My Proficorn Way (Part 99)

20 Mile March

As part of the readings for the Great Company course based on Jim Collins’ books, I read about the 20 Mile March. It is discussed in “Great By Choice.” The basic concept, in the words of Jim Collins, is this: “Companies that thrive in a turbulent world self-impose rigorous performance marks to hit with relentless consistency—like walking across a gigantic continent by marching at least twenty miles a day, every day, regardless of conditions. The march imposes order amidst disorder, discipline amidst chaos, and consistency amidst uncertainty. For most organizations, a one-year 20 Mile March cycle works well, although it could be shorter or longer. But whatever the cycle, the 20 Mile March requires both short-term focus (you have to hit the march this cycle) and long-term building (you have to hit the march every subsequent cycle for years to decades). As such, it’s a rarified form of disciplined action that correlates strongly with achieving breakthrough performance and sustaining flywheel momentum.”

As I read it, I realised that this gave a name and put into words what my philosophy has been at Netcore for a long time! Netcore’s high margin business (email and marketing automation) has demonstrated exactly this growth over a decade.

Except for one year where we were flat, we have maintained the 20 Mile March discipline – under three CEOs. Even during the past year disrupted by the impact of the pandemic, we have grown 30% over the previous year. It is this discipline which is the hallmark of proficorns.

For a proficorn, there is no growth capital other than the profits made from the business. So, if one has to expand, one has to generate profits which can then be reinvested for future growth. In the early years, Netcore’s SMS business delivered the profits which we reinvested into the email business. As the email business grew, it delivered the profits which enabled us to invest in marketing automation, international expansion and tuck-in tech acquisitions to add personalisation and product experience to our martech suite.

Building a business to operate with this discipline over long periods of time is not easy. It has meant that we have had to stay from bet-it-all acquisitions which could have gone either way. It has meant that we have had to sequence our international expansion – learning in SE Asia, and then foraying into US, and now Europe.

All of this was made possible by the fanatic discipline of the 20 Mile March. Day after day, month after month, quarter after quarter, year after year. And it all compounds over a decade into the great growth chart you see.

Thinks 83

India Breaks the Privatization Taboo: by Sadanand Dhume. “Optimists believe Mr. Modi is poised to deliver the industrialization India has long sought…But Modi’s new reforms aren’t all pro-market, and they may lead to isolation and crony capitalism.”

On Prediction Markets: by Tyler Cowen. “Prediction markets let people “bet” on some feature of the economy, thereby creating a new financial derivative. A prediction market in gross domestic product, or perhaps in local rates of unemployment, could be a useful means of hedging risk. If you are afraid that GDP will fall, you could “short” GDP in a prediction market and thus protect your overall economic position, because your bet would pay out if GDP came in lower than expected.”

Product Feature Prioritization —How to Align on the Right List: by Bob Pennisi. “If you want a more efficient and reliable way to prioritize product features, start with a clear and defined set of customer needs.” More on Outcome-Driven Innovation.

My Proficorn Way (Part 98)

Rethinking Assumptions – 2

It was February 2019. Kalpit (Netcore’s CEO) and I were attending SaaStr, the premier SaaS (software-as-a-service) conference in San Jose. As we sat through session after session, the realisation hit me that we had completely missed the new way of building products and taking them to market. We had been too caught up in the ways of the past – building a full-scale product and then a direct sales team to approach enterprises. This is what had got us initial success in India and SE Asia. My belief was that our products were complex and needed face-to-face persuasion which could only be done by experienced sales people.

Meanwhile, the world around had changed in multiple ways. Software developers wanted APIs that they could integrate into the code they were writing without having to talk to salespeople. For this, the product needed a self-serve and perhaps even a free trial. This needed a new approach to product development and sales. It needed targeting developers – which needed a very different approach then meeting CIO and CMOs. The SaaS way of marketing and sales was also different – a new world of SDRs (sales development representatives) and ABM (account-based marketing) was enabling companies to reach out globally without a physical presence in multiple countries. The primary metric was not annual sales but MRR (monthly recurring revenue). There was a new language of business that had fuelled a new generation of companies – and we were oblivious to both the vocabulary and the competition.

SaaStr opened my eyes to this new world. And the question that kept coming to me was – why had I not seen it earlier? A few knowledgeable colleagues had told me about the new world of SaaS – I ignored them repeatedly. I did not recognise that a new set of decision-makers were emerging in enterprises – developers, product managers. I also failed to recognise that a new class of companies was emerging – aggressive, exponentially growing startups. I was still locked to a worldview that sales and marketing of our solutions had to be via face-to-face connect in large organisations.

