 billion happened in February 2012, almost double the total value of $8.24 billion in Febru-ary 2011), the M&A season from April through June has been rather dull. The total deal value for the first six months of this year stand at $28.3 billion which is 20 per cent less as compared to the same period in the previous year. In fact, it is the lowest deal value for this period in the last three years. Moreover, most of the deals that occurred during the season were outbound deals such as Advent’s investment in Care Hospital, Olympus Capital’s investment in DM Healthcare and Accel Partners investment in Flipkart. Source: Grant Thorton

Value of M&a deals down in h1, 2012

10 | Inc. | november 2012

PH

OTO

S.C

OM

launch

The book: The Knockoff Economy: How Imitation Sparks Innovation, by Kal Raustiala and Christopher Sprigman; Oxford University Press.

The big idea: Patents, copy-rights, and their defensive brethren are intended to moti-vate creative types. But in industries ranging from fashion to financial services, freedom to copy fuels innovation.

The backstory: Raustiala and Sprigman are law professors at UCLA and the University of Virginia, respectively.

Peer police: Social norms can be more effective than regula-tion, say the authors. Standup comics adhere to a set of infor-mal but widely accepted gag laws (for example, being the first to deliver a joke on TV is like getting a patent on it). Famous chefs are cool with others copying their recipes—so long as they give credit and don’t copy them exactly. Performing another magician’s trick is OK. But reveal the secret to that trick, and you may get sawed in half.

If you read nothing else: The last chapter revisits main themes, such as how copying creates demand by speeding up the fashion cycle and serving as an advertisement for brands. But the book is fun, and if you skip the rest, you’ll never know how the advent of the player piano led to lenient laws on cover songs or about the firm that tried to patent the peanut butter and jelly sandwich.

Rigour rating: 8 (1=Who Moved My Cheese?; 10=Good to Great). The authors’ broad knowledge of case law is evident in the lengthy notes section. —Leigh Buchanan

inc. data bank Stress at work BlOWIng Off STEaM

Portion of Americans who list the following among their go-to stress relievers:

WATCHING TV

exeRCISING

PRAyING

TAKING A BATH

HAVING AN ALCOHOLICBeVeRAGe

fRazzlEd BOSSES

Portion of small-business owners and managers who say they feel more stressed now than they did a year ago:

43%HISCOx USA

Share of small-business owners who listed the following among their most pressing economic concerns:

eFFeCTIVeNeSS OF GOVeRNMeNT LeADeRS: 75%

COMMODITIeS PRICeS: 73%

ReCOVeRy OF CONSUMeR SPeNDING: 71%

HeALTH CARe COSTS: 70%

CReDIT AVAILABILITy: 54%

GLOBAL STOCK MARKeT TURMOIL: 51%

Portion of small-business owners and managers who say they are anxious about the following:

LOSING THe COMPANy: 54%

RePAyING PeRSONAL DeBT: 52%

LOSING CLIeNTS: 51%

64%

44%

34%

20%

31%

70%

42%

50%

40%

28%

BeING UNABLe TO BRING IN NeW BUSINeSS: 49%

PeRSONAL HeALTH: 41%

BeING ON CALL 24/7: 38%

RePAyING COMPANy DeBTS: 35%

HISCOx USA BANK OF AMeRICA SMALL BUSINeSS OWNeR RePORTPOLARIS MARKeTING ReSeARCH

a skimmer’s

guide to the latest business

books

anxIOuS EMPlOYEES

Portion of American workers who are stressed about something at work:

77%

Share of employees who cite the following as significant sources of stress:

LOW SALARy: 49%

LACK OF OPPORTUNITIeS FOR ADVANCeMeNT: 43%

HeAVy WORKLOAD: 43%

UNReALISTIC exPeCTATIONS FROM MANAGeRS: 40%

LONG HOURS: 39%

HARRIS INTeRACTIVe/eVeReST COLLeGe; AMeRICAN PSyCHOLOGICAL ASSOCIATION

JugglIng acT

Portion of small-business owners who say doing multiple jobs at once is the most difficult aspect of owning a business:

53%

Share of entrepreneurs who simultaneously fill the following number of roles at their companies:

3 OR 4 JOBS: 46%

11 OR MORe JOBS: 5%

9 OR 10 JOBS: 3%

7 OR 8 JOBS: 6%

1 OR 2 JOBS: 9%

0 JOBS: 1%

5 OR 6 JOBS: 30% eVOICe

OThER BIg cOncERnSWhaT ThEY’RE STRESSEd aBOuT

—Compiled by Andrew Shafer november 2012 | Inc. | 11

What are market values? how are they intruding where they don’t belong?They’re a way of valuing goods, based on use. When we’re talking about televisions, toasters, and cars, market values are appropriate. But when we’re talking about personal relations or family, market values may not be appropriate. For example, even if I wanted more friends, it wouldn’t work to try to buy some. The money that would buy the friend dissolves the good that makes friendship valuable. We have drifted from having a market economy to becoming a market society. A market economy is a valuable and effective tool for organising productive activity. A mar-ket society is a place where almost every-thing is up for sale.

Is there an argument to be made that the ceaseless pressure on companies to innovate propels them into morally questionable areas? Yes. Advertising is a very good example of this. The intense pressure to capture human attention has pushed it into morally questionable areas. For exam-ple, many school districts now are allowing advertising on school buses, in the cafeterias, in classrooms. And the advertising companies promote this to potential clients, saying you can gain access to a captive market of teenagers without the usual distractions. And it’s not just schools. The fans that people use in churches have ads on the back. They used to be from funeral homes, but now it’s corporations. So the congre-gation sits fanning itself in one large wave of product placement. Churches, fire trucks, fire hydrants, police cruisers.

There’s advertising in jail cells. Talk about a captive audience.

The political parties generally frame economic debates around taxes and spending. What should they be talking about?The values that underlie their views on taxing and spending. Beneath those arguments are questions: What is the relationship between individual rights and the common good? What do we owe one another as citizens? Those are big philosophical issues, and they aren’t just abstract ideas for scholars.

What examples would you use to frame such a debate?Increasingly, we have relied on the mar-ket to allocate military service. In Iraq and Afghanistan, there were more paid military contractors on the ground than there were US troops. Yet we never had a public debate about whether we wanted to outsource the war to private companies.

What are the most extreme market solutions you’ve seen proposed by politicians?One novel effort to raise funds for local government was put forward by a can-didate in Nevada who proposed allow-ing people to buy permits to speed up to 90 miles an hour. The state highway patrol concluded that it would imperil public safety.

did that candidate win?No.

has the free Market gone Too far? Pushing the limits of what’s for sale

These days, too many things come at a price, argues Michael Sandel, a political philosopher and Harvard professor. Market values have metastasized through our society, he says, distorting debate about issues as complex as health care and immigration and as seemingly simple as the question “What do we value?”. In his recent book, What Money Can’t Buy: The Moral Limits of Markets, Sandel accuses businesses and the US government of sacrificing values such as justice

and respect for human dignity in favour of utility. Inc. editor-at-large Leigh Buchanan asked Sandel about when such tradeoffs cross the line and what he thinks politicians should be discussing.

The book: Makers: The New Industrial Revolution, by Chris Anderson; Crown Business.

The big idea: Do it yourself used to mean assembling an Ikea bookcase. Now, thanks to open-source design, 3-D printers, and other machines, home-based manufacturers can produce products as diverse as toys and electronics.

The backstory: In his best-selling book The Long Tail, Chris Anderson, the editor of Wired, described the atomization of markets into ever-smaller niches. Makers explains how entrepreneurs can supply such markets, using itty-bitty production runs of supercustomized products.

Beyond crafts: Articles about the “maker movement” tend to emphasize the quirky charm of its practitioners. Anderson doesn’t ignore that. But this is a book about a potentially dis-ruptive economic force, not just how fun it is to shop on etsy.

If you read nothing else: Chap-ter Nine argues persuasively for a manufacturing revival in which small companies absorb design ideas from enthusiast communities, squeeze out physical products using inex-pensive services that cater to the small-batch crowd, and market their goods online.

Rigour rating: 7 (1=Who Moved My Cheese?; 10=Good to Great). Makers is rich in anecdotes, but it chronicles a promising beginning rather than an established shift. And Anderson speaks like a true believer. Why wouldn’t he be? 3D Robotics—his own manufacturing start-up—is on track to do $5 million this year. —Leigh Buchanan

a skimmer’s

guide to the latest business

books

12 | Inc. | november 2012

Get Real BY Jason FRiedJason Fried is co-founder of 37signals, a Chicago-based software company. His job often leads to happy surprises.

In 2005, I read a book called The Innova-tor’s Dilemma, by Clayton Christensen. It blew my mind, because it seemed to describe my business perfectly. 37signals had just released Basecamp, our web-based project management app. Aimed at small-business owners, Basecamp was designed to be affordable and easy to use. It did only a few things, but we made sure it did them well.

Our major competition at the time was Microsoft Project, which was expensive, complex, packed with fea-tures, and aimed at large organisations. It wasn’t particularly pleasant to use. I’ve yet to meet someone who is excited about Microsoft Project.

In The Innovator’s Dilemma, Christensen explains how suc-cessful companies with well-established products are constantly being threatened by newcomers. Winners, he argues, don’t lose when new rivals attack from the high end of the market. They lose when start-ups attack from below. This, of course, was pre-cisely what 37signals was trying to do to Microsoft. And it was working. Needless to say, I became a passionate fan.

Fast-forward to 2012. Through a series of seemingly unrelated connections, I was invited to join a small group to spend a few hours with Christensen at Harvard Business School, where he teaches. I was thrilled. It’s not every day you get to sit down with one of your heroes. The group met for about three hours. Sometimes, a chat with the right person makes all the difference, and that’s what happened with Christensen. I’d like to share three insights in particular.

At one point in our talk, Christensen quoted Theodore Levitt, a legendary professor of marketing at Harvard: “People don’t want to

a Chat With the Master it’s not every day you get to meet one of your heroes. But i recently sat down with one of mine

buy a quarter-inch drill,” Levitt argued. “They want a quarter-inch hole.”

I understood what he was getting at. To most consumers, the hole matters a lot more than the drill. Yet the people who manufacture drills generally do not think this way. They can’t say enough about their drills, about fea-tures, technology, why this drill is “drill-ier” than that one. That’s the standard approach to marketing most products, and it’s myopic. It made me think about our own marketing. Do we talk too much about features and technology? Do we use the right words to describe what our product actually does? Or do we talk too much about the drill rather than the hole?

Later, Christensen discussed some-thing he calls the trap of marginal thinking. Again, he began with a quote, this one by Henry Ford: “If you need a machine and don’t buy it, you will ulti-mately find that you have paid for it and don’t have it.”

The point is that when an established company weighs the cost of new tech-nology or talent against what it already has, it usually sticks with what’s familiar. Why? Because the marginal costs of using what you have are almost always

lower than the full costs of investing in something new.But that’s a trap—and one that companies that are young and

hungry don’t get caught in, because they don’t think in terms of marginal costs. Rather than basing such selection on costs, start-ups tend to pick what’s best for the job. It’s a key reason newbies displace the old guard: They have better tools.

Christensen said one last thing that has really stuck in my head. It’s often said that someone can’t be taught until he or she is ready to learn. He put it differently: “Questions are places in your mind where answers fit,” he said. “If you haven’t asked the question, the answer has nowhere to go. It hits your mind and bounces right off.”

Whoa, I thought. It’s like Velcro. The loop side of the Velcro can’t stick to itself; it needs the hook side to latch on to. Questions are hooks; answers are loops. Thanks, Clay. I needed that.

Follow Jason Fried on Twitter: @jasonfried.

november 2012 | INC. | 13illustration by sHiGil narayanan

Someone should develop a kind of general anaesthesia for spouses of entrepreneurs. They could descend into merciful oblivion during the excruciating company-building process and regain consciousness only after the enterprise had achieved sustainable profits or been deep-sixed. The entrepre-neur would be spared a lot of agony as well. Nothing hurts like disappointing a loved one who may have prepared for a long, hard road but not the Trans-Siberian Highway.

The journey is easier when the entre-preneur manages his spouse’s expecta-tions. But hopped up on optimism and in thrall to his bold idea, he forgets that it’s better to underpromise and overdeliver. Before launch, he sits down with his spouse to review the business plan: “I’ll draw down on savings, use the house for

collateral to secure an SBA loan, and won’t take a salary for a while, but my most con-servative estimates show me breaking even in two years, and after that, we’re looking at double-digit growth until I fig-ure out the best time to sell.”

Benchmarks come. Benchmarks go. And so the question—at once solicitous and reproachful—inevitably arises: “Honey, why haven’t you made it yet?” Often the question is not verbalised but instead surrounds the couple like smog, polluting their every interaction.

Entrepreneurs are among the few types of people who get to define success on their own terms. (So do artists, but a lot of them are starving too.) By announc-ing those terms, the entrepreneur makes an implicit promise. And the people lis-

tening—not just the spouse but also chil-dren, parents, siblings, and friends invested and not—believe in that promise because they think the entrepreneur is in control. After all, don’t people start com-panies to control their destinies?

When success comes gradually, the believers get impatient. In 2007, Loren Brill founded Sweet Loren’s, a New York City company that manufactures all- natural frozen cookie dough. Friends and relatives pepper her with questions: Why aren’t you more profitable? Why can’t I buy your products in California? “So many amazing little things happen every month, but people are not wowed by it, because we haven’t gone nationwide and haven’t been on Oprah yet,” Loren said. “They don’t understand what it takes to build a brand.”

Honey, Why Haven’t You Made It Yet? It’s tough staying confident when your spouse loses faith

BalancIng acts BY Meg cadoux HIrsHBergMeg Cadoux Hirshberg writes about the impact of entrepreneurial businesses on families. Her book For Better or for Work was published in the spring.

14 | INC. | november 2012 illustration by sHiGil narayanan

balancing acts

“I think one enters entrepreneurship believing that you’ll make it, and it will take less time than you think,” said Fred New-combe, founder of PJC Ecological Land Care, a Massachusetts manufacturer of organic fer-tiliser. “So as we get going, we tend to market to ourselves. Who else hears that marketing? Our spouse, family, and friends.”

Entrepreneurs create approximate timelines to manage the risk of a business launch. But those measures are mere ref-erence points against which to track the company’s progress. In unpredictable cir-cumstances—the only kind of circum-stances that exist for start-ups—creating milestones is less science than art, and less art than crapshoot.

Unmet milestones can be psychologi-cal land mines, because though success is relative, relatives don’t always recognise

success. When the company fails to pay out or scale up at the rate anticipated, family morale erodes. Facing the doubts of his nearest and dearest, the entrepre-neur may discount those things he has managed to accomplish and start to won-der whether he isn’t a bit of a failure after all. More often, he dusts himself off and shifts strategy, which almost always requires more cash. He believes that suc-cess will redeem the plan retroactively.

His wife is not so sure. Even spouses who understand that setting milestones is a somewhat futile exercise can’t help fixating on outcomes rather than on process and possibility. Encountering incremental fail-ures, they view the company as failing.

I asked Wendi Goldsmith, CEO of Bio-engineering Group, a Massachusetts firm devoted to ecosystem restoration, whether the initial reassurance that milestones pro-vide to spouses is worth the eventual disil-lusionment. “Entrepreneurs fake it till they make it, even when we start out with a detailed plan,” Wendi said. “You can’t have a

legitimate discussion with yourself—let alone your spouse—about what you are get-ting into. It’s just words, not a profound understanding. I’m not saying don’t have the conversation. I’m just saying you should both recognise the futility of it.”

That’s little comfort for spouses waiting for the bacon to be brought home. And so entrepreneurs use various tactics to keep judgment at bay. I spoke with one CEO who regularly showed his wife customer testimonials praising his financially shaky service company. After promising to look for a job before pulling from savings to support the company, he withdrew $10,000 from their account. Attempts to butter her up with appreciation and assur-ances that he “heard” her concerns didn’t wash. “She knows when I’m trying to work her over,” he told me. “Her response was,

‘Don’t pull that bullshit life-coaching stuff on me. Just give it to me straight.’ ”

Sometimes the deception is mutual. Nei-ther spouse nor entrepreneur wants a rela-tionship in which one judges the other, so they live a rose-coloured lie. I spoke with a woman, herself a company owner, who pre-tended to swallow the upbeat reports of her husband, the co-founder of a technology company. She explained their dynamic: “I didn’t want to admit that I wasn’t being fed the truth. It felt like there was a thin veneer. You could punch a hole in it pretty quickly by asking questions. I didn’t want to embar-rass him, and I didn’t want to know that things might be rotten at the core.” She called their arrangement “an uneasy truce”—a truce that dissolved with the marriage.

Ideally, the question “Why haven’t you made it yet?” is posed not as an accusation but rather as a challenge to recalibrate and rethink. The spouse isn’t tapping his foot with impatience but extending a hand. If the spouse is familiar with the company or with business in general, he can help

the entrepreneur create new, more realis-tic milestones and address pressing con-cerns. At the very least, he reminds the entrepreneur that she isn’t in this alone.

Gia Machlin already had two success-ful start-ups under her belt when she launched EcoPlum, a green shopping-reward site based in New York City. So she had reason to be confident. But not as confident as she was. “I didn’t have a good plan for growing EcoPlum,” she said. “I thought the stars would align.” Her hus-band, Corey Sclar, who works in private equity, had cheered on Gia’s earlier ven-tures. When his wife fell behind on her numbers with EcoPlum, he didn’t become judgmental but rather initiated frank con-versations about next steps.

In the course of those discussions, Gia realised that her resistance to outside invest-

ment and the resulting performance of her cash-starved company were unfair to Corey. So she relaunched the business and prepared to take on investors. “Entrepre-neurs think of outside forces that limit or guide them as impediments, and they chafe at any restraint,” Gia said. “But being answerable to Corey made me recalibrate in a way that made both my business and my marriage stronger.” 

