jitha, Author at So it Goes.

Your brain is a muscle. Here’s how you give it a workout.

jithaApril 16, 2015 3 Comments

I asked this question on Facebook last week, and got a lot of suggestions (thanks a lot, folks!). There were several great ideas for exercising the brain, but I also got one saying, “The brain is not a muscle. It’s an organ!”. So let me be the first one to say it here – of course the brain is an organ. But it does have some properties of a muscle – for instance, it can be trained and made more powerful, more agile, and sharper.

So, assuming you’re with me on the muscle metaphor, how can you exercise your brain every day?

Before we go on, let’s talk about the different facets of the brain – the different skills that you can hone. Now, scientifically, there are many different ways to look at this. One article lists five different brain-skills, and Wikipedia’s page on Cognitive Development lists seven! But for all practical purposes, I think of three distinct skills to exercise:

Agility – the speed and nimbleness of your brain. I’m sure you have those days, every once in a while, when it feels like your brain is fogged up, and you’re sleepwalking through your day. On those days, your brain is the opposite of agile. And you can fix that (unless it’s due to a hangover; everything has limits).
Creativity – The thinking brain, at its most basic, is a pattern recognition device (I’m really going with the metaphors here). Even its primary function of building and retrieving memories is built on pattern recognition – that’s why, when you’re thinking of something and you let your mind wander, you find you’ve reached quite somewhere else. Most of the time, these seemingly random connections happen at the subliminal level, and you suddenly realize you’ve answered the very question you’re grappling with – that’s what Eureka moments are. This kind of creativity can be manufactured as well. You can train your brain to see patterns where others don’t, and come up with insightful ideas – which is what creativity really is.
Memory: This is the biggest bugbear for our overburdened minds today. In this age of hyper-information, how do we remember everything of consequence, and extract it from our brains at the right time?

Let’s take these three areas one by one:

1. Agility:

The adage “Healthy mind in a healthy body” rings perfectly true. If you’re not sleeping well and exercising regularly, then that’s what you should do first to make your mind more agile. Nevertheless, the different exercises below help quite significantly.

a. Learn a new skill

Whenever you learn a new skill, you create new neural pathways in your brain – making it fresher and more active. That’s why you feel more energetic whenever you learn something new. When you learn to play a musical instrument or dance, you are learning physical skills; but they have an impact on your brain as well. You’re learning a new way to use your limbs, so to speak, and that creates new routines in your brain.

I started learning Krav Maga, a self-defense technique, last year. For a pacifist like me, this is as new a skill as one can imagine. And over the last 15 months, whether or not I’ve become better at protecting myself (I still get beaten up by the wife), I definitely feel a lot more energetic, both physically and mentally.

b. Use Elevate

If you use an iPhone / Android smartphone, you must try Elevate. It’s an app that gives you a few brain exercises every day, across several areas – math, reading comprehension and agility, speaking precision, listening, etc. It takes just 5 minutes every day, and you’ll feel the difference in a matter of days.

I’ve been using Elevate for a few months now, and swear by it. Doing such thinking exercises every day sharpens your brain – builds a muscle memory, as it were (yes, I know the brain is not a muscle). And the best thing about the app is that it always challenges you. As you get better at these exercises, so do they get harder. And this constant effort at the boundary of your abilities is what makes you stronger – again, just like building muscles at a gym (OK, I’ll try to stop with the analogies now).

In summary, this is an excellent app to use. If there’s one thing you do after reading this post (apart from sleeping well and exercising) – download Elevate.

c. Meditate / Practise Mindfulness:

In our rush to get the most out of life, we tend to optimize away our time (I know I do). Do this for too long, and you face burnout.

Sometimes, you need to simplify, slow down, and clear your head. And meditation is a great way to recapture your energy. But you don’t have to sit in one place in padmasana and try and blank your mind. Rather, meditation is more about concentrating – concentrating on your breath, your limbs, etc. And meditation is closely related to mindfulness, or paying close attention to what you’re doing and thinking. And you don’t have to sit down to be mindful – focus when you’re doing even mundane tasks (like folding clothes). You’ll find that by the time you’re done (unless you’re doing laundry after a very long time), you’re the fresher for it.

I try this sometimes when I’m stuck in traffic on the way home – I keep my phone aside, and pay attention to what’s going on around me. That way, when I get home, I’m rested rather than frustrated, and rearing to get to work again. As they say, when life deals you lemons…

As an aside, if you want to learn meditation, Headspace and Calm come highly recommended. I’ve never tried them, but do give them a spin. And tell me whether you like them.

d. Daily writing:

I strongly recommend this as well. Every day, maybe just before going to sleep, write 500 words. You can write about anything – your day, a funny incident, an observation, anything. Putting your thoughts down helps you structure them and clear your head. And there’s nothing like a clear mind to dump more thoughts and information into.