As Adam Grant explains in his book “Think Again”: “Scientific thinking favors humility over pride, doubt over certainty, curiosity over closure. When we shift out of scientist mode, the rethinking cycle breaks down, giving way to an overconfidence cycle. If we’re preaching, we can’t see gaps in our knowledge: we believe we’ve already found the truth. Pride breeds conviction rather than doubt, which makes us prosecutors: we might be laser-focused on changing other people’s minds, but ours is set in stone. That launches us into confirmation bias and desirability bias. We become politicians, ignoring or dismissing whatever doesn’t win the favor of our constituents—our parents, our bosses, or the high school classmates we’re still trying to impress. We become so busy putting on a show that the truth gets relegated to a backstage seat, and the resulting validation can make us arrogant. We fall victim to the fat-cat syndrome, resting on our laurels instead of pressure-testing our beliefs.” I was trapped in an overconfidence cycle.

While we did change the organisation direction on our return to India, we lost a few crucial years of growth. When I look back, I wish I had more humility and openness to listen to others, a better recognition of what I did not know so I could have reset my initial assumptions. I should have fast-tracked my rethinking and done it much earlier.

Thinks 82

Price controls for vaccines? by Ajay Shah. “The path to reaching every small town and village runs through having no price controls.”

Minimum government: Commissions and omissions: by Shankkar Aiyar. “The quest to restructure the [Indian] Leviathan has flailed over decades…To paraphrase Parkinson, permissions and clearances expand to keep the behemoth employed. Peculiarly, the government is the policy maker, a player owning PSUs and the regulator in many sectors. World over, telecom, civil aviation, broadcasting and shipping are governed by independent regulators answerable to elected bodies.”

How the first review decides the fate of your product: By Thomas McKinlay. “A negative first online review creates a chain reaction of fewer sales, fewer reviews, and more negative reviews. The opposite happens if the first review is positive.”

My Proficorn Way (Part 97)

Rethinking Assumptions – 1

One of the reasons companies fail (and I have also gone through my share of failures) is that entrepreneurs do not reset starting assumptions against the market realities.

Entrepreneurs start off with some ideas and assumptions about the market. Once they take the product out into the market, they get feedback – about customers’ expectations and market size. It is at that time that there is a need to think about some course alteration – in case there is a mismatch. Many times, they don’t do that – working under the principle that their efforts will accelerate the market’s response towards their product. That rarely happens. What follows is disappointment.

It is never easy changing one’s assumptions quickly, especially when one has been thinking about them for a long time. But they should be exactly that – just starting assumptions.

Adam Grant is his book “Think Again”:

Intelligence is usually seen as the ability to think and learn, but in a rapidly changing world, there’s another set of cognitive skills that might matter more: the ability to rethink and unlearn. In our daily lives, too many of us favor the comfort of conviction over the discomfort of doubt. We listen to opinions that make us feel good, instead of ideas that make us think hard. We see disagreement as a threat to our egos, rather than an opportunity to learn. We surround ourselves with people who agree with our conclusions, when we should be gravitating toward those who challenge our thought process. The result is that our beliefs get brittle long before our bones. Intelligence is no cure, and it can even be a curse: there’s evidence that being good at thinking can make us worse at rethinking. The brighter we are, the blinder to our own limitations we can become.

As I’ve studied the process of rethinking, I’ve found that it often unfolds in a cycle. It starts with intellectual humility—knowing what we don’t know. We should all be able to make a long list of areas where we’re ignorant. Recognizing our shortcomings opens the door to doubt. As we question our current understanding, we become curious about what information we’re missing. That search leads us to new discoveries, which in turn maintain our humility by reinforcing how much we still have to learn. If knowledge is power, knowing what we don’t know is wisdom.

I can trace almost every one of my failures to my inability to rethink my starting assumptions and relearn based on market feedback. I did not take an empirical approach and stayed rooted in my original beliefs. Even in the face of overwhelming evidence, I clung on to hope – wishing for that one big thing that would change the game. I did not listen to feedback from others – because I thought I was wiser than them. I did not know what I did not know – and it has had bad consequences for me as an entrepreneur.

Thinks 81

How to make a social safety net for the post-covid world: from The Economist. “Governments must remake the social contract for the 21st century…For years social spending has favoured the elderly and an outdated safety net. It should be rebuilt around active labour-market policies that use technology to help everyone from shopworkers who are victims of disruption to mothers whose skills have atrophied and those whose jobs are replaced by machines.”

Thomas Sowell: “When the government chooses between policy A and policy B, it is making a choice in which the personal interests of the decision-maker are involved. Rewards for both elected and appointed officials – whether in money or in kind – come from increasing the demand for their services. If policy A will achieve a certain result largely through the individual efforts of the citizens themselves, and policy B requires the presence, activity, and visibility of politicians, clearly it is to the politicians’ advantage to advocate policy B.” (via CafeHayek)

My Proficorn Way (Part 96)

Non-consumption, not Competition

When starting off on a new idea, there are two possible approaches: to compete against incumbents with a product or service that is faster, better, cheaper; or, to look at non-consumption and unmet needs. Getting existing customers to change is not easy – the “switch pitch” must be very compelling for them to stop using what they are doing and start using a new product. Changing behaviour and products takes time (and therefore money). An alternate go-to-market strategy can be to look at customers who are non-consumers and need a product that is just about good enough for specific use cases.