And, of course, many doubting spouses aren’t concerned exclusively with finances. Business plans don’t include pro-jections of when the entrepreneur’s migraines and insomnia will disappear. Corey Sclar is not alone when he reports worrying more about his wife than about her company. “Usually Gia’s trying to get 3,000 things done in a day,” said Corey. “She’s so overwhelmed and stressed. Sometimes I say to her: ‘Are you happy? Is this really what you want to do?’ ”

“she knows when I’m trying to work her over,” oneentrepreneur told me about his wife. “Her response was, ‘don’t pull that bullshit life-coaching stuff on me.’ ”

Contact Meg Cadoux Hirshberg at mhirshberg@inc.com. Follow her on Twitter: @meghirshberg.

november 2012 | INC. | 15

innovation Companies on the Cutting Edge

Healthy ChipsRecently, the Ministry of Communication and IT released a much-needed mandate on reducing mobile tower emissions to one-tenth of their present levels. Delhi-based firm Syenergy Environics has been working on managing harmful electronic radiations at homes and offices for the past 20 years though. Enviro Chip, its latest invention, changes the nature of radiation emitted from mobile phones, tablets and computers to make them less harmful to the human body. “Contrary to popular belief, it’s the nature of radiation, not its intensity which is harmful to body cells,” says Ajay Podder, MD, Syenergy Environics. Research has shown that constant exposure to microwave radiations weakens the body’s immunity system and increases stress levels. Synergy claims people have reported better health parameters after using the Enviro Chip (see impact). Priced between `275 and `850 (for different devices), the chip has also become a popular corporate gift.

How it works When the Chip is fixed on a device, it changes the nature of “systemic” waveforms emitted by these gadgets to “random” waves that are compatible with the human body. Hence, it reduces the harm done.

impact When tested on 500 people with a relatively high pulse rate (a measure of stress levels) of above 82, the company reported that with an actual chip, the pulse rate went down by 5 per cent, and with a dummy chip, the pulse rate went up by 1.2 per cent.

16 | inC. | november 201216 | inC. | november 2012

“Reduction in radiation decreases the device’s signal

strength, so our chip focuses on the

nature of radiation, not its intensity.”

— Ajay Podder, MD, Syenergy Environics

Syenergy environicsEnviro Chip

pHotograpH by subHojit paul rEportEd by ira swasti

Your Business Toolbox The GoodsThe Perfect Gift hint: Keep it simple, but thoughtfulThere’s no time like Diwali and New Year to tell your employees how much they mean to you. But, gifts can be used to demonstrate more than your regard for your people. They also say a lot about your brand—both as a company, and an employer. When you get your gifts right, not only do you make your team members feel special, it activates good word-of-mouth for your brand from the people who matter most—your employees. So, try out some of these ideas. They’re unique and personalised. —Ira Swasti

For The biG-daTa TyPes Seagate Backup Plus: Since memories have gone digital, you need more storage space in your hard drive to capture those beautiful festive moments with your employees and their families. Here’s presenting a monster external drive with 1 TB of storage space to do just that. The drive lets you directly post photos and videos to Facebook, YouTube and Flickr and back up that data on the drive. So help your employees do the talking on your company’s Facebook page this season! COST: `5,325

For The GadGeT lovers Luna Tik Multi Touch Watch: Giving your employees a gold-plated wrist watch on Diwali is passé. Check out this “lunatic” watch that comes with a permanent conversion kit to transform your employee’s latest iPod Nano into a wristwatch. Compatible with the sixth generation Apple iPod, it fits onto an 8.5-inch wrist quite comfortably. It’s the perfect gift for the gadget-junkies in your office. COST: `2,999

For The music loversGrooveBassball Mini Rechargeable Speakers:

Size does not matter when it comes to these pocket-sized portable speakers! They work with any MP3 player, laptop or CD player via a 3.5mm

jack and come with a rechargeable lithium-ion battery and a USB cable for recharging the battery

to up to three hours of play time. Your music loving employees can play their favourite songs anytime, anywhere. Though it does come with a

cautionary note: check pockets before a meeting. COST: `1,199

For The orGanisers 10X Office Tool: Say goodbye to desk clutter with this office-version of the Swiss army knife. Believe it or not, this five-inch long tool packs 10 of the most-used devices in office, including a stapler, a pair of scissors, a paper punch, a pencil sharpener that doubles as a pen holder, a measuring tape and a storage basket for paper clips, among many more things. For small offices, this is a super space saver! COST: `999

For The ladies Chumbak Laptop Bag: This one is

sure to be a hit with your female co-workers. Made up of 100 per cent

canvas, this funky laptop bag gives their work days, and your office a

shot of colour. It measures 15x12x2.5 inches and is cosy enough to fit in a 15-inch MacBook Pro. You can also

choose from two very different patterns available at the Chumbak

online stores. COST: `995

NoveMBer 2012 | inc. | 19

small Printers With big Features Great new space-saving all-in-ones smaller multifunction printers may seem best suited for home use. These new all-in-one models are packed with business-friendly features, including the ability to print from mobile devices. —Adam Baer

1.

Best for speedy printing canon imaGeclass mF4890dW A good buy for a laser printer, the imageClass pumps out 26 pages per minute, or PPM, in black and white (sorry, no color). It has keys for quick scanning and copying and can scan multiple documents into one file. Our favou-rite feature: a dedicated Quiet Mode button that slows down printing and reduces noise. A free mobile app ‘due out’ from Canon this fall will let you print files from an iPad or iPhone. COST: $299

2.

Best for secure e-printing hP PhoTosmarT 7520 e-all-in-one The Photosmart can handle 14 PPM in black and white and 10 PPM in color. The ink-jet printer, which has a 4.3-inch touchscreen, lets you scan directly to e-mail. You can also scan mul-tiple documents into one file and print files from iPads, iPhones and Android devices. For added security, you can use PINs to verify the identity of users printing via mobile devices. COST: $199

3.

Best for specialty joBs ePson exPression Premium xP-800 small-in-one This wireless ink-jet model, which has a 3.5-inch touchscreen control panel, prints 12 PPM in black and white and 11 PPM in colour. It can print on a variety of specialty materials, including DVDs, and scan directly to e-mail, a memory card, or PDF. You can print files from iPads, iPhones, and Android devices using Epson’s mobile app. COST: $279

TAkINg NOTE

a better way to draw on your iPadNow that software companies are rolling out more apps for scribbling on your iPad, whether you’re taking notes or signing digital documents, stylus pens are back in vogue. geared toward drawing, the new Pogo Connect by Ten One Design has a 7-millimeter tip that is sensitive enough to control the width of a paintbrush and the saturation of colour applied. The sleek pen, which connects to iPads via Bluetooth 4.0 wireless technology and runs on a single AAA battery, has an automatic palm-rejection feature that prevents smudges if your hand grazes the screen. An LED indicator on the pen changes according to paint colour. The stylus also has a built-in radio locator that works with a free Find My Pen app. If you lose it, the app will pull up a radar display of its location. COST: $79.95 —A.B.

MusT-HAVEs

my favourite tool for hosting conference calls

Have you tried a new product or service that helps you run your business? Head to www.inc.com/thegoods and tell us about it. We run the best suggestion in the magazine every month.

My start-up helps people find and book unique travel experi-ences. Our four-person staff is spread out: I’m in Barcelona with one employee, my co-founder is in Fort Worth, and we have another staff member in st. Louis. For a while, we held meetings on three-way calls, but that got confusing. A few months ago, I tried a new service called ÜberConference, and now I’m hooked.

To set up a call, I log on to ÜberConference.com and create a basic profile for each participant, including his or her phone number and e-mail address. (I can add up to 17 people on a call.) Then, I set a date and time. ÜberConference sends an e-mail invitation with a call-in number to partici-pants. As long as they call from the numbers in their profiles, they don’t need a PIN.

I like the fact that ÜberCon-ference is so visual. The invitation includes a link to a webpage featuring photos of everyone on the call. When someone speaks, his or her photo appears at the top of the page. I can click on icons next to each photo to mute participants or “earmuff” them so they can’t hear parts of a conversation. I can also record calls.

I use the free version of ÜberConference, which also offers premium accounts start-ing at $10 a month. It is the sim-plest conferencing tool I’ve ever used. —As told to April Joyner

Oliver CamargOceo and co-founder weplann fort worth

The Goods Products + services

1

2

3

2 0 | inc. | NoveMBer 2012

FrO

M L

EFT:

CO

ur

TEsY

su

BjE

CT;

CO

ur

TEsY

CO

MPA

NY

(4)

Products + services The Goods

TIME MANAgEMENT

an easier way to schedule shifts still using spreadsheets to manage employee shifts and vacations? If so, you might want to try an online scheduling tool designed to make the process simpler. Here are three services to consider. —Jennifer Alsever

shiftPlanning.comThis service, which also has a mobile app, lets you create and share schedules, manage vaca-tion and shift requests, and send alerts via e-mail and text mes-sage. staff members can log on to clock in and out, request time off, set their availability, and trade shifts. COST: Free for 30 days, then starting at $20 a month for up to 14 employees

86shifts.comAimed at fostering communica-tion among employees, this service features a community wall on which staff members can chat and post shift trades. Managers can log on to man-age schedules, text alerts and publish a blog. COST: Free for 15 days, then starting at $35 a month for up to 20 employees

WhenToWork.comWhenToWork lets you manage and publish schedules and sync them to calendars on google, Outlook and the ser-vice’s mobile app. Managers can send text and e-mail alerts and see who has viewed their schedules. Employees can trade or pick up shifts on a trade board. COST: Free for 30 days, then starting at $100 a year for up to 10 employees

Without a shadow of doubt, the CapPad 5 is a huge improvement over its predecessor. The smaller form factor works wonders, particularly when it is secured in the wind-shield mount. The 5-inch display size means this CarPad is much smaller than the 7-inch predecessor. The design, and the thickness, means it looks like a slab, but is very func-tional. In portrait mode, below the display are three touch sensitive keys—return, menu and home. The left spine is completely clean, while the power key and the volume rocker are on the right panel. On the top, there is the 3.5mm headphone jack, the SIM card slot, microSD card slot and the mini USB port. Flip it over, and there is the speaker on one side of the panel, but what catches your attention is the rubberized finish.

Also, the touch response is much better than what we have seen in several GPS devices, but it still doesn’t have the capacitive display we expected on a device that costs `19,990. Display should have been slightly less reflective, but as it is, the device will still work well in sunlight.

The 1GHz Exynox 3110 processor powers the CarPad, and is a single core edition. This is important because beneath all the navigation goodness, the CarPad is essentially an Android tablet. On the device, preloaded, is Android 2.3.4 (Gin-gerbread), with the Navigation software as an added app. Needless to say, navigation quality and the maps are brilliant. The navi-gation app is on the home screen itself. It takes around 10 seconds to lock on to the satellites for the signal. The interface of the maps is brilliant, just like the Aura maps we had seen in the Zx250 navigator. The 3D maps, the way they render are of high quality. In fact, 3D building and landmark images

render extremely well, and in Delhi, at least, it works brilliantly. The recorded voice which speaks out directions is quite precise, and the accent easy to understand. Thank-fully, the speaker doesn’t jar or distort even when one pushes up volume to the max. Unlike all other navigators we have tested till now, this one has dedicated volume controls.

The battery life is impressive too, and it offers 35-40 kilometres on a single charge.

That might sound rather ordinary but con-sidering that these devices tend to become quite warm next to the windshield, this gets up a thumbs-up from us.

Also, because the device gives full access to the Google Play Store, and all the apps on it, it’s useful even when it isn’t clamped on the windshield, and giving directions. It even has a SIM-card slot, and can connect to 3G but because it does not have an ear-piece, you’ll need to rely on the speaker or a bluetooth headset to do your talking.

To conclude, this is a good device. What it needs is a rethink on price. —thinkdigit.com

is this the carPad for you? mapmyindia’s latest tablet device is pricey, but worth it.

sPECIFICATIONsdisplay: 5 inch (480 x 800 pixels) sim card slot: yes connectivity: wi-fi, 3g, bluetooth expandable memory: microsD platform: Android 2.3.4

NoveMBer 2012 | inc. | 21

The Goods Products + services

TeCh TrendS jOhn brandOn next on the agenda smartphone scheduling apps

i’ve always had a hard time staying on schedule during business trips, which usu-ally include multiple meetings in various locations. If I had my way, I’d bring along an assistant. On a recent trip to Den-ver, I tried the next best thing: two new mobile apps, Google Now and Cue.

Google Now, which comes loaded on smartphones and tablets running the new Android 4.1 operating system, works with Google Calendar, Maps and searches, along with your device’s GPS. I tested it on Google’s Galaxy Nexus phone. During the day, I could touch the Google search bar on my home screen to see “cards” with timely information.

Before I left my hotel, Google Now served up a card with the weather forecast for Denver. As I drove downtown, a card appeared with information on a nearby bus route. Later that day, I received a reminder for a 3 p.m. meeting one hour in advance, along with a map, directions, and an estimated driving time of 55 min-utes based on current traffic. I hustled out the door and arrived just in time. Thanks, Google Now.

After two days, the software got smarter. Each morning, for instance, it provided an estimated driving time from my hotel to downtown Denver. As I headed back to my hotel around din-nertime, it pulled up cards with details on nearby restaurants, including links to a map, directions and reviews. Not quite an assistant, but close.

On the second half of my trip, I tried Cue, a free app for iPhones. Unlike Google Now, Cue is not location based. Instead, it organises your daily schedule by scanning information in linked apps on your phone. The free version of Cue lets you choose from more than a dozen apps, including Gmail, Google Calendar and OpenTable (for dinner reservations). You can also pony up $4.99 a month for a premium

account that you can link with business-friendly apps, including Salesforce and Evernote.

When I added an appointment with a Denver start-up to my Google Calendar, it appeared on my Cue schedule in about 10 minutes, along with the location and name of the marketing director who e-mailed the meeting invitation. When I received a FedEx shipping confirmation in Gmail, the tracking number and a link to FedEx.com popped up on my schedule. Cue handles flight confirmations the same way. The level of detail was impressive, but I missed the maps and real-time traffic updates. In fact, I was late to some appointments because of traffic.

The bottom line: If you spend a lot of time on the road, Google Now is great. If you’re looking for a scheduling app that works with a variety of programmes, Cue is the way to go. For me, there was a clear winner: Google Now, you’re hired.

OPErATINg sYsTEMs

should you upgrade to Windows 8? microsoft plans to roll out its new operating system, Windows 8, this month. We gave the preview version a whirl to see if it warrants an upgrade. The biggest change to the system is the home screen, which replaces standard Windows icons with brightly col-ored tiles. On a touch-screen tablet, laptop or desktop computer, you can tap the tiles to open them or move them around the screen. On a standard computer, you can click on the tiles with a mouse or track pad. Or, you can skip the new home screen altogether and load the older interface.

You can choose from hundreds of apps in the Windows store and add them to your home screen. Another handy feature: you can sync your wallpaper and Internet settings across multiple devices, and they will load instantly when you log in.

During our test, the system was nimble. The tiles worked best on a tablet, but they also made our non-touchscreen laptop easier to navigate.

until the end of january, current Windows users can upgrade to Windows 8 Pro for $39.99. Our verdict? The system is a nice step forward. —J.B.

Google Nowavailable For:

Android 4.1 smartphones and tabletsWorKs WiTh:

google Calendar, Maps, and searches

cosT: Free

Cueavailable For:

iPhonesWorKs WiTh:

More than 20 mobile apps, including gmail

cosT: Free for a basic

version, then $4.99 a month

2 2 | inc. | NoveMBer 2012

PH

OTO

CO

ur

TEsY

su

BjE

CT

IllUSTrATIoN BY PrAMeeSH PUrUSHoTHAMAN C

Remove booklet along dotted line

10

Communication is the lifeline of any organisation especially now that businesses are spread across various locations and geographies. Companies spend a consider-able amount of time and effort to establish communication systems. In this context, streamlining communication pays big time.

A medley of compelling communication modes (instant messenger, e-mail, fax, SMS, phone) juxtaposed against multiple technologies necessitates streamlined communication.Use of the most inexpensive technology for a particular kind of communication by employees can ensure that communication doesn’t weigh heavy on the business budget. Routing voice communication on the internet via Voice over Internet Protocol (VoIP) instead of cell phones or landlines can, for instance, as much as halve communication costs. With global market intelligence company, SIS International Research, finding that communication barriers and latencies could be costing mid-market companies in eight countries (including India) up to 40 per cent of their productive time, streamlining communication is an effective way to get mes-sages across faster and save employee time for more profitable activities.

Using suitable technologies, network service providers and devices, and adopting best practices can cap your communication costs with no loss of talk time or call quality. Read on to get wise and choose right. —Charu Bahri

Cut spend on CommuniCations

Everything you need to know to run your business in today’s economy

: : : : : : : : : : : A monthly guide to policies, procedures And prActices

Vol. 03 No. 10 | inc. guidebook

cut spend on communicAtions : : : : : : : : : : : : :10

Avail cheaper telephony: Voice over Inter-net Protocol (VoIP) solutions can drasti-cally trim telephone bills with no loss of call quality. VoIP-based popular tools such as Skype, Google Talk and Yahoo Messenger enable free video conferenc-ing, provided both the caller and the called party have the application installed on their respective computers. Skype also facilitates calls from a com-puter to a phone anywhere in the world, albeit for a fee. TringMe, an Indian innovation, is easier to use. It works directly from the browser (unlike Skype, sans an installed application) and offers internet-based telephony for less than half the price of Skype.

Use prepaid local SIM and phone cards: Local prepaid SIM cards come in handy for frequent visits to a certain state or country. For instance, while Vtechsquad CEO Manish Sharma is based in the company’s back office in Gurgaon, he frequently visits business clients in the US. According to him, “In one visit, I spend $50 on an AT&T Go prepaid card (which includes data ser-vices) and another $50 on usage—for an average daily usage of about 60 min-utes over 10 days.” Sharma feels that local SIM cards work out cheaper than low-cost international SIM cards like the Matrix from India.

Matrix SIM cards, however, have an edge over local SIM cards bought over-seas—the Matrix international number allotted prior to departure can be circu-lated to colleagues. Matrix cards also make it cheaper for colleagues and cli-ents calling from back home to reach the travelling executive. Both these options allow free incoming calls, but

share a common drawback—calls must be made to a different number from the one in regular use.

