Challenges of Small Services (& Product) Companies

My Good friend, Amarinder, asked on OCC googlegroup that what are the challenges one faces while running a pure services company, or doing services to sustain yourself and your product development?

I just realized that we kind of fit in this category as we are developing products and surviving by providing services. I started OpCord abt 3 yrs back (in fact, we celebrated our 3rd birthday on 22-Jun) with trainings, services and also thought that I could develop products in future.  Services / Trainings are surviving us from last 3 yrs. I got an idea of a product worth pursuing (as I am crazy sometimes) about 2 yrs back of a mobile app which enables rides sharing (much more than car pool) and we are working on that as well. We are also working on test automation framework for web / desktop based applications and intend to make a product out of it.

After setting the background, the challenges we faced are:

1. Focus on product misses unless your services business revenue is so high that it can take care of both.You tend to make product team members billable if revenue is not good enough which breaks the flow. We are delayed on our product "RideAlly" by 6 months because we made key people billable.

2. Cash flow is a challenge. In our case, out of 35 members, 8-10 are dedicated to product development hence cost of these has to come from services. We are bootstrapped and able to manage without any loan/investment hence if some services gets stopped, we are on our toes.

3. You cannot hire high class talent required for product development due to high cost hence more mistakes, more learning time and more cost.

4. Out of 10 proposals, one gets 2-3 projects and each proposal takes considerable bandwidth. Whomsoever senior is available, participates in analysing feasibility, estimation and we dont care whether product development is taking a hit. We have worked for 2 months with 3 persons to get a project and still, we could not get Because customer changed technology itself, HTML5 over flash.

5. You are lucky if you get very tech savvy partner who understands product life cycle, architecture and fully committed (do or die kind). I have talked to almost 10 part time senior people (< 15 yrs exp) who wish to take plunge but ultimately could not. Its not easy to leave >20Lakhs/Annum job when you have EMI commitments, single salary, particular lifestyle (car, flat, kids going to school, maids etc), status etc.

6. Services business means you are always on hunt. You may have done great work for one customer but it does not mean that customer has repeat business for you. We get lots of 3-6 months assignment and once these people become non-billable, you just take a nosedive. Every year, we have 2-3 very bad months and 2-3 very good months.One needs to be very cautious in spending when earnings are good.

7. Being small company, we work with many small companies and they come to us due to cost advantage than large companies which necessarily means even you provide resource better than large company, your margin is less.

8. Many a times, we work with large companies through a middle partner and actually they earn, not us. I am not complaining as I also become middle partner nowadays.

9. Getting high performers on payroll is tough and retaining them is even tougher.

10. In India, we have so many taxes, service/professional/TDS/ESI and so many acts/laws with different CAs giving different interpretations. We spend lots of time in finance and marketing time reduces. E.g., we pay professional tax always on time and one month out of 2 yrs,  it got delayed by 2 days (due to weekend) and we got about 1200 Rs penalty. Person, who delivered, asked for bribe which we did not pay and later, our CA got it waived as well but it took unneccessarily my time.

11. Late delivery of invoices payment just kills you. I have to admit that I had to delay senior persons salaries just because invoice payment is delayed. Junior persons are always paid on time irrespective you take loan or sell yourself or whatever.


Challenges are many (above list is just top of mind and some points can be repetitive) and rewards are also many. Whatever it is, we are there and someone said that if one can survive for 3 years than they are going to be in business for forever. Amen!!!


Regards,
Hariprakash Agrawal (Hari),
http://www.facebook.com/OpCord

What's going in CEO or MD or Business Owner's mind?

Before we talk on optimizing business, I think that its apt to talk about what is going in CEO or MD or Business Owner's mind? What do they want? Are they interested in any of these frameworks? What outputs they wish to achieve for their organization?

Below, I am trying to list some of the parameters (list below is not exhaustive but indicative) which they might like to measure, track and improve for their organization:

1. Profits (YoY, QoQ)
2. Revenue (YoY, QoQ)
3. Customer Satisfaction (YoY, QoQ)
4. How many new products or its variants launched and market response?
5. No of new customers added or retained
6. Attrition or ability to retain best talent or employee satisfaction
7. Best Recruits or Ability to attract best talent or how industry perceives us?
8. Awards or recognitions in the industry
9. % of market share compared to competition
10. There are more depending on nature of organization

If top management wishes to address above parameters than what approach should they adopt? or which framework should they deploy? Should they invest in circle of principles? If yes, how? How much?

We will discuss more on approaches and their mapping to business critical parameters in next discussions.

Note: We encourage you to participate in this blog and add your comments on what parameters interests CEOs/MDs/business owners? and Which approach do you prefer to address them?