Incidentally, this is why I started this blog – as an outlet for all my thoughts. Writing forces me to make sense of them, and draw out coherent implications. It also forces me to be rational – if I write about the different ways of being more productive, I HAVE to practise them myself. Can’t just keep giving gyaan (if the wife were to read my blog, she would roll her eyes here).

2. Creativity

From as far back as I can remember, I’ve heard people talk about the left brain-right brain framework. People who are more analytical, logical and deductive are “left-brained”, and those who are more intuitive, subjective and creative are “right-brained”. I was always “left-brained” – good at math, computer engineer. People with liberal arts backgrounds are considered more creative, and “right-brained”.

However, not only is this left brain-right brain belief a myth, creativity is also something that can be learnt and cultivated. How do you do it? By strengthening the pattern recognition machine in your head. And how do you do that?

a. Creativity exercises:

A number of exercises help you train your brain’s creativity and improve your ability to come up with ideas. These may or may not have any real-world application, but each of them make you focus your mind on a particular problem and work at the boundary of your creative ability – thereby extending those boundaries too.

Make lists: I first read about this on James Altucher’s Blog. In a post with the most over the top title ever (The Ultimate Guide for Becoming an Idea Machine), Altucher lays out a simple thesis for becoming more creative. Make lists of 10 ideas every day. But ideas for what? Whatever you want – 10 books that changed your life, 10 startup ideas in education, 10 blog posts to write, 10 knock-knock jokes, anything. This sounds random, but it works. Let’s say you try and make a list of 10 things you learnt from the last book you read – you’d probably be able to think of 3-4 very quickly. The next 2-3 will make you sweat a little. And the last 3 will tax your brain – the proverbial heavy lifting where muscles get made. Make these lists every day, and your idea muscle will, slowly but surely, grow stronger.
And every once in a while, you’ll come across a great idea that you cannot but follow through on. Starting my blog, creating the Startup Weekly newsletter, many of my blog posts (including this one!) are all, in one way or another, the result of this simple exercise that I do every morning on my train ride to work.
Logical Puzzles: Logical puzzles, or lateral thinking problems, are a great way to practise thinking ‘out-of-the-box’. Doing such puzzles every so often, whether you get them right or you peek at the solution (I am an inveterate peeker), introduces you to different mental models or approaches to problem-solving, which will definitely stand you in good stead in real life (if only to amaze job interviewers who give you a puzzle you’ve seen before). There is a reason that ‘thinking out of the box’ has become such a cliché – it works, and while it can’t be taught, it can certainly be cultivated.
As a sample, try out this exam question that has taken the Internet by storm. And you can find many more online – just search for ‘logical thinking puzzles’ on Google.

b. Read books:

Books are a great way to expand your horizons, broaden your thinking, and build new patterns in your brain. Everyone should read. Whether you read 10, 20 or 50 books a year, you should read. They say experience is the best teacher, but you can only experience one life. Why not learn vicariously from the experiences of others – stand on the shoulders of giants, in Newton’s words?

Some people I know read only fiction, and others can’t bring themselves to read anything other than non-fiction. I read both. Fiction, especially science fiction, helps expand your idea of the possible. And non-fiction grounds you, so you can apply these patterns to the real world. That sounds either way too abstruse or too fluffy, but you hopefully get the idea.

3. Memory

Memory is strongly related to Agility – the same things you do to improve your agility also improve your memory. So, sleeping well, exercising, clearing your mind from time to time, using Elevate – all help improve your attention and your memory. In addition:

a. Take notes. And review them:

I’ve written before about the advantages of making notes. Using a software like OneNote or Evernote to capture your thoughts helps you remove the open loops from your brain and free your mind to make more memories. I also use these to capture notes from books I read, interesting articles, etc.

But taking notes actually takes stuff OUT of your memory. How then is it strengthening it? For that, you need to review your notes from time to time. What we hear / read goes into our short-term memories. Reviewing these periodically gradually puts them into long-term memory (I’m sure the real process is far more complicated, but this is a simple working understanding).

I do this for every book I read, and I go through my notes from time to time. Done right, this is as good as re-reading the book – you refresh your memory of the key learnings from the book. Of course, making notes is slightly tedious. But think of it as just taking 10% longer to read a book.

b. Learn a new language:

Learning a new language has many advantages. A key one is that it helps you improve your memory. As you try and establish new patterns in your head to remember the new words you’ve learnt, you also evidently reengage old patterns. I strongly recommend Duolingo and Memrise for this. While Duolingo is the more popular one, Memrise helps you build more sticky memories – it encourages you to associate an image with every word, so that you can leverage not just your memory, but your brain’s pattern recognition machine as well (if there’s one term I’ve overused in this blog post apart from the muscle metaphor, it’s pattern recognition).