Matrix customer Amit Garg, direc-tor, AKG Group of Companies, attests to saving over 85 per cent of the typical international roaming charges. Compa-nies like Matrix offer smartphone data packs or country-specific data cards to access the net at a fraction of the cost of international data roaming charges.

Fax over the internet: Faxing over the internet saves paper and ink costs asso-ciated with traditional fax machines. Since faxes are sent and received over the internet via e-mail, fax documents can be easily stored on a computer. The growing popularity of smartphones ensures access to faxes even while trav-elling. “We communicate with custom-ers, prospects and vendors over the internet—be it faxes or call centre com-munication,” shares Sharma.

adopt Best practicesGet the best deal: As a rule of thumb, calls made from cell phones are the most expensive. Still, the variety of plans offered and intense competition between service providers makes it worthwhile to shop around for an appropriate mobile plan. Freebies like unlimited night or weekend usage are

better suited for personal plans. Busi-ness users gain more from free daytime local or long-distance minutes, or a combination of these. Negotiations can help strike a favourable landline deal as well. “Reliance provided 60 free instru-ments for 60 office landlines and we get 300 free minutes per line every month, which can be grossed across the total number of lines. We pay about `16,000 towards monthly rentals and usage,” shares R Ramkumar, director, Spices, AB Mauri India Pvt. Ltd.

An SIS International Research study shows that more than half of the employees of small and medium-sized businesses travel outside the office, roam inside the office, or work from home often. Such mobile workers would benefit from the Closed User Group rental plans that give subscribers unlimited talk time with each other.

To optimise the use of good tele-phony deals, install a telephone exchange with the least cost routing fea-ture. Long distance and local calls can be routed over the cheapest network to reduce outgoing office call charges.

Use a data condenser: Get more out of competitively-priced international data packages with mobile tools that con-dense downloaded data. Onavo.com offers an iPhone app that compresses users’ web, e-mail and application data to extend data plans by up to five times and monitor data usage. Opera offers free data compression for internet surf-ing (but not for downloads or videos). Download the mobile browser Opera Mini, which works on popular Androids, BlackBerrys and iPhone models to get as much as up to 500 MB

use appropriate teChnologies

As a rule of thumb, calls made from cell phones are the most expensive.

inc. guidebook | Vol. 03 No. 10

surfing on a 50 MB data plan. Type m.opera.com into the phone’s browser, or download it from Apple’s App Store, the Android Market or Nokia’s Ovi store.

SMS for free: Using free tools can elimi-nate the cost of texting altogether. Pop-ular sites such as way2sms.com, 160by2.com and fullonsms.com facili-tate sending free SMSs from a computer to a mobile number in India. A few cel-lular providers also offer free email to SMS gateways for users to send simple text e-mails to mobiles for free. Users need to know the recipient number and its provider to start e-mail texting to a mobile phone. For instance, a message can be sent to a Tamil Nadu Aircel number on this ID: number@airsms.com. The reference for Chennai Airtel is

919840number@airtelchennai.com, for Delhi Airtel it is 919810number@airtelmail.com, for Orange numbers it is number@orangemail.co.in, for Idea Cellular it is number@ideacellular.net.

run Cheaper marketing CampaignsThe printing and despatch of marketing collaterals such as sales flyers usually account for a significant chunk of com-munication costs. “E-mail marketing campaigns can completely eliminate these costs. We use both e-mail and SMS to communicate with our mem-bers,” says Dinesh Agarwal, founder and CEO, IndiaMART.com. Cheaper email-based marketing campaigns can become more intense because announcements can be sent more often.

“Apart from the cost advantage, online media is a much easier way to reach a customer base. We use it for customer acquisition as well as customer service marketing,” adds Sharma.

IndiaMART also creates digital vari-ants of traditional marketing collateral, online video tours, etc for its customers. The idea is to leverage the cost-savings from internet-based communications. Novices can tap e-mail marketing tools offering predesigned templates that can be customised to suit business needs (see resources). These tools help main-tain customer contacts and incorporate useful reporting options to boot.

Newer technologies are fast becom-ing an integral cog in the way businesses communicate. Adopt these today and see your profits soar.

Notes:

cut spend on communicAtions : : : : : : : : : : : : :10

resourcesAvail free email marketing tools, visit http://mailchimp.com/about/

Read the SIS International Research study, at http://wiki.sie-mens-enterprise.com/images/4/40/smB_Communications_study.pdf

SMBs and unified communica-tion, read more at http://www.mitel.com/resources/smB_Buyers_guide_to_uC_Whitepaper_Final.pdf

Popular communication technologies nowadays include landline phones, mobiles, internet-enabled videoconfer-encing, instant messaging, etc. This proliferation of technologies creates multiple points of presence for each employee, sometimes posing a barrier to effective communication. Unifica-tion is the key to manage these multiple points of presence, intelligently inte-grating communication-enabling gad-gets to allow cross-device calls, for instance, making calls from an instant messenger to a mobile device. readiness: It should allow users to get started right away. That way, businesses can quickly leverage new services without any additional investments. Customisable: Call, conferencing and messaging facilities should be easily customisable to the enterprise’s needs. Compatibility: The unification plat-form’s communication capabilities should be integrated with technologies the enterprise has already deployed.

avail inexpensive data doWnloads during travel Receiving an e-mail with a 5 megapixel photo on roaming would require a mobile to download about 2 MB of data. That’s a lot for one measly photo, all the more reason to avail of inexpensive data connectivity when you travel.Since most business people can’t restrict data downloads only to occasions where free WiFi is available, consider renting a portable wireless device. Cel-lularAbroad.com offers the National Geographic International MiFi, portable Wi-Fi covering over 100 countries as well as the single-country MiFi. The lat-ter offers unlimited data rates as low as $12 a day for a fortnight’s use in countries like Australia, China and Italy. Tep Wireless (UK) offers a pocket-sized Wi-Fi device servicing up to five devices simultaneously in 16 European countries. Rates begin at $15 a day for three days (longer durations get cheaper) and include shipping both ways. Adopt a few best practices as well:

Sign up for automated alerts to know when roaming charges exceed a certain threshold.

Set e-mails to download only text and turn off app pushes.

Set your phone’s usage tracker to zero to monitor data usage. Check into business hotels offering cheap VoIP telephony and free in-room WiFi as a standard feature.

uniFYing multiple teChnologies

inc. guidebook | Vol. 03 No. 10

1Digit | February 2012 | www.thinkdigit.com

log on to...

your technology navigator

moreforfollow us on

Join thinkdigit.com now!

ThinkDigit Reloaded!

latest Videos

slick User interface

opnions downloads

digit top 10

fresh design

social connect

Bold, engaging and fast - our mission statement for the new ThinkDigit website has finally come alive! discover new sections, improved Ui and simpler navigation on the new ThinkDigit.com, India’s most visited technology portal.

the new site sports an intuitive user interface by incorporating multi-level navigation panes, search filters and tools like product finders to ensure a smooth user exprerience.

explore videos of the hottest gadgets, popular global tech events and “first look” videos of newly launched products in india along with some exclusive video reviews from the digit

digit top 10 is a listing of top rated products across various categories, reviewed at the digit test labs.

our writers, reviewers and editors get a space to speak their heart out on some of the most controver- get hold of the latest tools,

apps and application suites to keep your PCs updated. You can use the download finder or refer to our Top 10 charts to directly download the best ones.

Test Labs. Browse videos by categories, popularity and ratings.

Mala Bhargava Editorial Director

9.9 Media

android phones

taBlets

sMart phones

More categories

sial topics. You can trust this section to stir up a lot of emotions. we look forward to your comments and opinions on these articles to instigate discussions.

opinionsnewsopinionsnewsopinions

comparisonsreviews

comparisonsreviews

comparisonsvideos downloadsnews

comparisons

videosreviewsvideosreviewsdownloadsvideosdownloads

buyingguides

featuresvideosfeaturesvideosdownloads

buying guides

videoscomparisonsvideoscomparisonstips

reviewstipscomparisonstipscomparisons

reviewsguidesreviews

guides featuresreviews

featuresreviews

tipscomparisons

tipscomparisons

http://www.thinkdigit.com/opinions.html

http://www.thinkdigit.com/download.php

http://www.thinkdigit.com/top-products.php

http://www.thinkdigit.com/videos.php

“Scale and evolution go hand in hand. If a business

can't change, it will be dead.”

“Modernisation is a loaded word. Fixing accountability has

been our biggest change.”

THE C-FORCE

Anuj, Rishi and Aditya Khanna have shown that change need not always be accompanied with conflict and chaos. Using

collaboration and consensus, they have given C&S Electric, their family’s 46-year-old electrical and power products company a

modern, mint-fresh look.

By ShreyaSi Singh DESIGN BY ANIL VK | PhotoGrAPhS BY SUBhojIt PAUL

Aditya Khanna

Rishi Khanna

2 4 | INC. | november 2012

A“It's a chicken-and-egg

situation. Do you change and grow, or grow and change?"

djectives can't often paint a true picture. For example, a

nearly five-decade-old family business manufacturing electric controls and switchgear seems anything but exciting. But nothing could be farther from the truth at C&S Electric, India's premier electric and power products company. A market leader in the switchgear business, the ̀ 1,100-crore company has had quite a decade. Ably supported by their fathers, C&S Electric's second-generation owners have transformed their family business well and smooth, one focus area at a time. It's a journey India's large swathe of family enterprises could learn much from.

Anuj Khanna

november 2012 | INC. | 2 5

loc

atio

n c

ou

rte

sy: s

mo

ke

ho

use

ro

om

, del

hi

THE C-FORCE

In 1998, when Anuj and Rishi Khanna came back to India from the United States to join their family business, C&S Electric was roughly a `100 crore business with seven factories in Delhi NCR. Their

main products were LV controlgear and switchgear, busducts, alternators and connectors. Brothers Ravi Khanna and Ashok Khanna, Rishi’s and Anuj’s fathers respectively had built a team of talented engineers but the promoter-duo directly controlled most of the func-tions. As Ashok Khanna puts it, “Informally, we had an unsaid agreement that Ravi looked after the finances and marketing, and I took care of operations and man-ufacturing.” In their first few years in business, Anuj and Rishi were also attached to different functions such as marketing and finance.

The younger Khannas soon realised that this wasn’t the right approach for them. It didn’t give either them or their professional managers the opportunity to be really accountable for the result. So, the two of them put their heads together, and mooted a business restructuring to their fathers. “We restructured into business units in 2002,” recalls Anuj. “Rishi and I managed two of the larger P&Ls—LV switchgear and Power Busbars because these were core to the identity and future of our company. This exercise was really the first conscious step we took towards change.” It gave the cousins a chance to get a complete grip—right from product development, manufacturing and labour issues to marketing and sales. “The account-ability for our unit’s growth and performance came right up to us".

They didn’t stop at that. Having carved out auton-omy and accountability for themselves, they went fur-ther. “After creating the larger structure, we started empowering our professional managers within each unit. It led to a more transparent, open culture of man-agement,” Rishi explains. “Honestly, it also happened

because Anuj and I did not have the same kind of hands-on experience that our fathers, who had built the company, had. So, instead of faking it, we said, we should let the people who have more experience handle those aspects. As simple as that may sound, it’s actually a very powerful tool because very often you’re not letting your people do what they are capable of doing because you’re too busy doing it yourself. That’s been an important change,” adds Rishi.

That philosophy has been in con-stant evolution since. As the company

grew, professional CEOs were brought in to head each of the business units. “Today, each business unit is accountable not only for its own balance sheet, but also its own P&L. Also, from being cash-focused, we’ve moved all our seven business units to be focused on return-on-capital-employed,” says Aditya, Ashok Khanna's younger son. “This has led to a huge impact in accountability. Because P&Ls are not affected by us, people have to own their performances.” These have seeded the company with a competitive spirit. Different business units compete for the company’s annual awards—instituted to recognise performance on core focus areas like growth, cost savings and green initia-tives. “It’s great how the culture we began setting for ourselves has flown. Awards or flak, our CEOs raise their hands to own up,” says Anuj. “Modernisation is a loaded word but really this transfer of control and responsibility from the family to professionals has been the biggest change,” concludes Rishi.

FOCus NO. 1 ACCOuNTAbIlITy & REsTRuCTuRINg

A TAlE OF MIlEsTONEsUndoubtedly, a lot has happened in C&S electric over the past seven years. Here’s a quick recap of all the action from 2002-2007:

2 6 | INC. | november 2012

THE C-FORCE

FOCus NO. 2 CApITAl REsTRuCTuRINg

international expanSionacquisition of dutch firm etacom for `100 crore

Branding moving to a new

brand identity, c&s electric roBuSt growth

more than 6X growth in annual turnover

Aditya Khanna, the youngest of the three, joined the company in 2005, after a six-year stint with Ernst & Young in London. A chartered accountant by training, Aditya initially worked on a joint ven-

ture. But his finance background ensured he naturally gravitated to look at the capital structure of the company. Even till the mid-2000s, although they’d organised them-selves in business units, the C&S Electric we know today was actually split across five to six different companies. The younger Khannas knew this didn’t make sense. A consolidation of both the balance sheets, and a singular identity was long overdue to give benefit to all the stake-holders such as bankers, promoters and employees. The trio also started thinking that there was good opportunity to bring equity to the company for them to grow. “That thought gave a lot of direction to what we were going to do, and how things played out,” recalls Aditya. “Making the business a single entity was a big aspect of modernisa-tion. At that time, it was actually considered cool to have a large number of companies, and to have this big business group. Somehow, that never rung with us. We wanted to have a single brand with a single focus,” adds Rishi.

What followed was a complex process of integration and consolidation. It culminated in two big events—the company’s rechristening to C&S Electric, and the infu-sion of private capital in the form of GE Capital picking up

nine per cent equity for ̀ 100 crore in August 2008. The behind-the-scenes of this financial restructur-

ing was frantic and immensely challenging. Each of the five companies followed different reporting and auditing mechanisms, had different business cycles, and had never previously been attempted to be brought together. Some of the group companies were JVs. This increased the complexity of bringing them together because shares had to be bought back from the foreign partners. By 2007, a central treasury was in place. Aditya admits, “We wanted to raise private equity, which made us push the buttons faster on these processes.” But, even that wasn’t about to happen without some major heartburn. As the deal with GE Capital was coming to fruition, global capital markets turned turbulent. Yet, GE Capital remained support-ive, and the deal came through in August 2008, just a month before the collapse of Lehman Brothers.

That infusion has fuelled the company’s organic and inorganic growth, including its greenfield, switchgear manufacturing facility in Nantong, China; and the acqui-sition of Dutch firm, Etacom. “This really has been a huge area of improvement for us. We didn’t have a corporate finance structure earlier. Putting that in place has enabled us to effectively deploy capital, and to make our expansion possible,” confesses R. N. Khanna.

Capital infuSion Ge capital comes in as

investors in august 2008

going gloBal setting up and operationalising its first greenfield international manufacturing facility in nantong, china

Smart r&d launch of five new products

november 2012 | INC. | 2 7

THE C-FORCE

The conversations set off by the need to consoli-date the many companies, and come out with a stronger, single entity gave a huge fillip to the company’s corporate branding. Over the course

of 2005 and 2006, Anuj, Rishi and Aditya had several discussions to sculpt their ideas into shape. “We didn’t just want to do something, we wanted to conceptual-ise the change,” they say. The first tangible manifesta-tion of these ideas was in evidence at the Elecrama

2007. Elecrama is the power and elec-trical industry’s biggest annual soiree. C&S Electric always had a big pres-ence at the exhibition. But its stall was a “big mela” till 2007, the three con-fess. There were multiple banners, each of which had different logos, dif-ferent company names, or names of JV partners on them. “There was no focus.” In the 2007 edition in Mum-bai, they unfurled the new name, C&S Electric because Controls & Switch-gear, the name of the flagship com-pany, was too long, generic and didn’t capture what they aspired to do. Armed with a new name, their Elec-rama stall that year showcased their divisions; and was hugely appreciated by both employees and customers.

The branding led to a cohesive identity. It prompted bonding and sharing between employees, many of whom might have worked in the same office but didn’t share information and experiences. Of course, this necessitated the massive task of migrating everybody to a set of uni-form human resource policies, and creating buy-in to bring parity in des-ignations and compensation. “We did this by building a culture of consen-sus, and by convincing people about the benefits of parity,” says Anuj.

FOCus NO. 3 bRANdINg & IMAgE

What also helped was formally articulating our vision and mission, Rishi says. “It’s not like those ideas weren’t there. Of course, our fathers also envisaged growth and expansion. They also had a lot of pride in the made-in-India label, and wanted it to get global recognition. It’s one of our definitive vision areas. But, putting it out there—in our presentations, brochures and website enables these ideas to reach all our stake-holders,” he adds.

The great benefit of “looking” like a corporate set- up has increased their ability to attract top-notch talent. "It isn’t hard for us to take somebody out of a larger company, and some of the CEOs of our busi-ness units could easily be from giants like ABB, L&T and Siemens," he says. The overall corporate brand-ing, and the attention they’ve got in the industry after their financial restructuring (see page 29) brought in private equity four years back and has also ensured that C&S is well-known beyond the electrical and power products industry.

OuTsIdER VIEwpREET MOHAN sINgH

2 8 | INC. | november 2012

MuMbaI-based investment and advisory firm Avendus was brought in by C&S elec-tric both for its private equity deal with Ge Capital in 2008, and its more recent acquisi-tion of Dutch firm, etacom. We caught up with Preet mohan Singh, executive director, Avendus Capital to get a behind-the-scenes look.

Q. What stood out for you in the run-up to the deal being executed? How prepared were the Khannas for this milestone? There is a fair bit of clarity on the growth plan. They spent a lot of time—both on exe-cuting the deal, and on ascertaining a busi-ness fit point of view. They had several rounds of detailed discussions with etacom to make sure they knew what they were buying. Their rigour on the execution is quite high. It’s well-demarcated too. As a group, they will take a view. Then, one or two members of the top management would go deep to figure out the business fit, and finally Aditya would handle the diligence piece. They were prepared to spend a lot of time on diligence, and get into a fair bit of detail. In fact, during the etacom deal, they employed a local management team even before the acquisition was sewn up. This really helped in the smooth integration.

