Progress Report: November; Change of direction
After a very long and hard look at the past two years I have decided that the company needs to change focus and the mode of operation. At current revenues (or even at 10x) it will take me at least three years more to get this into a place where it can start doing what it was started to do. There is also the fact that between a small operation and a big operation the overlap in effort is about 80%. You wind up doing a lot of things in common in both approaches.
But, the crucial factor that swung the decision for me was the fact that technology is the wrong place to keep as your sole focus if you don't have core IP that has sustainable value. In other words, if you can't license or sell it as a unit (or units), the value you bring to the table is largely related only to the price of a service and other easily replaceable variables. And that end of the market is a tough place to play at as there will always be someone out there who will undercut you. What makes matters even tougher is that the buyers are not themselves aware of the finesse of what lies underneath as long as it looks reasonable on the surface.
For Frontiernxt, that is where I had always seen the opportunity – a degree of finesse that starts with what lies underneath and meld it with higher parts of the product/organization that need not be digital to start off with. If you are a shop that primarily addresses the 'under the hood' aspect, a failure to transition to an engagement at a higher level leads to competing with the bottom feeders. Thankfully, the existing clients are not people who operate on those terms, but a look at the prospective market place makes it clear that those are exceptions.
The technology market has become a lot more commoditized in the past two-years. This was something that was an advantage for me when I started the company two-years ago, but it is now slowly starting to be a problem than an advantage. Product builds are easier to do and the gap between being excellent and having only absolutely essential is narrowing at an alarming rate. Granted, not many are out there who can still pull it off with a great degree of finesse, but what I have seen is that the gap is narrowing at an alarming rate.
In practical terms what this means is a gradual withdrawal from doing builds for clients. For what I set out to do, I need to have conversations which happen at a level that start higher than pure play execution. This may mean changes in the structure of the company itself and creation of new partnerships to address the gaps in competencies that exist in trying to move higher up on the curve. The January review should be an interesting one to look out for.
Read MoreProgress Report: October
So in the last ten days we shipped two plugins for Elgg (Sharedly, Updown), started work on a Drupal plugin and finished building out a content website that should be the first important step towards where we want to head to eventually as a company. 80% of the ongoing effort is still course correction – sorting out internal problems and refocussing energies and effort in the right direction. It will be another two months before we can actually devote majority of our effort into the core of what we want to do.
The code releases are not much, but it is something that is very important. In all the years that I have worked in the online domain, it has largely been a case of take and not much give. A significantly huge part of our industry has been built on open source and not many of us actually put back anything into the world that we took so much from. The Elgg modules are small steps to change that for us. Sharedly is an attempt at creating a social link sharing experience within Elgg, while Updown is a generic voting module that is used by Sharedly.
The first two years of running Frontiernxt were an experiment. It was more like an audacious experiment – to see if we can work the industry differently and work in it differently. From that perspective, things have been good. The company has paid its own way through doing work more or less on terms that it wanted to work at. But a lot of the internal systems and discipline has fallen by the wayside in the last 9-months and proving the basic hypothesis is only one half of the circle of success in an operation. We still don't have the other half – scale – in revenues or people as of yet. This is still largely a one-man operation and there are only a few exceptions in the world where that can be called a successful company.
So, the next six months I have to clean shop, scale up resources/revenue and move out of the experiment mode. Part of this is already in place. There is a lot of effort that is going into closing execution cycles than keep them clogging up the pipeline forever. But I have only started on it and the moment it is a major mountain that we have to scale. By the time the November update of this post comes up, it should give us a good idea of how much progress we have made on this front.
Read MoreThe Frontiernxt Story: A Year And A Bit Later
When I left the big company job in 2008 to start on my own, it was not the ideal scenario be venturing out. The global financial meltdown was well on its way and it was becoming increasingly clear that chasing the digital opportunity in India was going to be an uphill task. Now, about two years down the line from then, it has been an interesting experience to look at what all I've wanted to do and what all I have wound up doing.
Most of the time after I quit in 2008 was spent talking to various people across the ecosystem. I met other guys in the start up space, a bunch of investors, company heads etc to get a feel of how it all actually works at ground zero. It is one thing to have a 'feeling' about how it all works and entirely another to put that feeling to test in the real world.