So there you are. To summarize (TL:DR): To strengthen your brain – sleep well, exercise, learn new skills, read a lot, write a lot, and use Elevate. And yes, take a break and clear your mind once in a while.

I was hoping this post would be shorter than my usual fare, but well, I hope that every time. Maybe next week. In the meantime, would love your thoughts on this post. Do especially tell me if there are any other things you do to exercise your brain. Comment here, email me at [email protected], or tweet at @jithamithra.

The reading list that transformed my professional life

jithaApril 8, 2015 7 Comments

6-9 months ago, when everyone was posting lists of the top 10 books they read, I was unfortunately busy with work. And then, when I wanted to post my own list, it was much too late to do so – people had moved on to sharing Upworthy articles instead.

Nevertheless, what’s far more useful is to talk about the top things I learnt from books – the ideas, insights, stories that changed how I think about life and work. After all, that’s why you read books – to improve yourself in some way – isn’t it? Well, at least all books apart from the Twilight series.

So, here are the 5 ideas that transformed how I think about life and work, and the books I read them in. Rather than describing these ideas in detail, I’ll also share links to articles that offer a short version. But I would definitely recommend you read the book themselves too!

1. System 1 vs. System 2 Thinking – Thinking Fast & Slow

An understanding of psychology is, in my view, an essential skill for anyone whose daily life involves interactions with other people to get stuff done. The human mind is not only not rational, it is also irrational in a few consistent and repeatable ways. Understanding these cognitive biases and fallacies that we suffer from can go a long way in helping you get what you want in interactions with people.

[Tweet “The human mind is not only not rational, it is also irrational in consistent and repeatable ways.”]

One of the key concepts I’ve come across in this area is that the human mind is really two distinct personalities – let’s call them System 1 and System 2. System 1 is the more automatic, quick-and-dirty, heuristic based, lazy thinker – get to an answer quickly by applying habits and patterns, often at a subliminal level. System 2, on the other hand, applies more careful, overt deliberation to any problem, coming to a solution in a more considered manner.

At any time, you’re thinking in one of these two modes. For example, when you’re doing math, you’re carefully thinking of the problem and solution – that’s System 2 in operation. When you’re tying your shoelaces, you’re usually not thinking about the loops and knots actively – you just do it. That’s an example of a System 1 task.

Now, at most times, the mind defaults to System 1 – which tries to recognize and apply patterns without thinking too much. And the result is that it can get tricked in fairly predictable ways – what we call cognitive biases. Two examples of these are anchoring (where an initial number suggested to you often influences your answers to a numerical question) and availability bias (you tend to overestimate the probability of an event if you can remember examples – this sometimes results in people paying more for earthquake insurance than insurance for natural calamities – even though the latter includes earthquakes!). Won’t go into detail on these biases here – you can read the articles I’ve linked to, and the book. But I’ll blog about them soon too!

Another interesting implication of the dominance of System 1 is that you can trick your brain into certain emotions. For example, you know that when you’re happy, you tend to smile. But did you know that this can work in reverse – that you can trick your brain into happiness, by simply smiling? This was a ridiculously amazing insight for me – to know that causality works both ways, and I can control my emotions. I’m a ‘moist robot’, in Scott Adams’ words.

Book: Thinking Fast & Slow – one of the best books I’ve read – and I actually prefer fiction.

Further reading: 15 Lessons from Behavioural Economics – Slideshare, Scott Adams on Programming the Moist Robot

2. Making Skewed Bets – Fooled by Randomness & Antifragile

When I was in business school, I read Fooled by Randomness, by Nassim Taleb. At that point, I thought it was the best book I had ever read – so many brilliant ideas, one after the other. I read it again recently, and while I’m a little less effusive, it’s definitely worth a read – it’s long-winded and unnecessarily complicated in parts, and the language is often self-absorbed – but if you can look beyond that, the insights will hit you at an unrelenting pace.

But the most important insight for me – in that it almost exclusively governs my world view since I read it – is that of making skewed bets. The world is innately random – your success depends far more on your luck than on your ability. At first glance, this seems to encourage laziness. Why work hard when your destiny doesn’t depend on it? But looking deeper, the implication is that you should try and expose yourself to ‘positive’ luck as far as possible, while limiting the impact of ‘negative’ luck. In simpler terms, expose yourself to very high upside, while limiting your downside as far as possible.