Q. How much evolution do you see in the way they work, from four years when you worked on the GE Capital infusion, to now? There is a lot more focus. With Ge, they have an external reputed partner so the urgency around growth is much more. Sec-ondly, the effort on processes has certainly increased, in the way they approach and manage the business. There has been a definite evolution. Q. Would you say C&S Electric falls within a larger trend of professionalisation that we’re seeing in many family businesses? Or, is it almost a best practice? See, a couple of things stand out. If you see the business area they are operating in, it is one of the largest family businesses to oper-ate in the segment. Their competition is with major global players such as Schneider electric, Abb or L&T. but, they’ve shown they’re up to the task. Their ability to grow in the face of tough competition is admirable.

Also, the succession and management is quite professional. The execution is run by the second generation although the first generation does come in for strategic, advi-sory inputs. even within the second genera-tion, there is a fairly clear demarcation of roles and responsibilities.

THE C-FORCE

Along with the corporate finance structure, one of the most dramatic impact areas of change has been how the company’s revenue mix has changed over the years. Sample this: its exports

to more than 78 countries contribute to 20 per cent of the total turnover. C&S Electric is amongst the largest exporter of electrical switchgear products from India. “Till the mid-2000s, there wasn't much focus on this. But, our vision became bigger. We started focusing on international business. Rishi lived on an airplane for a couple of years,” says Anuj. They claim that C&S Elec-tric has become India’s biggest exporter of industrial power distribution and control equipment. Two mile-stone events best symbolise this spreading of wings—first, the acquisition of Dutch firm Etacom in December 2011. Etacom, which had a turnover of €20 million, is a globally acknowledged brand in cast resin busbar with a very strong presence in applications where high perfor-mance is required. On its part, C&S Electric had pio-neered the market for busbars in India and is a market leader in this segment. The combined entity has now become a global leader in the busbar markets, and helps C&S Electric establish a base to service the demand in Europe and the Middle East. Clearly, the successful acquisition has given the second-generation entrepre-neurs a lot of confidence. “We’ve realised that in our line of business, acquisitions are going to be something we’re going to do more and more in the coming years,” Aditya says, matter-of-factly. Their switchgear plant in Nan-tong, China which came up in 2010 is also a part of the strategy to establish the C&S Electric brand globally. Along with this expanding global footprint, the compa-ny's recent success with new products has also been heartening, says Ashok Khanna. Today, 20 per cent of the annual turnover comes from products launched in the last five years. Product development and R&D have been embedded in the company's culture. "We ensure two per cent of the C&S Electric turnover is invested in R&D across its four research centres," they say.

FOCus NO. 4 INTERNATIONAl ExpANsION & pROduCT dEVElOpMENT

The easy CaMaraderIe among the Khanna trio is difficult to miss. It could've been different—a slippery slope fraught with turf bat-tles and clashing viewpoints. Instead, Anuj, rishi and Aditya have made the fact that there are three of them their biggest advantage. “We hunt in a pack,” says Aditya, only half in jest, when asked about their rapport. Here, they give us a peek into this brotherly dynamic, and how it’s played a big part in their success at C&S electric.

rishi Khanna: We’ve witnessed strength in numbers because we saw our fathers work together. There’s great academic interest in management around the concept of singular leadership. In global management culture, the emphasis on the individual as a leader is paramount. There’s almost a belief that collective leadership is no leadership. our experience has shown that collective leadership does work, and can actually work much better than individual lead-ership because there is a balance of viewpoints. of course, we argue and disagree but we’ve learnt to use such circumstances well. To listen to each other is a skill we’ve developed. It takes some maturity but we understand how valuable it is.

Anuj Khanna: I think it would be far tougher for an individual, a single person to have effected these many changes. As a second generation, one is easily accepted in the business but there are also a lot of expectations. We derived a lot of strength from each other. We create consensus amongst ourselves, and consensus shows strength. The fact that there are three of us also gives the business an informal governance procedure which may not exist if you’re the sole owner. multiplicity of viewpoints is a given.

Aditya Khanna: There is an internal process of agreement between the three of us—a strategic decision has to be unanimous. For example, a few months earlier, I had proposed an acquisition. Anuj backed it but rishi didn’t agree. So, it didn’t happen. And, that was the end of it. our decisions are built on trust. Where there is trust, there is no ill will. You don’t need formal structures like family councils or other constructs for trust to exist. Actually, we often say the company is run by one person named ADrIAn, an acronym made up of the first two letters of our three names. We don't ignore the fact that things could've turned out differently. We value that we've been lucky to share this rapport.

THE bROTHERHOOd pACk

november 2012 | INC. | 2 9

THE C-FORCE

A key decision the trio took in 2007 was to insti-tute the discipline of board meetings. “Hon-estly, we didn’t have them before,” says Aditya. "Whatever was decided between our fathers

was it." When GE Capital came in, Rishi, Anuj and Aditya decided to make this a focus area as well. Today, their Board meetings are held every quarter without fail. To make the Board meaningful, they’ve also brought in independent experts to the Board, which now has a total of nine members (one each for the five Khannas across both generations, and four independent directors).

Former MD of the State Bank of India, Sanjay Bhat-tacharya is the Board’s most recent addition. He joins P. R. Khanna and V. C. Koura. This composition has led to robust discussions. “Our Board meetings have seen some really great conversations. For example, in the process of acquiring Etacom, we were greatly chal-lenged by our Board. They would constantly ask us why we were doing this acquisition,” explains Aditya. “How you react to this is your prerogative. One can think, oh! This is my company, and I’ll do what I want. Or, you can use it as a catalyst to push yourself. We use it like that—their questions made us second guess ourselves—are we just thinking whimsically? Or do we know why we really want to acquire this?”

In their last Board meeting, for example, one of the independent directors asked them to look beyond

quarterly figures, and annual targets, and tell the Board their five- and ten-year vision. “We were asked what we were thinking, and if we had a game plan to get there? It made us think hard—about what we want to do in the long term. We have to present our thoughts at the next Board meeting.”

The ideas thrown up in these meetings have led to other subtler, but equally important changes. For long, the trio say their company accounts would look like they were printed on “toilet paper”. As a private com-pany, C&S Electric does not have to declare its results. But, one of the independent Board directors urged them to “present their accounts with pride.”

Over the past couple of years, C&S Electric has been bringing out a complete annual report which is well-designed and printed on quality paper. They admit the impact has been tangible and positive. Aditya says, “When I gave Mr Bhattacharya our annual report in his

FOCus NO. 5 CORpORATE gOVERNANCE

3 0 | INC. | november 2012

ph

oto

co

ur

tesy

co

mpa

ny

THE C-FORCE

office as he was about to retire, he told me he was thrilled to see what we’d put up. That we’d made the effort to create something we didn’t need to, shows our pride in the company.” But, their corporate governance efforts go beyond the hygiene factor of having regular Board meetings. They have extended corporate gover-nance to make sure both the company’s financial pro-cesses, as well as their individual powers are regulated and well-defined. Aditya recalls an event that served as a catalyst to some of these decisions.

“When we first got the `100 crore funding from GE Capital, we had to transfer it to liquid funds. I signed that cheque. It was quite a moment—a `100 crore cheque! I took a photograph and sent it to Rishi. The next day, I realised that it was crazy that I was single-handedly allowed to sign on a cheque of that amount.”

The three of them sat down to change that, and to put limits on their financial decision-making powers—

as a group, and as individuals. Now, any cheque trans-action that goes beyond the figure fixed requires each of them to get one of the other two as a co-signatory. “Putting those controls on yourself is difficult, but it’s very important to do so. Many families in business are not able to differentiate between the company and their personal entity. We’re clear about that,” says Rishi.

The mandate for governance issues is bound to get larger for them in the future. To fund their ambitious growth plans, C&S Electric needs more equity to come in. There are definite IPO plans in the not-so-distant future. “If that’s the next step of evolution—what goes around it? We know at some step we might need a professional MD, somebody possibly from outside the company. That’s a further step away from management for us. It will become a personal evolu-tion—what do we then, how do we structure our-selves, should we farm out into other areas?"

soMeTIMes, one can’t help but resort to clichès. When meeting the founding generation of Khannas at C&S electric—r. n. Khanna and his younger brother Ashok Khanna—it’s impossible not to have “like father, like son" flash across your mind. Co-creating is clearly something the Khannas have most literally been born with. It was in 1966 that r. n. Khanna founded Controls & Switchgear in the garage of his father’s house, after working for four years in FAnAL, Germany. His younger brother, Ashok joined him a year later after an engineering degree from IIT madras. over the next three decades, the duo created a robust business in road sig-nalling devices, push buttons, pilot lamps, switches, fuses, controlgears, busducts and other electrical compo-nents. Their educational pedigree and professional experience helped them firm up many technical partnerships with european and American firms. It’s this exposure they credit with the

way they’ve handled succession too. “We learnt the importance of succes-sion. Let alone as an entrepreneur, even as a manager, you must have in mind who is going to succeed you. We applied that to our business also. We knew we had to give our children more and more responsibility," explains Ashok Khanna.

r. n. Khanna says their sons have imbued the entire organisation with the ethos of trust, empowerment and delegation. “We’re enjoying their growth. not that we’re surprised by it. As children, they saw us toil and suc-ceed. both their excitement and suc-cess is natural,” confides r. n. Khanna. International expansion, cre-ating a corporate financial structure

and expanding the product portfolio, he points out, are their second gener-ation’s most remarkable achieve-ments. “of course, there were moments when we felt they were too rash. but, they’ve always been able to support their ideas with logic,” adds Ashok Khanna. He also adds that the younger Khannas’ quantum of

achievement—of giving the company a major uplift—should give them as much satisfaction as the first gen-eration has of founding the company. Surely, for rishi, Anuj and Aditya, nothing else could’ve been a greater vali-dation. but, the elders have bigger tasks laid out for them. "The foundation of our

company has been to dream big, to take a garage start-up, founded with `10,000, to compete with giants like Abb, Siemens, and bag clients like American railroads and Ge," says r. n. Khanna with unmistakable pride. "The boys need to keep that—to dream big, to let the dreams create a desire, bring direction to it, and com-mit to that goal."

A MATTER OF gENEs: THE FOuNdINg FATHERs spEAk

“There were moments when we felt they were too rash. But, they’ve always supported their ideas with logic.”—Ashok Khanna, MD, C&S Electric

november 2012 | INC. | 31

speedtraps

some entrepreneurs just don’t know how to operate in first gear. That’s certainly true of the company builders featured in this issue of Inc. The median growth rate of Inc. 500 companies from 2008 to 2011 was 1,435.9 per cent. And when you’re travelling at that kind of veloc-ity, encountering an obstacle can be downright painful—and, in some cases, even fatal.

What kinds of obstacles do fast-growth companies encounter? Gary Kunkle, an economist and research fellow at the Edward Lowe

Every fast-growth company eventually runs into at least one of these all-too-common obstacles. How you handle them can make the

difference between success and a high-speed smashupby kimberly weisul /// illustrations by manav sachdev

managing fast

growth part onE

november 2012 | INC. | 3 3

Your Business outgrows its staff the people who got you to $5 million aren’t the ones to get you to $50 million

Foundation’s Institute for Exceptional Growth Companies, has long wondered the same thing. To get deeper inside what makes suc-cessful (and unsuccessful) businesses tick, Kunkle has constructed a vast database of some 45 million workplaces. He has collected more than 250 data points on each of those companies and can sort them by more than 400 factors, such as industry, size, and location.

Kunkle recently completed a study of 4,000 fast-growing companies in Pennsylvania. (The survey was sponsored by the Team Pennsylvania Foun-dation, a nonprofit economic development agency.) He then surveyed 600 of them. He visited their headquarters and held focus groups with their CEOs. It soon became clear that these companies had more in common with one another than they did with industry peers or businesses of the same size. In fact, these growth companies shared the same strug-gles, regardless of those factors. “These challenges transcend the industry you’re in, the location you’re in, or the size you are,” says Kunkle.

We asked Kunkle to help us identify the challenges that all fast- growing businesses face. They’re listed below, along with case studies show-ing how current Inc. 500 entrepreneurs managed to overcome them. If you plan to join the Inc. 500, you can expect to encounter these traps, too. The secret is not to let them slow you down.

and its challenges become more complex, you may need a whole new staff to deal with them.

Black Elk’s early staff members were excellent tactically, Hoffman says. But some lacked strong strategic skills. They were doing their jobs, but they weren’t measuring what they were doing; as a result, managers lacked the metrics they needed to boost the company’s effi-ciency and productivity.

Yet Hoffman was reluctant to part with his original employees. “It’s very easy to say, ‘You no longer fit, so you have to go,’ ” he says. “But that’s counter to our culture.” Early employees took a big risk in leaving their corporate jobs to come work for a

In 2008, Black Elk Energy closed its first deal, to develop a single gas field in the Gulf of Mexico. And the company’s logis-tics manager did a bang-up job of getting workers out to the drilling platform and back.

About a year later, Black Elk signed its second deal, this time to develop 30 oil and gas fields. Suddenly, the logistics manager had a very different job. Moving people and equipment was the easy part. Now, she had to figure out how to get the most efficient use of the company’s helicopters, boats, and other resources.

And so it was that Black Elk CEO John Hoffman found what many entre-preneurs have learnt: As a business grows

start-up, he says. What’s more, there’s a major talent war afoot in the oil and gas industry. If Hoffman has good people, he wants to keep them.

So when he has to tell someone that his or her job has outgrown him or her, Hoff-man tries to make it a positive experience for both parties. That’s not always easy. In most cases, Hoffman says, the employee does not understand the gap in compe-tency. To make his point, Hoffman assigns employees a difficult but not unre-alistic assignment. For instance, he asked his logistics manager to figure out how many passenger miles the company’s heli-copters flew every day. Then he asked how Black Elk might increase its passenger seats per mile.

The logistics manager couldn’t answer these questions, which Hoffman says is what made the light bulb go on: “Then you can have a real, honest conversation that isn’t personal.” In such situations, he takes pains to explain why the company

speed traps

3 4 | INC. | november 2012

You wait too Long to hire Demand is surging. Where are the employees to handle it? It’s only natural for new hires to feel some pressure. But at FM Facility Maintenance, which runs facilities for companies with mul-tiple locations, new account managers seemed to be having an extra-tough time adjusting. And the customer experience, CEO Jim Reavey thought, was beginning to suffer.

The problem, Reavey decided, was that he was hiring reactively. The solution: He now brings on account managers about 120 days before he truly needs them. That way, the new employees have plenty of time to absorb FM’s culture and shadow an existing account manager before they get started.

According to Kunkle’s research, most high-growth companies would benefit from a simi-lar strategy. Still, it isn’t easy. Reavey, for instance, tries to coordinate hiring with the deals he has in the sales pipeline, but if sales slow down or a big deal fails to materialise, those people do represent an added investment.

One way of addressing this problem, says Kunkle, is to follow what he calls the Chuck Noll approach, named for the acclaimed Pitts-burgh Steelers coach. Noll always sought the best overall athletes rather than the best candi-dates for particular positions, reasoning that a great athlete can be trained to play a variety of positions. This works for entrepreneurs, says

Kunkle, because they often have to hire before they know exactly what the new person will be doing or when he or she will be needed. By the time entrepre-neurs realise exactly what they need, then start searching for someone to do it, it’s often too late.

For Reavey, the best performers come from the military. He uses recruiters who specialise in veterans returning from Iraq and Afghanistan. They are trained in leadership and mentoring. And stress is never much of a problem. “They’re great when things don’t go their way,” Reavey says. “When things get really busy, they don’t panic. They keep their teams calm and focused on the customer.”

Since 2008, revenue has grown to $350 million from $37 million. Reavey says FM’s customers do not appear to have noticed the common back-grounds of many of his recruits. But he gives the new staff members the bulk of the credit for FM’s success. After all, he says, “When you’re in a pressure situation, it’s never as much pressure as bullets getting shot at you.”

speed traps

numBer two

entrepreneurs often have to hire before they know when the new person will be needed.

needs a different type, or level, of exper-tise. “If you allow them to understand your needs and why it’s important, nine times out of 10, they want the company to be successful,” he says. He doesn’t cut anyone’s pay, but he does not hesitate to recruit the talent the company needs. The original employees get someone to learn from and can keep doing the things at which they are best. As Black Elk has grown, he has hired senior people in nearly every department.

Black Elk manages 98 fields and has $340 million in revenue. There are six people in its logistics department, includ-ing a senior executive recruited from the giant JX Nippon Oil & Gas Exploration. The original logistics manager is still with the company. Hoffman has had conversa-tions similar to those he had with his logistics manager with about a dozen peo-ple in all departments. “We have zero attrition,” he says. “So I think we’re man-aging the right way.”

november 2012 | INC. | 3 5

Your Business Lacks the right sYstems Eventually, gut instincts won’t cut it For OtterBox, a manufacturer of protective cases for hand-held devices, the launch of a new device is a huge opportunity. But in May, when Samsung released its long-awaited Galaxy S III smartphone, OtterBox blew its chance. Though it had long been planning for the Samsung launch, Otter-Box had fallen behind and didn’t get its cases to retailers until two weeks after the product debuted. Founder Curt Richardson says he forfeited as much as $10 million as a result. “We totally blew it,” he says.

OtterBox is on time about 90 percent of the time. But for Richard-son, that’s not enough, and he has been struggling to upgrade his company’s systems for years. That’s a big change for OtterBox, where processes often have involved no more than a gut decision

by Richardson himself. “I’ve realised I can’t fight this thing the way I fought when the com-pany was small,” he says. “If I expect to scale, I need to look at this totally differently.”

OtterBox’s predicament is complicated. It’s not just that it needs a more systematic way of designing, manufacturing, and shipping products. It also needs

systems it will not outgrow—a problem, given that OtterBox has been growing at a ridiculously fast pace. Four years ago, it had revenue of $10 million; in 2011, sales hit $348 million. “When you’re growing this fast, the processes you have today will not be working in six months,” says Richardson. “You have to somehow get ahead of it.”

In 2009, OtterBox began installing a technology to help automate its distribution and add some clarity to decisions about what needed to be moved where and when. “I’ve got to be able to determine where my vol-ume is and how full my factories are, so I can determine if I need to put more factories in different spots,” says Richardson.

