Breakfast with Scott McNEaly: keeping it lightweight
- Buy spot market offerings. As much as possible, buy products and services at going short-term rates, even if it means you end up paying a premium for not agreeing to sign on for a longer term. McNealy said that things change too quickly in our world and that locking in a profitable long-term contract rate might prove to be an impedance down the road. He said that signing on more resellers rather than more salespeople during the dot-com era would have been one example of this principle at work; he added that Sun should have preferentially grown its reseller network over its sales force.
- Minimize fixed costs and overhead. As a parallel to a supposed Japanese business maxim "all inventory is bad", McNealy said "headcount is bad". He exhorted entrepreneurs to keep fixed costs low and concentrate exclusively on their startup’s unique value proposition where they differentiate themselves. In most build vs buy decisions, entrepreneurs should only build that which will enable them to erect barriers to competitive entry by other players.
- Get someone to think you’re crazy. McNealy said that the mark of a good strategy is someone thinking that its creator is crazy. Eliciting a vehemently skeptical reaction means that there is a controversy somewhere in the business plan, which in turn is an opportunity for the entrepreneur to differentiate themselves and their startup.
- Create barriers to competitive entry. McNealy emphasized the importance of creating unique intellectual property (IP) such as patents and trademarks that will inhibit competitive entry into an entrepreneur’s market niche. He was of the opinion that a portfolio of this kind should not be used predatorily but that it is nonetheless a good defensive measure. Sounds like the IP version of the Reaganesque maxim "Speak softly but carry a big stick".
I was struck by the extent to which McNealy’s advice resonates with the themes of Atomized Enterprises that we have discussed at great length on this blog. McNealy does not perhaps espouse atomization to the same extent; for instance there was limited commentary on outsourcing or cloud computing. In one instance, he even wondered why management consultants exist at all because an enterprise should never ‘outsource thinking’.
- Nonetheless, the idea of keeping overheads and fixed costs low is an important idea I took away from the breakfast. Do you think enterprises can still create value while outsourcing the effort behind core value creation (rather than the ideation behind core value creation)? Join the discussion in the comments below!
in|vest: Alok Mittal, Canaan Partners
Name: Alok Mittal
Location: New Delhi
Bio: Alok Mittal is Managing Director with Canaan Partners India. Alok focuses on building companies in the fast-growing wireless, technology and Internet domains.
A successful entrepreneur and founding member of Band of Angels India, Alok also seeks to foster the development of new global technologies in India. He led the technology practice at Baring Private Equity Partners, India, where he focused on IT products and services, BPO, Internet and Telecom. Prior to Baring, Alok was Co-founder of JobsAhead.com, a leading web-based recruitment business. Alok was instrumental in the acquisition of JobsAhead by Monster.com, the global leader in online recruitment. He also brings strong Telecom experience to Canaan having worked for Hughes Software Systems, the premium provider of telecom software services and systems in India. He serves on the Board of Directors of Bharat Matrimony, iYogi and Cellcast. He holds a Bachelors degree in Computer Science and Engineering from the Indian Institute of Technology, Delhi and a Masters degree in Computer Science from the University of California, Berkeley.
Have you invested in startups meant for the Indian market before? Which ones?
Canaan’s investments targeted at Indian market are Bharatmatrimony, Techtribe and Cellcast. The other companies with significant India component are e4e, Unitedlex and iYogi.
What sectors or investment themes look most promising to you in the Indian market?
We are looking to broadly invest in early stage technology ventures including internet, mobile applications, software products, offshore services, transaction processing and so on.
What excites you most about your sector of choice in the context of India?
High growth rate of consumer markets, increasing rate of technology adoption, and vibrancy of venture-backed startups are the key factors that excite us about India. Our focus on technology is derived from our extensive experience in this segment globally.
What is one thing that Indian entrepreneurs often overlook when deciding to start a venture?
A key element that entrepreneurs would do well to factor in is the element of differentiation - not just at a feature level, but how are they able to bring significant benefits to existing and competitive offerings - especially benefits that the customer may be willing to pay for incrementally.
What are your personal interests?
My personal interests include reading (a whole bunch of diverse non-fiction), music, driving/riding. I am a moderate gadget user, with the regular ipod, palm, laptop stuff.
Connect: http://www.canaan.com, http://www.venturewoods.org, http://www.indianangelnetwork.com
[To learn more about in|vest, read the overview page and this blog post. If you are an investor with an interest in India and would like to participate in in|vest, please read the participate page as well.]
Introducing Project Tofu
Readers of this blog have read some of my thoughts about Atomized Enterprises. But as the saying goes, ‘in theory, theory is no different from practice, but in practice it is’. And so it is now time to raise the curtain on an Atomized Enterprise project of my own: Project Tofu.
The rising incomes of India’s middle class, coupled with the favorable demographics of the country as a whole mean that the country presents a wide-open opportunity for any entrepreneur who is interested in taking it on. India’s diaspora of successful and sophisticated technology investors in the US (many of whom are former entrepreneurs) is eagerly seeking opportunities to invest in startups targeting the Indian market. Although I have deep ties to India, my recent visits have shown me the vision not just of entire industries being rebuilt but a whole country being rebuilt. Project Tofu is a venture (and a personal adventure) that I hope will teach me a thing or two about the Indian market as well as about creating and sustaining an Atomized Enterprise.
I can’t really say very much about Project Tofu right now other than that it’s an offering for the Indian wedding market, which is in its earliest stages of planning. As I go through the process of building it out as an Atomized Enterprise, however, I will catalogue my experiences here. An entrepreneur’s energies are all too often directed solely at solving problems of the venture he or she has launched. I hope to find the time to reflect here on the lessons I learn; if you, my dear reader, can also benefit from it, I’ll be so much the happier!
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