This is called making a skewed bet – where if you win, the gains are a windfall; but if you lose, you don’t lose that much. A lot like financial options or a startup – if you make it, you make it. And if you fail, then your losses are limited – the cost of the option, 1 year of salary, etc. Of course, the probability of a loss may be 90%. But if you make 10 skewed bets, then you’ll make a windfall gain on 1 of them – and that may be more than enough.

Another important way to keep yourself open to good luck is by simply staying on the field. Thomas Edison got the light bulb right on his 1000th attempt – and that happened only because he kept trying different things, and didn’t give up after 999. To surf a ‘killer wave’, you need to first be in the sea, navigating the 100 tepid waves before.

[Tweet “To surf a ‘killer wave’, you need to first be in the sea, navigating the 100 tepid waves before.”]

Book: Fooled by Randomness. Antifragile, a subsequent book by Taleb (even better), actually takes this one idea and distills it far more.

Further reading: The hard part about surfing

3. Goals vs. Systems / Success as a process- How to fail at almost everything & still win big

Taking the previous point further – success, then, seems to be a process rather than a brilliant idea, inch-perfect execution or just good luck. Try a lot of different things, observe, learn, and iterate. So that you slowly, over time, collect all the right materials for the magnifying glass of luck to ignite. You do all the right things and keep improving, so that when Lady Luck knocks, you’re ready.

Success is therefore a system (take several skewed, high-reward/low-cost risks), rather than a goal (I want to get rich). Now that’s at a macro-level, but this makes sense even at the micro-level – rather than adopting a goal of doubling your user base and throwing money at it, take a systematic approach of trying different things, observing, and then betting the farm on the 2-3 marketing techniques that work.

Scott Adams (of Dilbert fame) carefully charts out this approach in his book.

Book: How to fail at almost everything & still win big. I would venture that this is one of the best and most actionable books I’ve read. But read at your own peril – as they say, one should be careful when taking life and business advice from a cartoonist.

Further Reading: Goals vs. Systems – a short blog post applying this concept to life in general.

4. Power Laws, or why working hard is not enough – Zero to One

I’ve already blogged about this here, but it’s worth reiterating. Today’s business world is not a normal distribution, with most people distributed around average payoffs. Rather, it’s an exponential distribution – very few companies will make most of the money to be made. Therefore, success depends far, far more on what you do, than on how you do it.

In a power law distribution, very few sample points account for a majority of the population’s value.

The power law will permeate all your decisions (e.g., one marketing hack will drive 90% of your traction, one product feature will drive 90% of repeat users, etc.). Won’t go into more detail here – definitely read the post!

[Tweet “Success depends far, far more on what you do, than on how you do it.”]

Book: Zero to One

Further reading: The Power Law, or why working hard is not enough (my blog post, again)

5. Attractor States – Good Strategy Bad Strategy

The previous three concepts have all been around the idea of work and success. This one is different, and is a tool that I’ve found quite useful in jump-starting creative thinking about problems.

Let’s say you’re trying to think of a startup idea in a given space. You could look at what users do now, what they buy, how they consume, etc., and try to find areas where you can add value. Or, you can look at how the industry will inevitably evolve in the future and see how you can accelerate that.

The author calls this concept an ‘attractor state’ – given industry trends today, what do you see as the logical next frontier over the next 10-20 years? And how can you participate in that, rather than making incremental changes to the status quo? To paraphrase Wayne Gretzky, the ice hockey legend – don’t skate to where the puck is, but to where it will be.

This is a slightly nebulous concept, so let me provide an example. Let’s say I want to create an offering in the payments space. One option is to join the crowded current market, and provide a mobile wallet solution, a payment gateway, etc. Another way is to think of where the industry will be in 10-20 years – its attractor state. I’m not a payments expert, but seeing how it has evolved over time (barter -> gold -> paper money -> credit cards -> mobile wallets), there’s a clear trend towards individualization. The reasons mobile wallets are a great innovation is that everyone carries a mobile today, and they don’t share mobiles – it is a unique identifier of a person. Taking this individualization further, the next wave of advancement has to be biometrics – where unique characteristics of your person (iris, voice patterns, fingerprints, etc.) are your identifier, based on which transactions can be completed from your account. You don’t need to whip out your phone or credit card – just staring at a tiny lens is enough to connect to your payment account.

How does this help an entrepreneur? With this end-game in view, entrepreneurs can think about how they can add (and capture) disproportionate value in the long-term – the products and services they can start building today, to accelerate the attractor state. In the case of payments, it could be future biometric sensors, systems for collating massive customer data, POS terminals for accepting payments, etc. – each of these possibilities could be game-changing.

[Tweet “”Don’t skate to where the puck is, but to where it will be.” – Wayne Gretzky”]

Won’t go into much more detail here – but I’ll write a blog post or two on this concept soon. I find it an incredibly powerful way to improve your creativity when thinking about problems and solutions.