Unfortunately, the new system “was a giant disaster,” he says. For one thing, the company that was implementing it was acquired before the project was completed. And once it was finally installed, OtterBox promptly started to outgrow it.

After months of trying to patch things together, Richardson decided to start over. The company’s new platform is scheduled to launch in Jan-uary. And Richardson is confident that sometime in 2013, he will have a much better handle on how busy his factories are, how much product he has, where it is, and where it needs to go. And gaffes such as those that led to the botched Samsung Galaxy S III launch will be a thing of the past.

You run out of moneYCash flow is always a concern—no matter how much cash you have

You wouldn’t think Tony Jimenez, CEO of the IT-services provider MicroTech, would have had to worry about cash flow. Within several months of founding his company in 2004, he had a $500,000 line of credit and a pair of partners with money in the bank.

But Jimenez learnt that even the best- prepared businesses are never free from cash-flow concerns. In fact, Jimenez says, it’s a problem you never truly outgrow. “Your company’s never big enough to buffer you,” he says. “At the beginning, you’re playing with smaller balls of fire. The bigger you get, the bigger the balls of fire.”

In his research, Kunkle has seen this repeatedly. As companies land bigger con-tracts, they need to put larger sums of cash on the line to buy equipment and staff up long before they are able to start writing invoices. “Companies often actually become less liquid as they grow,” says Kunkle. “They grow them-selves right into bankruptcy.”

That’s nearly what happened to Jimenez and MicroTech. Shortly after launching, the company scored a major coup when it landed a gig as a subcontractor to General Dynam-ics, which had been hired by the Department of Defense to perform a major data migra-tion. Jimenez quickly hired 40 people.

And then the funding was pulled. Jimenez was faced with firing 30 of his

newly hired staff members. Plenty of business owners would have wielded the ax immedi-ately. Instead, Jimenez called everyone he could think of, trying to find jobs for his new people. But in the meantime, he was still pay-ing them, which was killing his cash flow. Says Jimenez, “I was convinced I was going to lose my company. It was a very emotional time for me.”

Jimenez has no regrets. But he has learnt his lesson. Now, even with a $30 million credit line and $100 million in credit from Dell, Jimenez never stops keeping a watchful eye on his cash.

3

speed traps

4

“ when you’re growing this fast, the processes you have today will not be working in six months.”

3 6 | INC. | november 2012

You can’t keep up with demand When people want what you’re selling, you had better be able to provide it

Chobani, the $634 million yogurt maker, has had capacity issues from the very start. At first, the problem was overcapacity. In 2005, Chobani’s founder, Hamdi Ulukaya, bought a 90-year-old yogurt factory in New Berlin, New York, on a vague conviction that, he says, “something is going to happen with yogurt.”

The company got its first order, for 300 cases, in 2007. Since then, it has been a constant scramble to keep up. “You get your sales started, and you’re very excited,” says Ulukaya. “Then you look at your actual capacity, and it’s very little.” By 2009, Chobani was selling 200,000 cases of yogurt a week. It had the capacity to make 400,000. Ulukaya wanted to expand his facilities to make 1.4 million cases a week. Price tag: $100 million.

This, says Kunkle, “is the most dangerous point for hypergrowth com-panies. They need to expand and often need to go into debt to do it. If the demand doesn’t show up, they end up highly leveraged and at risk of bankruptcy.” The best strategy, says Kunkle, is to manage growth so it can be dealt with in small chunks rather than in big ones.

For Ulukaya, that wasn’t an option. It would be a year before a new facility would be up and running. “You have to see the demand long before it’s coming,” says Ulukaya. “You have to invest in time, and hopefully, when you finish it, the orders will come.”

Ulukaya started building out his new production lines. He figured that as his business grew, he could use the profits to finance some of the expan-sion and that the growth would coax the banks to come on board. By 2010, he had enough capacity to produce 1.4 million cases a week. But by then, orders were up to 1.6 million. Ulukaya plans to spend $300 million this year on yet another expansion.

the proBLem is Youas your company grows, you need to grow with it

Jessica Herrin co-founded her first company, WeddingChannel, at the height of the dot-com boom. She recruited talented, highly motivated people willing to work around the clock. Then, one by one, she watched them burn out.

In 2004, Herrin started the jewellery and accessories designer Stella & Dot. This time, she was determined to build a lasting, global company, and she was pretty sure the frenzied approach of the dot-com era wasn’t the way to do it. She knew she would have to take her leadership abilities to another level. So she sought some help. Her first move: to establish a board. She recruited pros from the world of finance and from other beauty and lifestyle companies. They have provided crucial advice about the kinds of people Stella & Dot should hire and have worked their contact lists to help Herrin find them. She has also sought help from peer-mentoring organisations, such as the Young Presidents’ Organization.

Smart moves, says Kunkle. Most high-growth entrepreneurs, he has found, lack the experience needed to guide their organisa-tions. He recommends they create advisory boards and meet with them regularly. Peer- networking groups, he adds, can be helpful. But he cautions that peers often are unable to address the deep questions that many entre-preneurs face, such as “Who am I? Who should I be?” Indeed, one of Herrin’s advisers helped her understand that her intense drive may have exhausted the people around her. “I didn’t have a lot of patience for anyone who couldn’t give 110 per cent, 110 per cent of the time,” she says.

Herrin still has a vision, and she is as intense as ever. But she wants a company in which employees can grow into their positions and remain productive for the long haul. She has high expectations for performance but none for face time. Herrin says she finally understands that her way is not right for everyone.

Kimberly Weisul is editor-at-large for Inc.com.

n u m b e r

5

november 2012 | INC. | 3 7

A ReveRse JouRney

Fromto Employee

Entrepreneur

ReverseJourneyA

By ShreyaSi Singh PhotograPh by SriVatSa | iMagiNg by PeterSoN Pj

3 8 | INC. | NoVeMber 2012

A ReveRse JouRney

having a founding team of eight people must have been a tough balance. But, take us back to what it felt to be acquired, and work as an employee after Future group acquired indus League in 2005?

By the time the Future Group acquired us, two or three of the co-founders had already moved on to do different things. The rest of us who were there were well integrated without any problem at all. And, it’s not like I became the CEO right away. So, in some ways things didn’t change much for me in the beginning. First, Shriram Shriniva-san, the nucleus of the founding team, was here for a year or so. After that, K. K. Pant became the CEO. The interaction with the Future Group has always flown and been managed from the very top, so in the first couple of years, I wasn’t involved. It changed for me when I became the CEO in 2008. Even now, very few people in the company interact very closely with the Future Group. It’s for me to filter back the conversations, and strategies to Indus League. Actually, Indus League has always been, and continues to run quite independently.

has that freedom—to function as an independent entity —been a reason for your being able to continue to build and grow indus League as you would a company you owned

Rachna Agarwal was one of the eight co-founders of Indus League Clothing when the apparel company was born in November 1998. Today, Indus League is a ̀ 600-crore plus venture with an enviable felicity for creating home grown clothing brands including well-known names like Indigo Nation, Jealous, Scullers, Urbana and Urban Yoga. In the journey of fashioning these brands, Agarwal’s personal trajectory has been very interestingly patterned. Today, as the CEO of the company she helped found, which was later acquired by Kishore Biyani’s Future Ventures in 2005, she wears both hats—that of a professional CEO and an entrepreneur with remarkable ease. Inc. India met her for a chat on life after an acquisition, and her improbable reverse journey.

NoVeMber 2012 | INC. | 3 9

A ReveRse JouRney

directly? Did you have any apprehen-sions that staying on in the company might not work out for you?

Today, out of the original eight founders, I’m the only one left. Indus League is too much in my blood now. I doubt I can leave it. Of course, there are apprehensions when you’re merging with a larger entity—what’s going to happen, will things remain the same, or will everything-as-one-knows-it will be history? There were rumours also, such as will Indus League shift to Mumbai, and so on. But, that’s part and parcel of every change. It’s the noise around change, and it subsides soon enough.

Honestly, Future Group has been very willing to listen to our point of view. Through these past years, we’ve only got suggestions, rarely ever a diktat. They have allowed us to maintain a separate identity. We’re still called Indus League, and have a lot of freedom and independence to con-tinue the Indus League culture, so to speak. Actually, it’s the best of both worlds because in terms of productivity, we completely benefit from the advantages a company like Future Group can afford, such as having an IT platform like SAP. We get a lot of econo-mies of scale, and experience in opera-tions—in terms of fabric buys, negotiations and logistics support. Yet, in a lot of areas, Indus League as an independent entity has complete latitude, especially in terms of thinking about the brand, it’s positioning, having a strategy, and owning our own design studio. Actually, Future Ventures, a part of the Future Group, is almost like a mentoring organisation. Also, it helps that in a business like ours, neither being seen

as Indus League or Future Ventures is really relevant to the market. Our customers only care about the brand. I don’t think they even know that Manchester United and Jealous 21 are owned by the same com-pany. It doesn’t matter to them because their connect is only with the brand, say Indigo Nation, Scullers, or whatever else.

how important was it to choose the right larger entity to become a

“As long as a substantial part of your time goes into creating new things, it can remain exciting as an entrepreneur.” —Rachna Agarwal

4 0 | INC. | NoVeMber 2012

A ReveRse JouRney

part of? has the structure of Future Ventures helped in managing this seamless “entrepreneur-employee” role in any way?

Actually, being part of Future Ventures has increased our entrepreneurial ability, especially when it comes to risk-taking. The greatest thing about Future Group, and especially Kishore ji as a boss is that he pushes you to stay an entrepreneur. Very few people really give you the freedom to

make mistakes. There’s a lot of energy within the group to always move forward, innovate and try something new. There really is no harm in trying something out, figuring out quickly that it didn’t work, and of course correct or shut it down and move on. The point is you shouldn’t continue with something that has been a mistake from the very beginning. And, sometimes, you don’t know till you try. As long as you are on track in terms of the larger vision that has been shared, taking a few side paths is actually encouraged. Also, my experience as a professional manager at Madura Garments, before joining Indus League, helped me a lot. Even there, we were given a lot of freedom. In fact, I still feel very deeply connected to Allen Solly and Van Heusen as brands. I’ve created those. So, I’ve experienced what it’s like to be an entrepreneur in a larger set-up before. It also depends on how you view your role as an entrepreneur. Acquisitions can lead to different types of stories for dif-ferent people—you can choose to stay in the business, or take the money and start out again. For example, my husband is one of those serial entrepreneurs who enjoys the process of setting up a business, regard-less of whose money it is. The minute a venture he’s worked on has been set up, reaches a steady stage, and is preparing to move into a mode of operational efficiency and refining operational processes, he sim-

ply moves on. He worked to set up Madura Coats, Indus League and Reliance Trends. In each case, once these businesses reached a stable ground, he moved on. On the other hand, I enjoy a mix of both stages—of set-ting it up initially, and scaling up the busi-ness. Indus League continues to give me a chance to do that. Nearly 20 per cent of my time goes into conceptualising or starting something new, whether it was the Man-chester United launch, or before that, bringing Daniel Hescheter, an upmarket French brand to India. As long as a sub-stantial part of your time goes in creating new things, it can remain exciting as an entrepreneur.

What were some of the thornier issues of integrating?

With any change, there’s always some heartburn, or catch. Honestly, one of the most painful changes was to work more than five days a week. Now, we work two Saturdays a month. That isn’t a pleasant change. But, when you step back, and think, you realise that you are a retail organisation, and your front end anyway works seven days a week, so can you afford to not be there? It’s simple—you have to keep the bigger picture in mind. If you know why a certain change was made, and what intends to be achieved from that change, you’ll find a way to make it work.

agarwal’s quick tips on making a similar switch easy for entrepreneurs:

1. “Marry” well: an arrangement like this can work only if there is a huge level of trust, and a one-to-one personal relationship. Not everything in business must be deteremined by numbers, papers and documents. both sides have to be on the same page as far as the long-term vision is concerned. the short-term might differ but the long-term goal needs to be common.

2. Have an open mind: you have to give some, and take some. it’s not a one-way street.

3. Accept your new reality: there’s no shying away from the fact that you’ve been taken over. accept it. Sometimes, that can be a little tough, especially for entrepreneurs who have come without previous experience in a corporate set-up. in those cases, putting processes in place can sometimes be seen as bureaucratic, and can become a challenge. also, if you’re used to a company driven by a single person’s vision, and a centralised decision-making mechanism, you might find it difficult to work in a larger group where you have to convince others of your ideas, or get convinced about theirs.

Do’s & Don’ts

NoVeMber 2012 | INC. | 41

4 2 | INC. | november 2012

Beyond Vacuums Rodney Brooks, the creator of

the Roomba, is back with a new breakthrough invention:

a robot for businesses.

b y D av i D H . F r e e D m a nphotogRaph By doRon gild

(did we mention cheap?) robot that could revolutionise American manufacturing and change the way you run your company

The powerful, cheversatile,easy toset-up did we

november 2012 | INC. | 4 3

a roBot’s emotIoNs

wo years ago, Scott Eckert, while on vacation in the south of France, gathered his family around his laptop. The month before, he had accepted a job as CEO of a secretive start-up that was developing an industrial robot, and now he was about to see a video of the first demo of the machine.

He and his two children watched silently as the robot, which turned out to be no more than a small, cranelike arm,

shakily grabbed and lifted a plastic disk. The video ended. His six-year-old son broke the silence. “Dad, is that it?” he said. Eck-ert wondered the same.

Everything about the company Eckert would soon be running had been a bit mysterious. When the headhunter contacted him months before, he wouldn’t tell Eckert much except that the com-pany had been founded by famed scientist Rodney Brooks, who, until a few years earlier, had led MIT’s computer-science and artifi-cial-intelligence lab. Brooks, perhaps the most-acclaimed roboti-cist alive, had co-founded iRobot, maker of the hugely successful Roomba vacuuming robot.

Eckert, a former Dell executive who co-founded Motion Computing, a tablet company in Cambridge, Massachusetts, met

Brooks in a hotel lobby. At the meeting, Brooks continued to be sketchy on details, Eckert recalls, but he was enthusiastic. Brooks explained that he wanted to take robotics to the next stage by bringing out a game-changing robot for manufacturing compa-nies. One that, compared with existing industrial robots, would be easier to deploy, more useful, and much, much cheaper—making it affordable even to small companies. Brooks said he was convinced his company could sell tens of thousands of them, even hundreds of thousands. Maybe millions. Brilliant young robotics engineers were already on his team and making great progress.

Eckert checked out Brooks every way he could and heard noth-ing but good things. He called many of his contacts in the manu-facturing world. “They all told me, ‘Hell, yes, we’d love to have a

cheap, easy-to-set-up, capable robot; are you kidding?’ ” Eckert took the job, agreeing to start right after he whisked his family away for a long-planned vacation to France.

Now, having seen the video, he had to wonder: Had he made a mistake in putting his faith in Brooks?

But it turns out Brooks was just getting warmed up. That robot arm was merely the start. Brooks already had the team at his com-pany, Rethink Robotics, hard at work building something much more ambitious. Called Baxter, it is a humanoid robot that has the potential to be everything Brooks was shooting for: a breeze to use, capable of handling any number of basic assembly-line jobs, and ridiculously cheap. Many experts would have said such a robot was a decade or more away.

In fact, Baxter should be available by the time this article appears. But Brooks is the first to admit that the success of this product is no sure thing. For starters, it is at the absolute bleeding edge of one of the most daunting challenges facing scientists and engineers for centuries: how to endow machines with human capabilities. Getting Baxter to work has required innovating on multiple, complex fronts at once and then making it all work together seamlessly.

And even if Baxter works as hoped, there is no guarantee that companies will buy it in big numbers. “No one has ever done anything like this, so there’s no way of knowing what companies

will make of it,” says Brooks. “Getting people to buy them is the one thing that we absolutely have to do. And it’s the one thing that worries me.”

Consider it the risk that goes along with humongous upside. Brooks’s plan for Baxter is so ambitious that it’s almost scary: replacing humans in millions of jobs in the US alone. Baxter can be taken out of the box, set up, trained, and put to work in about one hour. At $22,000 each—less than the price of a minivan—it could easily pay for itself in months, saving a company $30,000 a year or more in labour costs per robot. (This will be a good thing even for the workers who are replaced, Brooks argues, because they will get better jobs—but more on that later.)

That’s just Baxter 1.0. A few years from now, Baxter could take over more complex jobs on manufacturing lines, such as operating

Tasleepon standby

CoNCeNtratINgLearning a task

Neutralready for training

A

4 4 | INC. | november 2012

co

uR

tesy

co

mpa

ny

(7)

machinery. Perhaps one day, it could also make a mark on service industries. Picture Baxter flipping burgers, tending cash registers, sorting files.

And Brooks hints at even more ambitious plans. He is aiming at no less than a revolution in how work gets done, one that would change the economics of labour. “This robot will just keep on improving, and doing more and more,” he says.

meet Baxter in July, at Rethink’s offices in what the city of Bos-ton has taken to calling its Innovation District, a once- and to some extent still-gritty area outside of downtown, on the wrong side of the charmless Fort Point Channel. The site on which the offices are situated happens to be the former location

of the first electrified factory in Boston, once seen as heralding the future of manufacturing. It’s a history hardly lost on the Rethink team. Inside, the offices are a cross between the usual high-tech swanky blandness and a busy workshop. The cubicles are punctu-ated with workbenches and shelving that are littered with all sorts of random-seeming odds and ends, such as cereal boxes and automo-tive parts. (These are items Baxter uses to practice on.) Also perched on some of the surfaces is the occasional humanoid robot or parts thereof.

Baxter is something like a cartoonist’s vision of what the top half of a friendly, uncomplicated, but hard-working

robot would look like. Robots can easily come off as either creepy or goofy, but Baxter strikes a pleasant enough balance between the humanoid and the machine, with a head consisting of a computer screen displaying a line drawing of a face. The particu-lar robot in my demonstration is bolted to a pedestal behind a workbench, which would be a fairly typical arrangement at cus-tomer sites.