Clay Christensen’s Disruption Innovation theory and W. Chan Kim and Renée Mauborgne’s Blue Ocean strategy outline the thinking around the non-consumption approach.

Disruptive Innovation (from BMC Blogs): “The theory suggests that a small organization with fewer resources has the ability to challenge their larger counterparts by focusing innovative products and services toward the low end of the market, which is often ignored by incumbents as they grow profitable. The new entrants are gradually able to improve their innovation performance to attract the high end of the market, without compromising their original qualities – such as low cost, convenience, access or security, among others – that allowed them to succeed in the underserved market segment. When incumbents fail to identify the market void and realize a small company competing for their mainstream market-share, the damage is already done and disruption has occurred through the small company’s innovation.”

Blue Ocean Strategy: “Blue ocean strategy is the simultaneous pursuit of differentiation and low cost to open up a new market space and create new demand. It is about creating and capturing uncontested market space, thereby making the competition irrelevant. It is based on the view that market boundaries and industry structure are not a given and can be reconstructed by the actions and beliefs of industry players.”

When I launched IndiaWorld in 1995, I focused on Non-Resident Indians – who had limited access to Indian news and information. The Internet bridged the gap with a site which did not match up the traditional Indian newspapers and magazines but offered it to them faster and cheaper. Over time, we improved and widened the portfolio of our content offerings. By the time the mainstream Indian media woke up to the Internet opportunity, IndiaWorld’s websites had created a daily habit that was hard to break.

More recently, when we take Netcore’s email products to the US, we found only limited success – because we are offering a product similar to competitors and trying to compete in the red ocean. This is where I have been thinking about microns (micro newsletters) with a radically different pricing as compared to regular emails – as a possible disruptive innovation at the low-end and also creating a new market space for daily branded emails.

For an entrepreneur, the ideas of disruptive innovation and blue ocean are two very good starting points for thinking about the product and the target customers.

Thinks 80

The Fan Data Goldmine: “New tech that allows artists to interact with superfans — and turn their data into dollars — promises to open long-term revenue streams.”

The New Era of Social Media Isn’t About Feeds: by Will Oremus. “Products like Clubhouse and Twitter’s “Super Follows” offer a new kind of engagement…We’re starting to see a new crop of platforms that operate according to a different logic — a logic of loyalty, intentionality, and deliberate payment (whether of attention or money).”

How Belarus’s protesters staged a digital revolution: from FT. “When President Lukashenko cracked down, a media start-up using Telegram to challenge his autocratic regime stepped into the fray.”

My Proficorn Way (Part 95)

100X Disasters

We see them every so often in business (and perhaps in personal life): disasters which we could have avoided had we made a decision to spend 1% of the time or money sooner.

I had one such 100X disaster in the company in my early years as an entrepreneur when one of our persons in the billing team took suddenly ill. She used to single-handedly manage the billing for our mailing renewals. And as it happens, there was no backup or written process — there were just so many things in her head! She was amazingly efficient at things, so until she had to take leave for an extended period, we didn’t wake up to the extent of the flaw in the internal system. It would have taken little for us to have an understudy associated with her, but we had not even thought about it — one of these things that slipped through the cracks.

It boils down to “no backup” — either of a person, or of a process.  The question to really ask every so often is: which one thing are we doing (or not doing) which could cause a blow-up that can hurt? Of course, one cannot take it to an extreme, and duplicate every person or process. But there will be a few such things that we can do (insurance, Plan B – call it whatever) which can save embarrassment at a future point of time.

For example, a data leak can be a 100X disaster. Many times, businesses optimise on security checks. All it takes is a single error to create irreparable damage. A small investment in cybersecurity systems can go a long way to alleviating such disasters. Some other examples are: underinvestment in IT infrastructure (having a single point of failure), overdependence on a single large customer, lack of adequate backups of key software or systems.

For a growing business, it can be very difficult to recover from 100X disasters. So, entrepreneurs should make sure they are avoided at all costs. Looking ahead, planning and thinking of worst case scenarios can help ensure that such disasters never happen.

Thinks 79

How citizen data led India’s covid battle: from Mint. “Through the pandemic, Indian journalists, scientists and citizens have had to battle against the Indian state for access to basic data, which is often easily available in most other parts of the world, including in resource constrained Latin American countries. With new virus variants now altering the course of both the pandemic and vaccine development, transparent data will only become ever more important in the pandemic’s second year. Will India change course at least now?”

Success beyond software and services: by Shyam Ponappa. “India dominates the world market in motorcycles. What will it take to replicate this success in other industries?”

Thomas Sowell: “The minimum wage law is very cleverly misnamed. The real minimum wage is zero – and that is what many inexperienced and low-skilled people receive as a result of legislation that makes it illegal to pay them what they are currently worth to an employer. Most economists have long recognized that minimum wage laws increase unemployment among the least skilled, least experienced, and minority workers. With a little experience, these workers are likely to be worth more. But they cannot move up the ladder if they can’t get on the ladder.”