Book: Good strategy Bad Strategy. Apart from a discussion of attractor states, this book also has a great discussion of chain linked strategy and focus as a source of competitive leverage. I’ve blogged about this here.

Further Reading: Will write a detailed post on this soon!

These are the five concepts from books that changed my world-view. It may be asking too much to hope that they fundamentally alter your thinking too, but I hope you find these perspectives and books interesting. Do comment!

PS. Have you signed up for the Startup Weekly yet?

Why Taj is the best customer service company in the world

jithaMarch 31, 2015 4 Comments

I stayed at a Taj Hotels property in Delhi last week, for a conference. And I was blown away by the customer service there. Thinking back to my days as a business consultant, I stayed at several hotels across the price spectrum while traveling. But Taj hotels – whether Gateway, Vivanta or the higher-end ones – were always head and shoulders above the next best ones. Why, even when I’m just visiting a Taj for a meeting, the customer service there is superior to other hotels that I may actually be staying at.

But this post is not about why Taj is the best hotel. It’s about why it’s the best company, across sectors – how it embodies customer delight like no other company.

Over the years, I’ve interacted with a bunch of companies that excel at customer service. Amazon, for one, always has me marveling at how wonderfully well it treats its customers. Whether the big stuff (the ridiculously good deals that it offers with Prime and the Kindle) or the small (you don’t have to call Amazon if you have any issues; rather, they call you), Amazon has got your back. Many of Amazon’s customer service decisions fly in the face of its bottom line, but they are guaranteed to make customers happy – and Amazon always trades off in favor of its customers. It’s not for nothing that its stated vision is “to become the Earth’s most customer centric company”

But whether Amazon or Zappos (which introduced the “Try different shoes, and send back the ones you don’t like” model), excellent customer service feels ‘processified’. So, over time, these become expected and fail to surprise you anymore. So, while you would become a loyal customer of Amazon (I am), you’d not necessarily become an advocate (I wouldn’t write a blog post solely extolling its virtues). This is excellent customer service no doubt, but it’s not customer delight.

With Taj hotels, on the other hand, customer delight is present in every interaction with guests. The staff – whether in housekeeping, at the restaurants, or room service – all perform random acts of kindness that leave you surprised. So, rather than a customer service process, a customer service culture shines through. When I was preparing for this post, I could remember at least 10 examples of how their customer service left me spellbound. I won’t share all 10 (I wanted to write a short post for a change), but here are a few:

An ex-colleague of mine broke his suitcase trolley while in Nairobi on a project. He tried everywhere, but couldn’t get it fixed – the standard advice was “Buy a new suitcase”. After two weeks of lugging it around on one wheel, he had become inured to the inconvenience. But the moment he entered the Taj Palace in Delhi, the bellman came up to him and said “Can I get that fixed for you?” This was over 4 years ago, but he still uses that example to highlight the ‘jugaad’ innovation approach in India. I think, though, that the lesson is far deeper – he would not have received the same response at every other hotel.
During my most recent visit, the waiter at breakfast remembered that I had ordered a dosa on the first day and brought it to my table himself the next day. I marveled to myself for a bit about how, among a multitude of guests, he remembered what I wanted. But when I started eating, I realized that he had also remembered what chutney I hadn’t touched the previous time – it was missing from my plate! I was quite spellbound at the detail-orientedness that goes into their customer service (and remember, they don’t have big data algorithms churning at the back!). And this is not necessarily designed to show every customer they care – if I wasn’t similarly detail-oriented, I may not have noticed. This is not lip service customer care – they genuinely want guests to feel comfortable.
From the previous example, you may have guessed I have OCD. But the hotel housekeeping staff didn’t know that. Yet, when I returned to my hotel room after a conference session, I noticed that they had velcro-ed all the stray charging wires I had left hanging from plug-points. A great convenience, but one many guests are liable to not notice. But ones that do are guaranteed to be pleasantly surprised at how customer delight permeates every single interface with the Taj’s staff.
This stellar customer service is not restricted to the hotel’s guests. I had a meeting at a Vivanta once, and I was an hour early. I ordered coffee at the hotel’s restaurant, and was quite a prima donna about it – I asked them to bring it to the lobby (quite a distance away), as there were no free plug points at the restaurant and I wanted to charge my laptop. Not only did they cheerfully comply, they were equally cheerful in saying that it’s on the house when I asked for the cheque an hour later.

A common theme across these examples is the element of surprise. And I think it’s essential. This tiny overlap of excellent customer service and complete unexpectedness is what really creates customer delight.

[Tweet “The overlap of excellent customer service and complete surprise is what creates customer delight.”]