In this demo, the idea is that I will teach Baxter to move a ran-dom widget. I’ll grab one of Baxter’s arms, position it over a wid-get, and with a click of a button mounted on the arm, I’ll confirm to Baxter that this is the object I want it to be able to recognise and pick up. Then, Baxter will pick up the widget in the fingerlike grippers at the end of one of its arms, at which point I will guide Baxter’s arm to where I want it to place the widget. After that,

Baxter should be able to do all that on its own, over and over again, as widgets parade by it on a hypothetical conveyor belt, unfazed by variation in how the widgets are positioned. Baxter should be able to stick the widget in a box, put it in an electrical tester and sort it into Pass and Fail piles, drive a screw into it—whatever’s needed, as long as it’s a fairly simple task.

Brooks has made it clear to me that this demo is premature—it’s one of the first being given to the outside world, and Baxter is still undergoing intense tweaking. And sure enough, Baxter misbe-haves at the start, having trouble with every step, finally becoming sullen, or so it feels to me, though technically it has merely become nonresponsive. An employee patiently reboots Baxter, as one would a balky laptop or cell phone. The second time around, everything goes pretty much as it’s supposed to. Baxter works.

But not like other machines. In particular, Baxter doesn’t—and wasn’t intended to—move in the precise, sharp, angular way nor-mally associated with robots (and with those tiresome people who imitate them). Instead, it seems a bit uncertain, taking its time and struggling a bit to get it right. As it does so, its screen-based face goes through a range of expressions, finally settling into one of contentment when it hits its groove. For an industrial robot, Baxter seems, well, laid back.

Brooks, on the other hand, hovers near the demo like an anx-ious parent. He is clearly trying to resist intervening but occasion-

ally fails and jumps in to run things. He has participated in demos of various robots hundreds of times over the years, but he con-fesses he is nervous about this one. “We still have a number of bugs to work out,” he says with a shrug. It’s about two months before the official release date.

Later that day, Brooks regains his normal, affably edgy composure while he traces out his path from academic superstardom to high-pro-file entrepreneurship. When he stepped down from running the artifi-cial-intelligence lab at MIT in 2007, he recalls, people were so shocked they asked him if he had a serious illness. What he had, in fact, was an urge to get back to the hands-on robotics tinkering of his early career. Brooks began toying with ideas for making robots more useful.

That, in a sense, is what all roboticists do. But Brooks has always had a more down-to-earth idea of what useful means. In the mid-

CoNfusedHaving trouble finding an object or otherwise completing a task

foCusedWorking away without a problem

sadGiven up trying to complete a task; there’s a problem

surprIsedA human has approached

i

rIse of the roBots

november 2012 | INC. | 4 5

rIse of the roBots

1980s, when robotics was struggling to come up with complex software programs to mimic human intelligence, Brooks electri-fied the field with simple, insectlike crawling robots created with bare-bones programming. His machines excelled at real-world tasks, like getting around an office without bumping into things, and were relatively inexpensive.

Brooks became a clear leader in the field and drew all sorts of funding for experimental robots. But what he really wanted to do was see robots become integrated into everyday life, and that meant starting a business. His first was aimed at producing advanced toy robots that would cost just $100, leading him to tour Asian factories to understand the art of making things cheaply. The company he co-founded in 1990, iRobot, eventually ended up abandoning toys for robotic vacuum cleaners, scoring big with the Roomba’s release in 2002. “When I started my career, there were a few hundred mobile robots in the world,” he says. “iRobot made more than a million robots last year.” The company’s annual sales now top $465 million.

Brooks left iRobot in 2008, but the success gave him the first and perhaps most important of a series of what he calls maxims that guide him at Rethink, and with which he plies his employees in lieu of actually telling them what to do. (“I don’t manage,” he says. “I have no reports, and I don’t want any.”) That first maxim: Get something out that’s so laden with breakthrough capabilities at such a low price that the competition will be crushed before it exists. “There are competitors to Roomba, but even today, they don’t work as well as our first one did, and they cost more,” he says.

Vacuuming proved a sweet spot in the previously nonexistent mass-robotics market, and Brooks was determined to find another. Having succeeded in the home, he turned his attention to robots for businesses. Though there wasn’t much need for robots in offices, factories were another matter. Industrial robots have long been handling heavy-duty chores such as welding and spray paint-ing for big automotive companies, but those can cost $100,000 or

more. And then the real expense kicks in: They have to be carefully set up and programmed by experts to rapidly perform actions to precisions of one-hundredth of an inch, over and over again, with-out any variation. Assembly lines have to be built around them. And they have to be operated in caged areas away from workers to avoid crushing someone’s skull in the blink of an eye.

For the most part, these robots are affordable only for the largest heavy-industry companies. What, wondered Brooks, would a robot for the rest of the manufacturing world look like and do? He pored over labor statistics on manufacturing. The new sweet spot, he decided, was materials handling, which basi-cally means picking things up and putting them down, usually on assembly lines. A lot of those jobs could be handled by a robot with a dexterous arm. Narrowing things down by difficulty of task, he came up with a list of jobs that he was sure he could build a robot to handle. It was a list of jobs performed by 800,000 people in the US.

If Brooks could develop a $22,000 machine capable of grabbing parts and shoving them somewhere usefully, he was looking at a $16 billion market. By the summer of 2008, Brooks was raising money for his new robotics company.

etting to Baxter was a journey. First, there was that lone, cranelike arm, an appealingly simple approach, and one that followed another of Brooks’s maxims: Robots should not be humanoid just for the sake of

making them look like humans. Doing so creates an aura of “inau-thenticity” about the machine, he says, much like putting racing stripes on a Toyota Yaris. But the crane arm didn’t seem very excit-ing. Besides, there were already companies making $30,000-and-up robotic arms that could be programmed to carry out simple tasks, and Brooks wasn’t gunning for mere incremental improve-ment. “People work better with two arms,” he says. “Why wouldn’t a robot?” (He briefly considered three arms before rejecting it as too much of a good thing.)

By the NumBersbaxter is cheaper and more quickly deployed than are traditional robots. In a decade,

it might be able to tackle tens of millions of manufacturing and service jobs.

How much it costsBaxter:

$22,000, all in

typICal INdustrIal roBot:

$100,000 plus another

$200,000or more in programming costs

How long it takes to get runningBaxter:

1 hour to unpack and set up, plus five minutes to train on the first job

typICal INdustrIal roBot:

months

How many jobs baxter could potentially replace in the U.S.

2013 2018 2023

30 million

11million

800,000

G

4 6 | INC. | november 2012

Having two arms meant mounting them on a torsolike frame. The middle of that frame seemed a natural place to mount the screen that would facilitate interacting with the robot, but the team found that the moving arms often blocked the view of the screen. So the screen was mounted on top of the frame, making it look like a head. Uh-oh; with two arms, a torso, and a head, Baxter was suddenly looking distinctly humanoid. “But it was authentic,” insists Brooks. “Every feature had a purpose.”

Those features eventually came to include a face, or part of one. Baxter is designed to work right alongside ordinary employees. That meant there had to be a way for Baxter to let those standing near it know what it was up to, lest they become startled or get in the way. Originally, that chore was left to a series of lights on top of Baxter’s “head.” Though the lights are still there, they were deemed insufficient, so Baxter got cartoon eyes on its screen. Its eyes “look” in particular directions to indi-cate where an arm is about to reach. A calm, focused expression indicates Baxter is successfully working away; the eyes open wide in surprise when someone suddenly approaches; and they are canted in confusion when Baxter is not able to complete a task.

From the beginning, the technical challenges were fierce. Robotics labs today are filled with million-dollar, state-of-the-art robots that struggle with mundane chores, such as gripping a cup of coffee or opening a door, even after months of programming. Baxter, on the other hand, would have to perform any of a range of tasks with whatever object was placed in front of it, and it would have to learn one of those tasks in just minutes. Every aspect of its target capabilities—recognising objects, gripping them, manipulating them, being easily trainable, not being dan-gerous to proximate humans—was in its own right a massively complex goal that was pushing the envelope of robotics. To work on them all at once and tie them all together would have been a frighteningly daunting challenge if Baxter was planned as a long-term project and a half-million-dollar machine. To do it in a few years for $22,000 seemed at times just plain impossible.

That’s where Brooks’s nonmanaging management style came in. Development-team members are quick to cite his role in keeping everyone moving forward in the face of an endless stream of technical impasses and sagging hope. He dispensed

encouragement, ideas, and reminders of the vision. “He’s pretty selective about when to get involved,” says Ben Berkowitz, one of the lead engineers. “But when he tells us something, it’s usually important, and it’s great.”

Robotics engineers typically make something work any way they can and then worry later about how much it all costs. But from the beginning, Brooks forced the team to focus on low-cost solu-tions. He hired a vice president of manufacturing before there was even a basic design sketch. “We were able to put a ton of effort early on into making this buildable,” says Jim Daly, the fellow who took the job.

With Daly’s input, the team used a lot of plastic, off-the-shelf parts for the components. Brooks was determined to outsource all manufacturing. Rethink wouldn’t make a thing. Instead, different companies would make pieces of Baxter—the arms here, the electronic controls there, and so forth, with final assembly handled by yet another company. The result, says Daly, is that Baxter will be profitable at fairly low volume. He won’t say how low, but he notes that volumes won’t have to get to nearly the levels the Roomba required to pay off. “We don’t need to sell mil-lions,” he says. “If we can crank up volume just a bit, we’ll be good. Baxter is no loss leader.”

Brooks was as uncompromising on safety as he was on cost. One errant swipe of a robotic arm at a customer site as a flimsy human happened to be walking by could bury the venture and set robotics back a decade. Baxter fairly bristles with features to prevent that sort of inadvertent aggression. Besides the facial expressions that serve as warnings, Baxter features several cam-eras and sonar sensors that monitor the surrounding area, so it “knows” when someone is nearby and freezes when there’s a risk of impact. If someone manages to shove a body part in front of Baxter’s moving arm too quickly to give the robot time to react, the pressure of the resulting impact on the robot’s yielding, plas-tic “skin” triggers an instant halt to all motion, with the result that Baxter can’t deliver much more than a love tap. (The company has a video of Eckert being struck repeatedly on the head by Bax-ter to no ill effect.)

The most ambitious element of Brooks’s scheme was designing Baxter to be trained the way humans learn things—by having some-one show them how to do it—instead of having to be programmed by experts. At first, the team came up with a design that would let someone train Baxter on a new task by guiding it via joystick. But Brooks rejected the approach as nonintuitive, demanding instead that Baxter’s arms be directly guidable by hand, the way a parent might help a child master the use of a knife and fork. Building guid-able arms turns out to be a lot harder than it sounds, requiring the design of a “zero-gravity” system that allows Baxter’s arm to move freely when being pushed around but prevents the arm from flop-ping under the pull of gravity. The team was skeptical of the idea up until the moment it finally worked. “Once they tried it, they instantly got why it was so much better than a joystick,” says Brooks.

robotics engineers typically make something work any way they can and then worry later about how much it all costs. but from the beginning, brooks forced the team to focus on low-cost solutions.

rIse of the roBots

november 2012 | INC. | 47

After being trained on a task, Baxter goes about it much like a human would. That’s because Baxter isn’t designed to manoeuvre its grippers in the exact same way every time, as a conventional robot would. Rather, it spots the object and then “feels” its way through gripping and manoeuvring it, doing so a little differently each time. If asked to stick a part into a tight-fitting box, for example, Baxter carefully wiggles it in, sensing the part slipping into place—which is how you would do it, too. This ability to use vision and touch sensing to improvise its way to successful task completion makes Baxter highly adaptable to the ordinary, human-oriented work conditions found in small-company assembly lines. The idea is that Baxter can be wheeled right in to do what a per-son was doing, rather than needing a work environment to be built around it, as with conventional industrial robots.

The team is still struggling frantically to smooth out the sorts of bugs and rough edges in Baxter that appeared early in my demo. But all in all, the robot seems to be coming together, much the way Brooks envisioned it. Which merely leaves the nagging question of whether companies will actually buy a product that may be perceived by some as alien and baffling. “After six months of production, we will have doubled the world’s population of humanoid robots,” he says. “Is it too big a step for the market?”

hen approached by Rethink, potential buyers all ask the same question: What’s the robot’s preci-sion and repeatability? That’s how conventional industrial robots are measured. “It’s the wrong

question for Baxter,” says Brooks. “They might as well be asking how high it hops.”

Clearly, Rethink has its work cut out for it when it comes to convincing manufacturing companies that Baxter’s imprecise, improvisational approach is an asset, not a handicap. To make things trickier, the company will be trying to sell to the small- and midsize-business market, one that is largely unfamiliar with robots. “Our main target will be the 107,000 manufacturing com-panies with between 10 and 500 production employees,” says Eck-ert. “But we’ll also be selling to the 160,000 manufacturing companies that have fewer than 10 employees.”

But the pitch has its appeal. Because conventional robots are so difficult to program and set up, they can’t be cost effective unless they remain in the exact same place doing the exact same thing for years. Baxter, in contrast, could work much like a temp. With 10 minutes of training from any employee, it can get to work on a job and after a few hours switch to another one. It could relieve different workers at different times, and roll with changes in the assembly line.

rIse of the roBots

how to traIN a roBot, IN seVeN easy stepsbaxter can be trained by anyone, simply by guiding one or both of its arms and following menu prompts on the monitor that serves as baxter’s “head.” Screen selections are made by using a sort of mouse built into

baxter’s arm. Here’s how to train baxter to pick up widgets and stuff them into boxes:

1. Select training mode.

2. Grab one of baxter’s arms and swing its “hand” over the widget, and click to indicate that this is the object to be grabbed.

3. A camera in baxter’s hand will

center on the widget and display the image

on the screen; confirm with a click that this is the right

sort of object.

4. baxter will grab the object. Swing the arm over the four corners of the box, and click to indicate this is the destination for the widget.

5. Click to confirm that baxter is to insert the widget into the box.

6. baxter will put the object into the box, using sensors to guide the widget in. Click to confirm that this is the entire task.

7. run the conveyor. As long as widgets appear in roughly the same area, baxter will identify, grab, and box them. Its facial expressions will indicate if it is struggling or working smoothly.

W

4 8 | INC. | november 2012 ILLuSTrATIonS by jASon Lee

That’s why Chris Budnick, who has had a chance to try Baxter out, wants to buy one. Bud-nick is president of Vanguard Plastics in Southing-ton, Connecticut, a 30-person injection-molding firm that makes parts on contract for medical-equipment makers, automotive companies, and other manufacturers. Vanguard already uses more-conventional robot arms to yank parts out of its molds. The arms are well suited to that job, he says, because it takes precision, it doesn’t vary, and the arms’ high speed keeps the expensive molding machines operating at peak output. But then he has to pay people to stuff the parts into bags and boxes for shipping—using robot arms would require professional reprogramming for each new part or package. Rethink, looking for user feedback, let Vanguard put Baxter to work earlier this year. “We had him picking and packing in five minutes,” says Budnick. “We think it would pay for itself in a year. We’d have it working three shifts and packing two different lines at once, one with each arm. The sky is the limit with this thing.”

It’s not just that Baxter could save labour costs by replacing a human employee. It could also open up opportunities to reimag-ine the manufacturing process. Baxter won’t object to working in less-populous locations, where it’s cheap to build but hard to find labour. It won’t get sick from working in extreme heat or cold, or from exposure to toxic substances or poor air quality. It will uncomplainingly work graveyard shifts, weekends, and holidays. It won’t get repetitive-stress injuries from repeating the same motion 10,000 times a day.

Working against Rethink will be the inevitable concern that the company is facilitating the outsourcing of jobs to robots. Automation has been replacing people in the workplace for two centuries, of course, but there’s something particularly unsettling about a humanoid machine being dropped in as a one-to-one substitute for a flesh-and-blood employee.

The last thing we should be worrying about is protecting the human’s place on the assembly line, counters Brooks, who has visited numerous factories in many countries. “These are mindless, repeti-tive jobs that turn people into robots,” he says. Brooks adds that many factories are increasingly having trouble finding people willing to fill them, especially in late-night and weekend shifts. He reasons that if robots take those jobs, the cost savings and productivity boost will create growth, opening up positions more interesting than assembly-line work. As a result, says Brooks, employees replaced by robots won’t be let go; they will be promoted. “The PC didn’t replace people in offices,” he says. “It made them more productive.”

Let’s hope Brooks is right, because if Baxter’s capabilities con-tinue to improve as envisioned, it could take away tens of millions of jobs in the manufacturing and service industries. The resulting productivity boom could lead to an economic renaissance—if it doesn’t merely lead to vast layoffs.

But first, Baxter has to work, and well enough to get good reviews from early customers. So, Rethink is being careful about who gets the first models. “We want them to go to companies that will put them in the sorts of applications we know they can succeed at,” says Brooks—tasks such as picking up an object from a conveyor and putting it into a bin.

Given that Amazon founder and warehouse-automation pio-neer Jeff Bezos was the first to invest in Rethink, there’s probably more to Baxter’s future than picking things up and putting them down. In particular, says Brooks, Baxter’s abilities could grow quickly after programmers get their hands on its software innards. And they will soon enough, because Rethink will encourage outside developers to take Baxter in new directions. Baxter may well become the iPhone of robots, a popular plat-form backed by an array of third-party apps. “At some point, we expect one of our manufacturing partners will find the right application for Baxter,” says Daly, “so he can help build himself.”

Still, Brooks expects many—maybe most—businesses to ini-tially dismiss the idea that they are ready for robots. He says he got much the same reaction when he started talking about robot vacuum cleaners. Brooks took to asking the skeptics if they could imagine robots vacuuming homes in 50 years. “They always said they could,” he says. “At which point I told them that that meant we could agree that sometime between now and 50 years from now, robot vacuum cleaners would be coming into homes. All we were doing is arguing about where along that timeline the change would actually happen.”

For Roomba, it turned out to be a couple of years. Now, the clock has started ticking on Baxter. “I think everyone’s going to be surprised,” says Brooks.

David H. Freedman is a contributing editor for Inc. He wrote about commercial real estate start-up 42Floors for the May issue.

The last thing we should be worrying about is protecting the human’s place on the assembly line, argues brooks. “These are mindless, repetitive jobs that turn people into robots,” he says.

rIse of the roBots

november 2012 | INC. | 49

A secure job at AIIMS, India’s leading hospital, and being a pioneer surgeon was not enough for Dr Mahipal Sachdev. He wanted to be more than a doctor. So, although his family advised him not to, Sachdev listened to his inner voice and left the safe environment of AIIMS to join the insecure world of entrepreneur-ship in 1996. Since then, he has grown Centre for Sight into the world’s second largest ophthalmology chain, projecting a turnover of ̀ 125 crore this year.