Two things made this period even more difficult. 1) I am not a very social person. This is a considerable drawback when you are trying to run a business on your own. You can fake your way through it to an extent by putting your game face on, but that won't measure up much to someone who is a natural at it. 2) I have little natural inclination or an educational or family background in business. I had to learn most of what I know from scratch.
I tried poking around various product niches then – some of the ideas I came up with were pretty OK, others were beyond ridiculous. But I was willing to let go of my biases and prejudices (which I had in plenty) and give opportunities and ideas a decent shot. It did not take very long for the realization to dawn that the product space in India Digital is tiny, and very little of that was not easily replicable. Given enough money and/or persistence, anyone could be overrun.
The market itself was another problem. We are price sensitive to the point of absolute absurdity. Quite often, perception is a larger factor in ascertaining a justifiable cost than actual benefit. Customers are often willing to accept a lower value/quality product at a higher price point from a behemoth than a higher value/quality product at a much lower price point.
Then came the bugbear of the opportunity size. The one billion-strong Indian opportunity is absolute bunk. It exists only in the imagination of outlandish product pitches and investors who want to buy into it. Spare a Naukri, most other larger players are nothing but marketing-driven plays. They acquire customers at a significant costs and then attempt to outlast the competition. Deep pockets ki jai ho!
There is a reasonable opportunity in India in terms of execution, which has been demonstrated well enough by companies like Flipkart, but it still needs a pretty significant chunk of cash to be put into the system before you can get going. Which was my greatest problem – how could I actually go about financing all of these things that I wanted to do?
When I looked at my own concepts, I did not feel there was anything concrete there that deserved to be funded. I would not have invested in myself. Hunches are nice, but they don't make a business plan and I did not want to misrepresent or inflate the picture I had in mind and con someone into putting up the cash to fund what could rightly be called indulgences. Thus started the story about 'building websites'.
What I was sure of by then was that we could not aim for anything at scale for a while to come and our main source of income had to be something else than the products we were looking to build. The only place where that was possible was in the service-oriented niche. Even there things were not easy. Even though there is an ever-growing opportunity for vendors who service the online space, the market is an absolutely crazy one.
To compete in this market requires you to fight both the vendors who will get business by driving down prices to levels that are unimaginable and the big ticket guy whose pricing is 80% the brand and nothing else. Because of this I decided to give the 'site building' market a miss and aimed instead to build upon something that is a lot more nascent, with the market being at least two-years away from bringing on the pricing massacre in that niche.
In retrospect, it is easy to claim our tryst with Elgg, the social networking platform, was well thought out and a logical conclusion. The reality was that we actually stumbled on to it by accident. A project we took on had the requirement of the particular platform and over time we became really good at using it. It made sense to build on our expertise in the platform and earn our bread and butter from it, which is what we have been doing for a year now.
This has enabled us to incubate about three different products at the same time, all of which are in different stages of development (or disarray, considering the shape some of them are in) and it is an act of will and gymnastics at times to pull all of this together at the same time. It could probably be a lot easier to fast track all of this by focussing more on 'building websites', but I am still very averse to that. Even though, when asked what do you do, I find it to be the easiest answer to give others.
The coming year will be a hard one. Like every small scale venture that reaches the level where it can sustain itself, I also find myself in a situation where it is imperative to go for broke or be happy being the tiny tot. It has become near-impossible to scale this any further with existing resources, but that also does not mean that we have the liberty to go on a spending spree. Much of our edge is in how lean we are and I don't want to compromise on that – yet.
One of the greatest learnings of these two years has also been the importance of picking the right people to work with. This extends to not just partners and employees, but also to the customers you choose to work with. A good customer who works with you is well worth forgoing two who will make your life miserable. The same goes for partners and employees. Choose them wisely.
Six months down the line I will revisit this post and do an update on how far we have progressed by then. It has been such a journey that I can't even make any predictions about where we will be by then. 90% of what I am doing right now is not something that I had planned. How I wanted to go about doing it is probably the only consistent bit in it and six months down the line I think the story is likely to remain the same.
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