Another critical element of customer delight is service recovery. Anyone can smile pleasantly at genial and benign customers. But how do you rescue a negative situation – a disgruntled customer, an overturned wine glass, a missing booking, etc. – in a way that transforms the irate customer into a loyal one? Sure, you can create many customer-friendly policies like a free dessert or a large discount to defuse such situations, but to truly delight even the most agitated nay-sayer, you need to go above and beyond. These extreme cases are what distinguish merely excellent customer service companies from ones that delight customers.

And the Taj staff came through in what is perhaps the most extreme case of all – the 26/11 attack in Mumbai, when terrorists laid seige to the Taj Mahal Palace hotel at Gateway of India. Numerous employees, in different parts of the hotel, were instrumental in shepherding the guests to safety – all of them made sure that guests came through unscathed. They were the last men out. And in some cases, they did not get out.

[Tweet “Extreme cases are what distinguish merely excellent customer service from true customer delight.”]

The Taj has thus created a culture – not a mission, not a process – of customer service. And unlike a mission statement “We exist for and because of our customers” that’s only read out sonorously at company meetings, this has trickled down to the lowest level employees across departments – employees are empowered to make customers happy, even if it means extra costs.

This willingness of Taj’s employees to go beyond their remit – in both traditional and extreme situations – is how great customer service stories are made.

I can’t afford to stay at the Taj whenever I travel, but it’s one hotel I look forward to visiting, even if just for a meeting. Do you guys have any other examples of such companies – where you look forward to just interacting with them? Would love to hear about them – do comment below / mail me at [email protected] / tweet at @jithamithra. And yes, do subscribe – I post roughly once a week, on startups, business models, consumer behavior, etc.

PS. I’ve just started a newsletter called The Startup Weekly with Abhishek Agarwal, a close friend, curating the most interesting articles, case studies, etc. for startups that we come across every week. It would be a good addition to your inbox. Sign up here – the second issue goes out this Saturday! And here’s a link to the first issue, in case you need some more convincing!

Sometimes, good old focus can be a competitive advantage.

jithaMarch 25, 2015 2 Comments

We constantly read about companies that have created barriers to entry – through technology, intellectual property, large-scale manufacturing, or sometimes even by throwing a ton of money at a problem. For startups, this barrier to entry is a constant refrain, especially in conversations with potential investors – “What’s your barrier to entry? What asset are you building that’s hard to replicate?”. And this is a hard question with no easy answers, especially for a young company that’s not building a high-tech, proprietary product – a bigger competitor with deeper pockets could appear at the ramparts anytime, and replicate exactly what you’re doing.

But what if just focus on a particular user segment could help you develop a competitive advantage? What if expending all efforts to serve a particular market niche or user segment could help you unearth a resilient barrier to entry?

I read a book called ‘Good Strategy Bad Strategy’ last year and was struck by how insightful it was. I’ve revisited my notes from the book at least twice now, each time capturing a new nuance. It’s a must read for students of strategy, advisors on strategy, and practitioners. Having been all three (in that order, oddly enough), this is right up my alley.

The book had many great ideas on sources of power for companies – what gives a company lasting supremacy in its market. One idea that stayed with me was of single-minded focus – how focus on a particular type of user can be a sustainable source of power or competitive advantage. How would this work? Let’s dig in – this feels like another 1800 word post.

Any company’s business model has 9 different parts, as below:

Source: Strategyzer.com

The author, Richard Rumelt, points out that to focus on a specific user segment, you need to make coordinated changes across multiple or all parts of your business model. Thus, your final offering to the customer is a sum of many moving parts that have all been finely configured – a sum that, as the cliché goes, is more than its parts. Applying such focus takes incredible coordination of policies, which, along with their interlocking and overlapping effects, can then confer unassailable advantages and make you a hard act to follow.

I know this seems very philosophical (a little like bad strategic advice!), so let’s look at a few examples to illustrate this better:

1. IKEA

Rumelt uses the example of IKEA to illustrate this concept. IKEA is a furniture retailer that sells ready-to-assemble furniture. It targets do-it-yourself or DIY users, who love the feeling of putting something together. It has been hugely successful across multiple countries, but 70 years since its founding, no credible competitor has appeared or lasted. That’s sustainable competitive advantage!

IKEA has no secret sauce in terms of patented technologies for furniture, greater marketing strength, etc. The source of IKEA’s lasting advantage is, instead, the coordination between the different elements of its business model to serve its target segment. For a competitor to challenge IKEA, they don’t just have to sell ready-to-assemble furniture – they’ll have to change their whole business model.

They’ll have to design new types of furniture;
They’ll have to start carrying larger inventory;
They’ll have to create their own, branded stores; and
They’ll have to change their selling models.