Since I was a child, I’ve always tried to do more than what’s required of me. In school, I was not only a bright student but also did well in sports and extra-curricular activities. After completing my schooling from Mod-ern School, I studied medicine at All India Institute of Medical Science (AIIMS). I loved the subject of medicine, and really threw myself into it. Fortunately, I kept going up the rungs of an academic career, and became one of AIIMS’s youngest associate professors in 1986.

While pursuing my MBBS, I had developed a keen interest in surgery. I also wanted to pursue a branch of medicine which wasn’t a competitive battlefield. And, I was eager to jump right in. I didn’t want to have to further

super-specialise. Ophthalmology caught my eye. It seemed a good fit for my preferences. Although it was a niche segment, say when compared to cardiology, a lot of develop-ment was happening around here at that time, especially in laser technology. So, I eventually specialised in cataract surgery, contact lens, refractive surgery (laser vision correction) and cornea transplantations.

After teaching at AIIMS for three years, I went to the US in 1989 for a year for a fellow-ship from Georgetown University, Washing-ton and learnt phacoemulsification. This was cutting-edge technology for removing cata-ract. In spite of its many advantages of being a stitchless surgery, that is less invasive and has a reduced recovery period, it was prac-

AS told to SonAl KhetArpAl / Photographs by Subhojit Paul

A Janusian Doctor-Entrepreneur

Dr Mahipal Sachdev Centre for Sight

HOW I DID IT

5 0 | InC. | novEMbEr 2012

Eyeing Profits A passionate

opthalmologist, Dr Mahipal Sachdev has built a

successful business to ease eye surgeries using the

cutting-edge technology of phacoemulsification.

HOW I DID IT

tised by only three or four doctors in India. It was considered a very risky, high-speed operation. It required intense coordination on the part of the surgeon because any slight error could cause potential damage to the eye. But, because of its numerous advantages, I latched on to this technique.

not only did I learn it, I travelled exten-sively throughout India providing demon-strations and training doctors in this new skill I had acquired. This technique became an instant success with patients too. My experiences with this defined my career in those times. In fact, I also authored Phaco-emulsification: A Practical Guide, the first book on phaco by an Indian doctor in 1996. It quickly became the Bible for doc-tors who wanted to learn this surgery.

though I had established myself as a suc-cessful phaco surgeon, I was driven by set-ting up an institution that would be the last word in ophthalmology. Being part of a system of an institution, like AIIMS, does not give one much leeway to experiment. In 1996, after teaching there for nine years, I ventured into private practice against my family and friends’ advice. I also got a part-time consultancy job at Indraprastha Apollo Hospital.

I took a small room on rent at Cure Clinic in south Delhi to set up the first Centre for Sight clinic. It was a tough move. I remem-ber even today how disoriented I felt the first few days. Doctors aren’t taught the “b” of business administration. But, as a private practitioner, I not only had to perform an operation, but ensure all administrative issues and logistics were in place. The only reason I could retain my calm was the knowledge that I have the required skill set to be a good ophthalmologist. I was keen on the risk, for it proved to be worth it.

I also made a project report detailing the investment required, and the surgeries I aimed to do. I had projected to perform 30 surgeries a month by the end of my second year of practice, but I could accomplish that in the very first month itself. This furthered my belief that I could build this clinic into

an institution. You have to believe what you are doing is right for you.

Consciously, I chose not to associate Cen-tre for Sight with my name. If the clinic is christened after the doctor’s name, it means his or her ego is bigger than the practice. It also creates barriers for other doctors to join in. “Depersonalising” the clinic worked in my favour. Early on, I could get four doctors from AIIMS who were super specialists in different parts of the eye to join me.

As an entrepreneur, building a strong human resource team and attracting the best talent is a critical role to play. It’s not enough to just employ doctors and give them higher salaries. We equip and train them to grow

academically, and intellectually as well. This approach of widening their horizons and giving them more opportunities has enabled us to attract the best doctors.

For example, at Centre for Sight, even junior doctors can use all the expensive equipments in our clinic. Many govern-ment and other private hospitals prohibit this. But, when you want to grow, it’s very important to be broad-minded and to del-egate responsibility. You can’t put in con-trolled access situations. The same belief extends to our patients. Frequently, we refer our patients to other doctors if they are better equipped to help them. Medicine isn’t about arrogance. It’s not humanly pos-sible for one person to be able to do every-thing on his or her own.

“Just being good at your job isn’t enough. It takes immense hard work, compassion and precision to build a thriving enterprise.”

Curing Millions With 44 centres across India, Dr Sachdev is now planning to build one of the largest composite opthalmology centres in the north.

5 2 | InC. | novEMbEr 2012

HOW I DID IT

advts.indd 56 12/22/2009 3:02:47 PM

It takes immense hard work, efficiency, compassion and precision to build a thriv-ing enterprise. When you work in health, your responsibilities are manifold. Just being good at your job isn’t enough. It’s crucial to give patients honest advice and deliver promised results to win a patient’s trust. I firmly believe we have managed a CAGR of 45 per cent for the last 15 years which would not be possible without offer-ing the best services and treatment.

the biggest milestone for Centre of Sight was to open its branch at Safdarjung Enclave in south Delhi in 2004. It was the largest private facility in ophthalmology at that time and it turned around things for us. People started recognising our brand.

In 2008, we decided to spread our wings and establish a centre every ten miles so patients don’t have to travel far to reach

us. We ensured all our branches main-tained the same standard for quality and technology. Two years later, we were able to raise our first round of funding of `50 crore by Matrix Partners. Having exhausted most of that on our expansion, we are now working on raising a second round for around $30 million. The ability to attract these investments gives us a lot of confidence.

today, we are the second-largest ophthalmology chain in the world with around 44 centres across India—right from Jammu in the north to Rajahmundry, Andhra Pradesh in the south. Multiple centres make sense economically, reducing our break-evens as we set up more branches. We also have the largest lasik network with 23 lasik machines across Asia, Australia and the Middle East.

We have recently acquired 60,000 sq ft of land in Dwarka, Delhi to set up a compos-ite ophthalmology facility, which will have teaching, research and an eye hospital, all under one roof. It will be the largest such facility in north India. Over the next three years, we intend to set up ten new centres every year. Though we want to become a truly pan-India player, there is a lot of opportunity to impact conditions overseas as well. Large parts of Africa, Nepal, Sri Lanka and Bangladesh are still under-served by ophthalmology.

Acknowledgement by society and recog-nition by peers is the reward I cherish the most. Getting the Padma Shri award in 2007 was the highest accolade bestowed on me. Such appreciation from society and colleagues motivates me to work harder, for the journey is long.

advts.indd 58 3/23/2010 2:32:15 PM

by Ira SwaStI PhotograPh by Photos.com

caSe Study

Chi needed to bring in GenY diners. Could its Twitter campaign serve up enough excitement to do just that?

Strategy Tactics. Trends. Best Practices.

november 2012 | INc. | 5 5

strategy

Much like his restaurant’s signature “chizzas” or pizzas with an Asian twist, Sohrab Sitaram managed to rustle up loyalty amongst families for Chi Kitchen and Bar, his Delhi-based pan-Asian res-taurant. But he knew to survive in a competitive, cluttered market like an Oriental cuisine restaurant in Delhi, he needed to carve out a slice of India’s huge GenY population. This demographic profile ate out more often and was an important ingredient for growing his business. But with a multitude of eating options available, and the subsequent advertising overload, Sitaram knew grabbing and holding the internet generation’s attention would be a challenge. Could Sitaram craft a smart social media campaign to stir up the pot? Could his company create brand awareness in an undifferen-tiated market and attract the youth at the same time?

1the backStory

Tempting GenY operating in the crowded pan-asian food segment, chi required a campaign that could differentiate it enough from others to attract a significantly higher number of young customers to the restaurant. “earlier, our target segment was families, and that worked well for us, but considering our growth plans for the next three years, we wanted to establish a connect with the youth,” explains Sitaram. what better place to target geny than social media where a lot of their conversations take place? Now Sita-ram’s kitchens might be able to whip up del-icacies, but he knew his understanding of social media (for he believed there was more to it than just updating your restau-rant’s Facebook and twitter page) needed to be garnished. So, instead of attempting it in-house, Sitaram enlisted brandlogist, a branding consultancy to design and imple-ment a campaign for chi.

2 the probleM

3 the Next StepS

The restaurateurIn 2001, sohrab sitaram opened no escape, his first restaurant bar in Delhi’s connaught Place, after five years of setting up and man-aging restaurants for taj hotel properties across the country. “I had learnt enough about restaurants in those years to know I could start a couple of mine soon,” says the Institute of hotel management, aurangabad graduate. true to his word, in the next few years, he set up a lounge bar, a seafood lounge and a chain of Italian restaurants, all of which did quite well. Within a few years, he sold his stake in these ventures to start up again, this time to create restaurant “brands”. through 2002 to 2006, he set up three more restaurants, including chi Kitchen and bar, a casual-style pan-asian restaurant. Designed to look like a dining room, with tables placed close to an open kitchen, chi (which means positive energy), offers a wide range of asian delights. today, the restaurant has two company-owned out-lets in Delhi with total sales of just under `5 crore a year. Its future plans are ambitious—to expand to 30 outlets in the next three years. to get there, understands his growth strategy must focus on the largest segment of India’s population.

Spreading positive energy In February 2012, brandlogist launched a twitter campaign called #spreadingchi. taking the core value of the brand—spreading positive energy or happiness—the team identified potential customers based in Delhi on twitter who were tweeting about being “hungry”, “angry”, “sad”or “bored” and replied to them with funny quotes, videos, photos or invited them to dine at chi. once the conversa-tions were initiated, they tried to find out what dishes on the chi menu were peo-ple’s favourites. and in the next leg of the campaign, 30-80 per cent discounts on these were offered. but not just that, the team also conversed with food connois-seurs and popular bloggers (who had more than 3,000 twitter followers) to keep the conversations around chi alive.

5 6 | INc. | november 2012

strategy

the expertS weIgh IN

try the tweet-to-order ModelI liked the campaign designed by Brandlo-gist. A 96 per cent response rate is really high especially if people didn’t know about Chi earlier. At the same time, I am not sure why the duration of the campaign was limited to that period. The real opportunity is to keep it alive to transform the positioning of the brand among the youth. If they home deliver, they could also try taking orders from customers via Twitter. Apart from delivering conve-nience to its customers, this will generate buzz for the brand every time a customer orders on Twitter. Pradeep Chopra | CEO And CO-fOundEr Digital Vidya, Delhi

go to the Next level The campaign is a great idea. The hashtag generates curiosity, has a built-in intent, and carries the brand name. The thought of engaging with people on Twitter in the context of “hungry”, “angry” and “sad” was an interesting way to engage. However, sending dis-count coupons in such early days of the campaign makes it seem more like a direct marketing campaign. Maybe home-delivering a pack of momos to the person who is hungry would have taken this campaign to the next level and gen-erated some serious social buzz. Hareesh Tibrewala | JOInT CEO Social Wavelength, Mumbai

reFINe locatIoN-baSed targetINgThe idea was smart and connected to a younger audience. However, location based services have their limitations on social platforms like these since the probability of a potential consumer being in the proximity of a particular restaurant is quite low. A mobile app like foursquare that allows people to tag their location via their mobile phone is yet to gain pop-ularity in India, but could be a good way to know where your next potential cus-tomers are, and send them special offers based on specific meals and time of the day, when they are in close proximity.deepak Goel | fOundEr Drizzlin Media, Mumbai

4Grabbing attention the #spreadingchi campaign went on for 10 days. of the almost 400 tweeple the team had managed to engage in conversation, about 96 per cent responded with happier tweets with their day made, thus creating a positive buzz around the brand. “but several of these 400 people had more than 3,000 fol-lowers each, which signifies that the cam-paign reached a much larger potential customer base in just 10 days,” explains saurabh Parmar, ceo and founder, brandlo-gist. chi is a restaurant with a very loyal fan following, he adds, and what the campaign did is grab attention of many new prospective customers who’d probably never heard of the restaurant. In fact, sitaram reports a recent influx of school kids celebrating birthdays in his restaurant and an almost 30 per cent increase in the number of geny customers since the campaign’s launch in February.

the aFterMath

Social media is the flavour for the future too sitaram says the campaign achieved what it had sought out to do—differen-tiate chi as a unique brand in an other-wise undifferentiated market. more importantly, it demystified the social media buzz for him. “this campaign was an experiment for us to see whether social media works as a mar-keting tool or whether it’s just a fad,” he says. With the medium’s wide reach, the results have been more than encouraging.“the restaurant business is a word of mouth business and with this medium, you are in a position to chat with everybody. you know what is being talked about your product every-day. traditionally, you come to know of this through comment cards which normally people don’t fill but on social media, people are not hesitant to write, and that helps us identify the problems faster and business decisions take less time,” he says.

5 the takeaway

november 2012 | INc. | 5 7

strategy

It was an idea born of a cold New England winter and a few beers among co-workers at Dimagi, a Cambridge, Massachusetts–based company that develops mobile apps designed to improve health care in developing countries. Next winter, why not move the whole company someplace warmer? Danny Roberts, a software engineer who had spent part of his childhood in Brazil, recommended it as a destination, and the idea started to gain traction.

It wasn’t such a crazy notion. The company had just 15 employees in its home office (another 14 were working elsewhere, including company offices in India and South Africa). And given that the company has projects in 25 countries, its workers—mostly program-mers—were used to working remotely, con-necting via e-mail and Skype, and saving their work to a cloud server. “All we really need are our laptops and a power supply,” says Dimagi’s chief technology officer, Cory Zue. What’s more, Dimagi’s workforce consists mostly of twentysomethings, so leaving spouses and families behind wasn’t a concern for most. Still, although it made sense to the employees, clearing it with the boss was another matter.

Roberts pleaded the case to Dimagi’s CEO, Jonathan Jackson. An informal planning committee had already worked out several technical details of the proposed work-cation. The most important detail—a place to stay and work—was settled later, when Roberts’s grandmother offered her apartment in São Paulo while she was away on vacation. A nearby hostel would provide additional beds.

“By the time the plan got to me, it was already pretty big,” says Jackson. “The employees were driving this, and I wanted to support them. From a business-development perspective, getting a better understanding of South America and scouting potential partners there made sense. But I wanted people to know that this wasn’t just a way to party down in Brazil. They needed to be able to communicate with the team at home and remote clients as well.” Given that there was only a one-hour time difference between Boston and São Paulo, and after a successful Internet speed test was performed by Roberts’s

grandmother, Jackson was reassured that long-distance collaboration was logistically feasible. He also trusted that his young team was mature enough to stay out of trouble abroad.

Even though everyone at the company was invited, one of Jackson’s main concerns was that those who couldn’t make the trip might feel left out. “I didn’t want people here to feel that the people in Brazil were wasting time,” he says. Because not everyone could go, Jackson insisted that employees who wanted to go would pay on their own way. “Nobody argued with that at all,” says Zue.

Team members deployed in two waves starting in late January 2012. Almost everyone made it for at least a week, with a core group staying on for a full six weeks. At the peak, 10 people were working out of the São Paulo apartment. The team gathered lap-tops around the kitchen table, sprawled on a couch, or vied for a prized spot on the small deck. By and large, the close quarters improved communication among co-workers, and bickering was rare. “There was a lot more casual asking questions across the table,” says Zue. “And we tended to work later in the day than we would at home, since we were having dinner together almost every night.” It also helped that there were no major technical glitches. “Our Internet service in São Paulo was actually better than we had in Cambridge at the time,” says Zue.

Managingway out of the officeOne CEO’s decision to let his employees pack up and move to Brazil for six weeks

No Shirt, No Shoes, No problems Despite the relaxed dress code,

productivity remained high for the Dimagi employees who left

cambridge to work in são Paulo.

5 8 | INc. | november 2012

Ph

OTO

S.C

OM

strategy

After hours, the team frequented a local bar and made good use of vacation days for long weekends spent sightseeing in Rio. The staff celebrated Carnival in a small colonial town and hung out at a beach house on the island of Ilhabela. Though there were concerns about hav-ing half the company go offline all at once, it was never an issue. “If anything, we were much better about communicat-ing when we were going to be on- and offline,” says Carter Powers, Dimagi’s chief operations officer.

When Jackson flew in for a week, he was impressed. “We’d done Skype chats, so I knew they were being productive, but the second I saw them, it was clear they had a really cool level of bonding,” he says. “There was a ton of great energy. People really wanted to prove that the idea of an away month was feasible, and they were very productive.”

Those who couldn’t go lived vicariously via videoconference with colleagues who seemed to be wearing less clothing with each passing week. For Dan Myung, 32, a senior engineer with a then-pregnant wife and a major project set to deploy during the São Paulo trip, get-ting away wasn’t viable, but he holds no grudge against his freewheel-ing co-workers. “I’m one of the older guys in the company, and I feel less pressure to have my social life and work life be related. They put the most hilarious stuff that happened on YouTube, anyway.”

For both employees and manage-ment, the trip has had enduring bene-fits. “A lot of that friendship and energy is still there,” says Jackson. “People are definitely walking tall, being able to tell their friends that they got to work in Brazil.” And it’s been good for hiring. “We recently gave an offer to a guy who, when he accepted, said, ‘How can I not go to work for a company that goes to

Brazil for no reason?’ For the social-enterprise sector, we offer com-petitive pay, but we’re not in the Google range. Doing this type of thing absolutely helps.”

Jackson says companies contemplating a similar experiment don’t necessarily need a trip to Brazil. Getting the group together anywhere away from the office will probably lead to a great bonding experience. He does suggest letting employees—not management—drive the planning process. And it’s important to recognize that even if you’re the world’s coolest boss, you’re still a boss. “I think they appreciated that I went there for part of it,” says Jackson, “and also that I wasn’t there for all of it.”