More later,
Regards,
Hariprakash,
http://opcord.com

Circle of Principles (CoP) for High Performing Teams (or Businesses)

We all know that to grow the business and to sustain the growth over time, teams need to continuously look/measure customer satisfaction, employee satisfaction, revenue (top line) and profitability (bottom line) as a bare minimum.

If anyone of these goes down, it will be just matter of time that business or organization collapses and it may take significant time and effort to bring it back to its glory.

To achieve above business parameters, we need many high performing teams. High performing team is the one which keeps their commitment (on-time delivery), with best of quality, with right set of features or requirements, keep it in budget and with every project, teams becomes even better.

To do that, businesses/teams needs to adopt Circle of Principles (CoP) as mentioned below:

Quality over Time
Mentors over Managers
Innovation over Compliance
Team Spirit over Individual Excellence
Leading Indicators over Lagging Indicators
Lean Documentation over Comprehensiveness
Measurement of Goodness over Defects
Face to Face Interactions over Emails
Collaboration over Competition
Automation over Manual
Facts over Intuitions

CoP has 11 principles which enables the teams to satisfy its customers, reduces overheads, increases interactions, keep them focused/accountable/happy and in turn grows revenue/profit of the business.

To understand these principles better, have "Prefer" as prefix e.g. Prefer quality over time or prefer measurement of goodness over defects etc. Items on both sides of 'over' are important however businesses/teams which chooses items on left side have more chances of success over a period.

We can discuss each one of these principles in our talks with ample examples whenever we meet.

Regards,
Hariprakash Agrawal,
http://opcord.com, https://rideally.com, http://testoptimizer.com

About a concept - OpCord

Earlier, I had published about my journey to entrepreneurship and now, we are making an attempt to explain the concept "OpCord". OpCord means Optimizing with Coordination.

OpCord is a concept which understands that each organization has multiple factors / constraints which affect their output. It believes that one can achieve best results when they recognize all possible parameters and optimize them rather maximize any one parameter. Here, we are listing some of the outputs which organizations are usually interested in:

Organizational Success Parameters
Customer Satisfaction
Employee Satisfaction
Revenue (Top Line)
Profitability (Bottom Line)

Product / Project Success Parameters
On time Delivery
Delivers expected functionality
Product Quality
Within Budget
Organization becomes stronger or product is a hit

Once we wish to achieve many mutually exclusive outputs, we no more can work in silos. Let's say, we would like to maximize productivity but it is important that we do not loose focus from product quality while looking at only productivity. Some times, developer develops one functionality in hurry and is not able to grasp that one small mistake (or bug) today might affect whole product and in turn, whole company in future. At times, we consider only a few outputs in mind and face the brunt at later stage.

Let's focus on optimization of various outputs rather maximization of one of the output precisely because of reasons mentioned above. It is good idea to keep customer delighted all the time but burning employees at the same time, might not keep customer delighted for long time. We need to understand the importance of trade-offs and that one does not get everything every time. It is of utmost importance that we decide trade-offs in the beginning, understand our constraints and achieve most optimized outputs.

Second, most important point, we miss some times is the coordination. A few organizations fail in integration while each and every individual or team or division or dept is doing their best. Organizations are not able to integrate well due to either rivalry, lack of transparency, lack of bigger picture, lack of accountability, lack of coordination, lack of trust etc.

Organizations need high degree of coordination among team members, business analysts, designers, developers, testers, managers to ensure the smooth and best delivery of products. No matter, how great the process is or how great the technology is, we might miss on hitting the road just because of lack of coordination among various horizontals, verticals, domains, divisions etc. Hence, it is very important that we coordinate well.

That's the reason, we thought of optimizing with coordination for organizations and self. Let's opcord and be happy.

Regards,
Hariprakash Agrawal (Hari)
http://opcord.com

Journey to entrepreneurship...

From long time, I had this dream of becoming entrepreneur and at last, I could realize it last month, Jun'2009. I knew that this is going to be a tough job as I am new to entrepreneurship but I realized that it is not really that tough if you enjoy what you work and you work for what you believe in.

I do not remember when first time, I thought of becoming entrepreneur, may be, it is in blood as I belong to a community known as "Baniya" in India. Baniya means business person. I am a calculated risk taker and I do take risks after doing my home work with whatsoever little I know. The day, I entered in IIT-KGP, I knew that one day, I can realize this dream and it took 10 years to have that courage, confidence, financial stability, family support (in fact, strong support from family), goodwill among friends (even those persons who are yet to become friends), some level of network and most important recession, which brought me out of comfort zone. Sometimes, you feel like flowing with life especially when life is smooth but than one day, you are in mid of the river and find that one storm has arrived from nowhere and you need to take prompt action to sail and reach to destination safe and sound. Recession has had similar impact on me.