Thus, copying IKEA is not a simple matter. IKEA’s policies are so different from the norm in the furniture industry that any competitor would have to replicate ALL of them to meaningfully compete for the same user segment. Adopting one or two of these policies and implementing them, even perfectly, would be useless – it would add huge expenses without providing any real competition.

2. Apple

Apple is another example. Over the years, Apple has targeted its products at premium customers who want a superior experience – well-designed products that just work. They’re not interested in the most technologically advanced products with the most bells and whistles – they want products that do their job simply and well. Oh, and there’s snob value too.

Apple has made several interdependent decisions to target this group:

Complete ownership of the product: Take the iPhone. Unlike its closest competitor, Android, Apple controls the entire product – the OS, the hardware, user interface, etc. This allows it to deliver a very coordinated and quality user experience.
Complete ownership of computer ecosystem: Moreover, Apple coordinates the experience across all its products. The Apple ecosystem can satisfy all your computing needs – desktop, laptop, tablet, phone and music player. All of these products follow the same design language, and work together seamlessly – they sync with each other very easily, without any need to fiddle with system settings.
Branded retail stores with a luxury experience
Marketing mainly to premium customers who don’t mind spending more – this not only raises product revenue, but also increases the long tail of revenue from app store downloads, music downloads via iTunes, etc.

The reason Apple’s position in the market is unassailable is that a competitor can’t just copy one or two things to start selling to the same group of customers. The competitor would have to copy everything, a formidable task even for very nimble companies. And copying sequentially won’t work – you can’t begin to deliver the Apple or IKEA value proposition without copying everything from the outset, in a coordinated manner. Which is why, even though Android and its partner OEMs have copied a lot of product design elements from Apple (in fact, the first Samsung Galaxy S was an iPhone in all but name), they haven’t been able to displace Apple from its position as the proprietor of all things cool.

Thus, the business models of IKEA and Apple are like a chain – multiple independent elements interlock to engineer a truly durable value proposition. As for a competitor, the flipside of a chain-linked model applies – your proposition is only as strong as your weakest link. Focusing on strengthening just one or two aspects of your model won’t increase your ability to compete even one bit – you need to strengthen everything, all at once.

Let’s try and apply this mental model of a chain to a few other sectors. Are there other companies as well, which have used focused, chain-linked business models to derive competitive advantage?

3. Wal-mart: In the 60s and 70s, Sears and Kmart dominated retail. But they mainly served large towns or cities that could ‘support’ a large retailer. Wal-mart changed the game by creating large-format stores away from cities, allowing enormous spaces at lower costs. It positioned itself as a ‘discounter’, something other players avoided like the plague. And it was able to make money while offering deep discounts, through several interlocking innovations:

Extremely wide product portfolio with deep discounts on some products, cross-subsidized by other high-margin products
Cutting-edge technology to track customer purchase behavior, and tailor portfolio accordingly
Agile supply chain, keeping its stores well-stocked with the right products very efficiently

Thus, several innovations, all focused on offering products at the lowest prices, gave Wal-mart lasting competitive advantage. By 2002, Wal-mart was the largest retailer in the world, and Kmart was bankrupt.

4. Dell: If you wanted to buy a desktop in the US in the 80s or 90s, your only options were to either buy a standard configuration through a retailer, or buy individual PC components to customize the machine yourself. Unless you built the PC yourself, you did not get much choice in the product or configuration you wanted. Dell saw an opportunity to change this by offering customized configurations, and thereby targeting the more technologically adept consumer.

Dell took a number of hard decisions to make this happen. It created an easy to use online / phone interface for users to configure computers of their choice. It delivered this promise through a mass customizing production process, and built a direct-to-customer distribution channel. None of these decisions were easy to replicate even singly, much less in lockstep. The result – a lucrative business model that stood unchallenged during the PC boom of the 90s.

OK, these are standard business school case studies. Let’s look at a few newer companies.

5. Innocent: The British healthy drinks / smoothies player has built a strong position in its home market. Innocent offers health-oriented users very fresh fruit-based drinks – their promise is, zero preservatives, only natural fruit. Offering this focused proposition means a number of business model decisions – sourcing the best fruits only, producing for short shelf life, faster cold chain logistics to get the product to retailer shelves very quickly, and so on. All separate decisions, coordinated to deliver user value. Competitors have found it very hard to replicate this – Pepsico, after years of trying to compete in this market, finally bought a smaller competitor to gain a toehold.