Jackson doesn’t expect an away month overseas to happen every year, but he’s open to trying out variations on the theme. In fact, the company recently had a second trip, to a place closer to home but exotic in its own way—the New Jer-sey shore. —Adam Bluestein

“ We recently gave an offer to a guy who, when he accepted, said, ‘how can I not go to work for a company that goes to Brazil for no reason?’”

strategy

exposure to a group of entrepreneurs changed the way you had long thought about strategy. tell me about that.For a long time, I had been teaching strategy, mostly to managers in large corporations, as a matter of frameworks and analysis. Then I started working with entrepreneurs. They talked, sometimes very emotionally, about hard decisions they had faced about whether to stay the course or try to reinvent themselves. And I realized, first of all, that the way we think about strategy has become too mechanis-tic. And second, I realized how responsible these people felt for their strategies because they felt responsible to their companies and the people working for them. So I thought we should shift our emphasis from the strategy to the leader responsible for that strategy—the strategist.

what is the strategist’s job?The strategist’s job is to determine what the

company’s identity will be, why it will matter, and to whom. Just saying why you are differ-ent isn’t enough if you’re not different in a way that matters to a customer. Think of the distinction Peter Drucker draws between doing things right and doing the right thing. Strategy is about doing the right thing. Here is an exercise. Take a piece of paper and write down the purpose of your business. Then describe what the world is like with you and what it would be like without you, and see if there’s a meaningful difference.

you’ve asked a lot of entrepreneurs what makes their companies different. what are some bad answers you’ve received?“We’re a one-stop shop.” Usually the leader thinks that’s more important than the cus-tomers. So I say, OK, if what you have rela-tive to competitors is that you’ve put these things together, why is that important to the customer, and how much are they willing to pay for that? Another is something like,

“We’re the largest independent wholesaler in the Midwest.” Well, who cares? A lot of peo-ple have points of difference. But they’re not points of difference that matter.

what’s a good answer?Say someone who grows pineapples can show that the number of days from the field to the store is fewer than his competitors’. Pineapples are a perishable good, so that really matters. The customer will come to him instead of the other guy. Because he’s connecting the customer’s needs with his offerings.

what are ceos spending a lot of time on at the expense of strategy?Leadership has become all about people and culture and these soft things. Yes, it’s important to get buy-in, but buy-in to what, exactly? People say, “Which is more important: formulation of strat-egy or execution?” That’s a stupid ques-tion. What’s the point of having a half-baked strategy executed well?

but a lot of ceos pin their successes on their people, not their strategies. I hate it in these annual reports where they just say, “It’s our people.” That’s lazy think-ing. Why do those people want to work for you, and why are they more effective

Leadershipthe beating heart of the enterpriseIt’s the strategic plan, stupid. have you reconsidered yours lately?

Leading people is exciting and inspiring. Formulating strategy? Not so much. Cynthia Montgomery, professor of busi-ness administration at Harvard Busi-ness School, urges CEOs to stop treating the strategic plan as a dead, dusty document and instead make it the beating heart of the enterprise. In her recent book, The Strategist: Be the Leader Your Business

Needs, Montgomery imbues strategy with an existential quality: it is why companies exist. Done right, it is why companies succeed. Editor-at-large Leigh Buchanan spoke with Montgomery about why CEOs should learn to love this misunderstood part of the job.

6 0 | INc. | november 2012

CO

ur

TESy

Su

BjE

CT

IllustratIons by shIgIl narayanan

strategy

working for you than for somebody else? In what way are you adding value to the people? You’ve got to think about your company, not just your people. You’ve got to look at your customer and how your company is meeting that customer’s needs uniquely well, because the customer will decide whether you are successful or not.

If strategy is created by the entrepreneur rather than by a committee, is it more likely to resemble the leader’s character?It’s amazing how often that is true. You look at people like Henry Ford and Alfred Sloan, and the strategies for their companies match up with their backgrounds. A student once told me he used to know Michael O’Leary, the CEO of Ryanair. He told me how O’Leary was socially blunt-in-your-face. Then you look at Ryanair’s strategy of having every-thing bare-bones. They wanted to charge people to use a bathroom. It was about reducing costs, but there was a rudeness

entrepreneurs I’ve worked with who have tried to get into storage. And they’ve failed.

what other mistakes do leaders make when formulating strategy?A lot of companies get into strategy creep. They just keep adding technologies, add-ing services, adding customers they’d like to serve. The cost of breadth is often edge—you lose sight of the thing that makes you different.

If a strategy is composed of interlocking parts,—customers, suppliers, pricing, human resources, etc—can you change pieces of it without changing everything?If you realize that this whole idea of who you are and what you’re bringing to mar-ket doesn’t work anymore, then you have to change everything. Look at Gucci. It had drifted way off course, and when a grandson of the founder tried to take it back to being the pinnacle of the fashion world, he failed miserably. Then they got a new leader, Domenico De Sole, who said

from now on, Gucci will stand for good value, fashion forward, and good price. And he changed every single thing in the business model. He changed the stores to be edgy. He changed the customers from conservative, middle-aged women to younger women. He changed the sup-ply chain. He put people on pay per per-formance—and he had to win over the unions to do it. And it worked, because he had absolute clarity about what Gucci was going to be.

the alternative is to keep the core but update it?There are lots of changes you can make without changing your core identity. Ikea is always looking for new technologies and new ways to save. But they still do things in a very Ikea way. Students without cars would buy their stuff and had no way of getting it home, so now Ikea lets you rent a van. A higher-end furniture company would never dream of handling deliveries that way. They also have services that can assemble your

“People say, ‘Whichis more important: formulation of strategy or execution?’ That’s a stupid question.”

furniture for you. So as competi-tion comes in and they’re expanding the market, they embellish their strategy. But the essence stays the same.

how much time should lead-ers spend on strategy?Strategy is like an open folder on your desk. You should always be thinking about it. You probably have a formal process once a year where everybody gets together and talks about the strategic plan and connects it to budgeting and sets targets for people. But that’s not where real strategy is made. Entrepreneurs have to think of strategy as something dynamic and fluid: what is a good idea in 2012 may be a bad idea in 2014. They should be constantly reinter-preting the company’s experi-ences as they happen. So it’s not just, does my company make a difference? It’s, does my com-pany make a difference today?

to it as well.

you say strategies often fail because the leader didn’t understand the industry. In what way?They look at Starbucks and think they can make a lot of money selling high-end coffee. What they don’t understand is the whole system behind Star-bucks that enables them to do what they do, and the impor-tance of the brand. They should be looking at different niches. Or they may see an industry that no one has ever got quite right, such as furniture delivery. And they just kind of glibly think: well, there’s something wrong with this industry, and I should be able to fix it. They don’t think about all the forces that have made it so difficult. Or they’re attracted to an industry because the barriers to entry are low. Everyone says storage is a great opportunity. I can’t tell you the number of

november 2012 | INc. | 61

strategy

After successfully leading Jet Airways’ loyalty programme JetPrivilege for several years, Bijaei Jayaraj decided to start his own loyalty business in 2006. But, he soon realised running a business was more than just approaching your clients with great business ideas. It required organisational skills and an in-depth knowledge of financial structures. So, he decided to go back to a job, and worked with MasterCard Worldwide for the next two years with a clear focus—to understand the financial and organisational aspects of building a business. Loylty Rewardz was reborn again in 2008. Since then, Jayaraj has built a 185-people strong team, and counts the State Bank Group, Citibank and HDFC bank as its marquee clients. What he enjoys most though is inspiring his team members to be entrepreneurs in their own right.

As told to IrA swAstI | PHotoGRAPH By JIten GAnDHI | IMAGInG By PeteRSon PJ

the wAy I work | BIjAeI jAyArAj, loylty rewArdz

I’m not a tough boss. I focus on inspiring people to do the right thing.”

“

6 2 | INC. | november 2012

Acing It! bijaei Jayaraj today manages loyalty programmes for almost 117 million customers across India.

Growing up in a boarding school, I learnt to be disciplined from very early on in life. Even now, as a rule, I wake up around 5am. This is a big mantra of my work life. If I don’t get up on time in the morning, my day isn’t nearly as effective as it could’ve been.

My day begins with exercise. The first thing I do is go to the gym for an hour to hour and a half and run on the treadmill. There’s nothing like running to get your mind work. It gives me a lot of time to think about my business—from short-term concerns like the agenda for my day ahead, a stock taking of the day gone by, or larger issues about where we really are as a company. My running routine helps me clear my thoughts and bring things in perspective.

Once back home, I get ready to go to work, and usually just grab some fruits on my way out. I leave for office around 8.30am, and don’t have time for an elaborate breakfast.

november 2012 | INC. | 6 3

strategy

guy so I am very hands-on with all our clients. I work very closely with our commercial team that goes and gets clients and manages the relationship. In fact, my client delivery, client service and client acquisition teams are the ones I spend maximum time with. We collect a champagne cork for every client we get and place it in our conference room. Each cork has the date and the client’s name writ-ten on it. I think we have collected about 13-14 now. Today, our clients are mostly gigantic banks—the State Bank group, Punjab National Bank, Bank of India, Union Bank, Central Bank of India, Federal Bank, Karur Vyasya Bank. Cumulatively, we manage loy-

alty programmes for almost 117 million customers across India.

hen we began, we wanted to focus on travel loyalty because I had a deep understanding of that space, thanks to my stint at Jet. Later, working at Master-Card gave me a decent under-standing of the credit card domain. So the idea was to do something with credit cards and travel loyalty. Loylty Rewardz was conceived to do that. Early on though, we realised that airlines aren’t very gung-ho about loyalty pro-grammes because the airline industry is not exactly rolling

in money. On the other hand, banks have the appetite to on-board a new initiative. They’re prepared to foot the initial costs if it results in deeper engagement with the consumer.

As expected, during the early days of the business, I was deeply involved in every aspect of the work. Each slide of the presentation was prepared by me. I used to make entire proposals myself, and micromanage everything. But now I am more of a keen observer as other teams and units have taken over these roles. To be honest,

Fortunately, I live close to office. It’s just a 15 minute drive away. Usually, I make a couple of non-work related calls while I am being driven to office—either to my parents, or to my wife while she drops our children, my eight-year-old daughter and my five-year-old son, to school.

By 8.45am, I am in my cabin and start organising my day. Even though I am extremely digitally savvy, I still do this bit on paper. This time of the day, till about 10am, is one of the most productive parts of my day. I spend it having quick conversations with my key team members, going through their plans for the day, and getting updates on client meetings lined up for the day.

Nearly 80 per cent of my time is spent with people. We have an interesting routine for meetings. Our office is on the MV road, just off the Andheri-Kurla Road, and barely seven minutes away from the Mum-bai International Airport. Sometimes, when I need to have a conversation with some-body in my team, and it’s likely to take around 10-15 minutes, I say—let’s go out. We trudge up to the top f loor of the office building which is usually empty to watch the planes land and takeoff. It’s a great setting for a one-to-one conversation. I like to be informal and friendly with my team. In fact, the word irreverent fascinates me. If my employees question me, I welcome that.

I’m far from being a tough boss. Actually, I’m barely a boss. I don’t get tough with anyone. I don’t jump on people when they do the wrong thing; I focus on inspiring people to do the right thing. Honestly, sometimes I feel that it’s a weakness.

But, the flipside of that is the strength of being able to bring people together and motivate them to do unthinkable things. I often tell our people—it doesn’t take great people to do great things but ordinary folks to do extraordinary things, and achieve suc-cess. I’m proud that at Loylty Rewardz, we’ve been able to create a culture where people can truly become entrepreneurs within the organisation. Personally, I value that. I don’t want to get in the way of people coming up with suggestions and ideas about the new ways we can do things. For instance, someone came up with the idea of screening movies like The Secret or A-Team on every Sat-urday. These screenings have a dual purpose—both to have fun, and collectively learn from them. It was a great idea. There are many ideas like that at Loylty Rewardz which is driven by different people in the team.

Fortunately, not just with employees, my relationship with cli-ents is as strong too. Fundamentally, I’m a business development

w“Irreverence

fascinates me. I welcome

employees who question me.”

6 4 | INC. | november 2012

strategy

“I live this credo —work very hard but stay thoroughly disappointed.”

Just before leaving office though, I spend an hour or two to clear my mails. I receive about 150 mails in my inbox everyday; most of them are just copies. But I make sure I read all of them because I am crazy about information. I tell my people I would rarely inter-fere with their work but I insist to be marked on all mails, not just with direct team members but even their team members. This gives me a holistic view of the organisation, and I know what is

going on in each department.

ecause I leave early and come back late from office, my wife and my two children have a special arrange-ment about how we spend time with each other. I tell my wife that you cannot run a start-up half-heart-edly and you can’t have children growing up without a father. So we adjusted to the whole situation by making our kids sleep late at night. Unlike kids who go to sleep at 8.30-9pm in “good” households, our kids sleep at 12.30am in the night. That way, whenever I reach home, I am with the kids for an hour and a half or two. Despite the intense hours I work during the day, I remain close with my children. I play Temple Run and Angry Birds on the iPad with them, have pillow fights and

give them elephant rides. They catch up on their sleep during the day to make up for their eight to nine hours of sleep. I hit the bed around the same time they do.

There are no weekends in an entrepreneur’s life either. I work most Saturdays and some Sundays. If there are some senior level interviews lined up, my team knows they can schedule it around 11am on Sundays, I’d conduct those and be back home by lunch. Sometimes, I even go to the office in the second half of the day since office is so close by.

I take a break once in four Sundays. I just sleep that day, and do nothing else. I try to live my life by an aphorism that was passed on to me by Sumantra Ghoshal, the founding dean of Indian School of Business, Hyderabad, when I completed my MBA in strategic marketing and leadership in 2002. He said—go out, work very hard and stay thoroughly disappointed. So, I do just that. I work very hard and never find myself content.

I liked that intensity of involvement. I miss it. But, I know it’s counter-productive for the company because if you continue to micromanage, you can never scale up. It’s hugely important to let go. Yes, sometimes things don’t get done the way you wanted, and I would feel more satisfied when I do it my way. As an entrepre-neur, this is a key adjustment. You have to learn to be satisfied when other people do it their way. It’s not easy to do that though—to make sure that you’re just guiding people only when necessary, and not jumping in to do everything yourself.

For this approach to work, you have to get the company culture right. In fact, that’s a key priority area for me. I consciously think about, and act to build on our organisational culture. In fact, we have specific meetings, beyond client issues and business development concerns, to examine how we are working—whether we are transparent in our practices, do we set timelines justly, or are we doing too many late nights? Bringing issues down to a few simple questions is a very effective way for taking stock and making decisions.

We deploy this when we are hiring also. After an interview, we simply put three questions in front of us —can she do the job, will she do the job, and can she fit in? The “can” evaluates a candi-date’s basic smarts and intelligence, not experience. Relevant work experience isn’t a big issue. Most things can be taught. Once that box is checked, we ask ourselves whether a candidate “will” do it? I’ve often seen extremely smart, intelligent people who are not driven. If someone comes to us, and says she wants to work here for a year and then go to Harvard University, we’ll hire her. These are people who want to achieve something in life, so that one year with us will be great! I conduct most of the interviews at the upper management level and often ask the question—do you want to change the world—to understand a candidate’s drive.

People often ask me where I get my energy from because I am in the office by 8.45am and leave anytime between 9 and 11pm. Given that I have a hurried breakfast, and that I usually skip my lunch, I’ve realised that my energy comes from what I do. Even in the fourth year of our company, I am still the guy who has turned off the lights of the office the maximum number of times.

B6 6 | INC. | november 2012

After his engineering degree from IIT Bombay, Rajendra Gandhi found himself joining his family business. But being handed a business was never going to be enough to satisfy his entrepreneurial ambitions. A journal article on the bright future of recycling in India led him to zero in on the rubber recycling industry as a possible venture and this led to the birth of Gujarat Reclaim & Rubber Products (GRP) in 1974. Since, GRP has become one of the largest producers of reclaimed rubber in the world, with an annual turnover of `300 crore. Here, Gandhi takes us through the milestone events in his 38-year-old entrepreneurial journey.

I wIsh I knew then...

Rajendra Gandhi, vice chairman and MD, GRP

Initially, because I belonged to a tradi-tional business family, it was difficult for me to trust outsiders. But, one needs to have a very different mindset to run a company professionally. I knew to make my venture a success, I had to learn to trust colleagues and delegate responsibility. My mentor K Philip, considered the father of the Indian rubber industry, taught me the importance of listen-ing to others with empathy, and to have the courage to form a large vision for the growth of the company.

When we had to set up a manufacturing unit for reclaimed rubber, the machinery required was not available in India at that time. Instead of importing, we decided to design and fabricate our own machines. With the technological expertise of my part-ners, we could set up our first plant in Ankle-shwar, Gujarat in 1978. The four years of setting up the unit were a testing period for all of us ,which taught us many valuable les-sons. We learnt what works and what doesn’t. There were a lot of technical and work pro-cess related problems. We could not avoid making mistakes, so we accepted and learnt from them. Sometimes, we learnt the hard way but it proved useful in the long run.

Leading the company was not easy either. Many a times, I had to ignore my pride and ego while making decisions or working with colleagues. I’ve apologised to a colleague also. In a business, it is important to be someone everybody can trust. It’s only when you estab-lish that you deserve to be trusted that your partners, employees and stakeholders will trust you in return.

As a company, we started making profits only by 1982. Slowly, we expanded our pro-duction capacity, fine-tuned our work pro-

cesses and widened our product catalogue to cater to the tyre and non-tyre industry. An important landmark was when the Malay-sian government invited us to form a joint venture and set up a plant to produce reclaimed rub-ber in Malaysia, which helped to place us on the global platform. When the Indian economy liber-alised, we actively ventured into global markets. There was a huge demand for our products interna-tionally. To meet the growing energy needs, we decided to gen-erate our own electricity using the natural gas resources in Gujarat. As a result, we could run our plants 365 days of the year, which has helped to drasti-cally increase our production

capacity. Over the past decade, we’ve grown at a steady pace, more than 30 per cent each year. We currently have five manufacturing units in India. Today, we export to more than 45 countries, and serve the top six tyre compa-nies across the world.

— As told to Sonal Khetarpal

Valuing Life’s Lessons Gandhi has learnt to be self-reliant rather than depend on outside support.

6 8 | InC. | november 2012