What might make the difference is your preparation on your dream. How far one goes, depends on how strong the foundation is. Entrepreneurship is a creative process and I learnt a few steps from many individuals and I could take care of some of them. Below mentioned points might help a few other entrepreneurs as well.

1. Understand your finances
Only few can undermine the importance of money especially when you are about to take a new journey. One must calculate the current savings and how long can one survive. In my opinion, do not count on your properties, immovable assets at this point because those will be useful if you hit rock bottom for some reason. In normal scenarios, I could foresee that I can survive for about an year even if I do not have any profit from new venture (Pls note that I do depend on my spouse's income which is very very big support). Me and my wife sat together and understood our savings and inflows and we collectively thought of a few cost cutting measures, like, delay paint for our flat, no major expenses, cuts on outings, reduce lavish lunches/dinners/parties etc and we felt that we can pay our EMIs, we need not to trouble our parents (and extended family) and more important that we need not to borrow.

2. Ensure family support
There is an old saying that hope for best, prepare for worst. Life looks good when everything is going good but in bad times, it is the family who provides moral, emotional, and financial support. This is key to start business as one will have rough patches on the journey (like Indian roads:)) and that time, if someone is around, life does not look that bad.

3. Develop competence
One need to be thorough in the area one wishes to enter unless you have huge money and you can hire experts in that area. One also should learn a bit of company law, equity, finance, HR, legal areas etc to not to be cheated by others. Network can help you in reaching to key stakeholders but its your competence, confidence which will convert it in a deal. In simple words, do not miss a single opportunity to learn. Just be open to any kind of learning.

4. Nurture your friend base
I am realizing that most of the tasks get done due to the relationship one share with his/her friends instead of logic behind the task. Sometimes, we argue a lot about a particular task with a person but if we share great rapport with the person, the argument reduces. One's friends are their business managers in the beginning when one can not invest much money in marketing. At times, one's reach in market is directly proportional to the friends one has in the beginning. Needless to mention, do help your friends in need, share life with them and one might get unbound, limitless opportunities.

5. Build your network
Who can dare to deny importance of network in coalition days? Do attend most of the business events (like, startup fairs etc), attend trainings, Alma mater, from very beginning. Nobody can predict that which relation may help you in getting some assignments. Do initiate/ involve in community service projects as it might help in building goodwill and some good friends.

6. Understand customer base
Synonym to business is customers. Do some amount of research on what industry segment one wish to enter, what problems one is trying to solve, who can be potential customers etc. Have a discussion with few potential customers to understand their challenges, pain areas and wish lists. It might help you in refining your approach.

7. Prepare business plan
Enough is written on need of business plan and one can do google to know enough on this topic. Point is that one need to keep end in mind, have a clear vision & mission statement and a plan to achieve them. Planning is like setting strong foundation and validating your thoughts with industry veterans. It is indeed even more important if one is looking for investments.

8. Business vs Service
Each business addresses some or other need of society hence it does have a social linkage. Society at large must feel benefited with that business. The degree of benefit may vary. New company must highlight that how do they plan to create more value to society. Define the USP (Unique Selling Proposition) or in minimal words, explain your unique offerings or value to society.

When one does business than always have your interests in mind and be clear on that. In other words, service is done with more involvement of heart while business is done with more involvement of mind hence have a clear distinction between these. In nutshell, no space for intuitions, collect as many as facts possible before the jump.

9. Plan distribution of equity
If you have many partners and investors than must plan equity carefully. One of the major factor of loosing trust can be this. Choose your partners carefully with whom you share trust. It does not matter that how long you have been knowing them but it does matter that what is the general perception of the each individual. Building competence is easier at times than building trust.

10. Unique identity of company (Logo, name, website etc)
For some reason, I do not see parents naming their son / daughter with very old names , like, mine. There is lot in name and its important that we understand it. If one wish to create its own brand, do not copy some already published name, like lets refrain from naming your company Petsi in line of Pepsi. It might not give impression of creativity. Name of company should reflect your line of business.

Logo is something which should reflect theme of the company. It can be a simple line if one can explain rationale or theme behind it. It should generate curiosity among onlookers and they should ask you that why did you do it this way.

Website is one's identity in faceless world. It is never complete and one will always find scope of improvement. Have a basic website ready to launch as early as possible. With so many open source frameworks (content management system, like, Joomla) available, it is very easy to build website with minimal technical knowledge.


Not sure, where this journey will take me but I just thought of putting my thoughts and one may provide his/her feedback that does it look enough or am I missing any important point.

Bye for now..
Hariprakash Agrawal (Hari)
http://opcord.com - Optimizing with Coordination