6. Zara: Zara has carved itself a preeminent position in the ‘fresh fashion’ space. Zara’s stores are always stocked with the latest trends – Zara gets clothes from design to outlets in 10-15 days flat. And it has done this by tailoring multiple parts of its operating model to accentuate this speed:

Much larger design team than other apparel brands – its 200 designers ensure a steady flow of new designs, taking advantage of the latest trends and feedback from customers.
While most apparel brands manufacture in China, Zara manufactures in Europe close to its main markets – this gives it a head-start of at least 1.5-2 months.
Short production runs, with limited quantities – Zara doesn’t run more than one production cycle for most of its products. If a particularly striking outfit runs out at its stores, that’s it. You won’t see it again. From a user’s point of view, this drives a purchase decision faster. If you plan to come back tomorrow to buy a dress, it may not be there.

Putting these aspects together, other brands find it very difficult to catch up with Zara – all of these are major business model revamps that are difficult to pull off, whether alone or in coordination with each other.

These and several other successful companies show that focus and coordination can create a massive barrier to entry and lasting competitive advantage, keeping challengers at bay for years to come. It’s a telling reminder to businesses – you don’t need cutting-edge technology or a massive fund-raise, just good old-fashioned customer service will do!

What do you think? Are there any other consequences – positive or negative – of focusing your business model on a specific user segment? Would love to hear from you – mail me at [email protected], tweet at @jithamithra, or comment here on this blog. And do subscribe here – I post roughly once a week, on startups, business models, consumer behavior, etc.

PS. I’ve just started a newsletter called The Startup Weekly with Abhishek Agarwal, a close friend, curating the most interesting articles, case studies, etc. for startups that we come across every week. Would be a good addition to your inbox (so much for conquering it). Sign up here – first issue goes out this Saturday!

How to conquer your inbox and reclaim your life

jithaMarch 16, 2015 4 Comments

Shilpa (the wife): So, what did you do at work today?
Me: Quite busy today. You know, emailing.

A standard exchange for me at the end of a workday, till recently. And I’m sure it’s commonplace – the average professional today sends or receives over 120 emails a day. At even 2 minutes an email (assuming you don’t take breaks), that’s four hours of your workday! Vanished, lost, gone, hacking away at your keyboard fighting the insidious email monster, while the rest of the world moves on. Wait, scratch that. Everyone is hacking away at their keyboards, emailing each other.

But email is not really work, at least for most of us. And if something that isn’t work is taking up such a large part of your workday, guess what – you’ll have to work longer hours.

Over the last few months, I’ve made a number of changes that have helped me manage my inbox better (rather than the other way round). If you’re like I was before – where work equals emailing – here are 7 things you can do to reclaim your life.

1. Email only at specific times

Back in the days of snail mail, did you hang out near your mailbox and wait for the postman? Then why check your inbox all the time? People aren’t expecting you to respond 5 seconds after they email you.

So here’s a plan:

Check your inbox first thing in the morning when you wake up (not good, but I know you’re going to do it, so why stop you). Decide which emails you’re going to respond to, when. If there’s work required to respond to any of it, fit it into your schedule.
Don’t check again till about 11 am. Spend half an hour if necessary, clearing a bunch of emails.
After that, check again at 2pm, and then once more at 5pm to triage any pending emails

At all other times, don’t check your inbox. And no cheating – log out and close your browser, close Outlook / Thunderbird, and turn off email notifications on your phone as well (got you! I’m nothing if not meticulous).

[Tweet “Do you hang out at your mailbox and wait for the postman? Then why check your inbox all the time?”]

2. Schedule less time for email than you need

If you read my previous post on productivity and are trying some of my tips, you would see the merit in actually scheduling time for email, rather than checking it whenever you’re bored.

The other little hack is to schedule less time for email than you need. Email, like work and play, balloons to take up the time you give it. There’s nothing like some urgency to plow through your inbox – your emails can get done in less time than you think.

[Tweet “Email, like work and play, balloons to take up the time you give it.”]

3. When you’re done with an email, archive it

Using the mailbox analogy again, once you’ve read a letter, do you put it back in the mailbox? Similarly, when you’re done with an email, don’t keep it in the inbox. Archive it (or better still, delete it. If you dare).

Archiving takes emails out of your face once you’re done with them. Your inbox now includes only the emails that you have to work on – much simpler to decide what to do. Otherwise, it can become difficult to find emails that you have to act on, amidst the barrage of less-important emails, newsletters you don’t remember ever signing up for, promotions and spam. Not to mention how a full inbox tires you each time you look at it.

Sure, you can change your Inbox settings to keep unread emails on top. But those other emails that you see will continue to distract you.

Avoid all these complications – archive emails that you’re done with (if you use Gmail, it’s the first button that comes up in the header when you select an email). If an email is in your Inbox, it means you have to act on it. And you can always go back to your Archive (it’s the All Mail folder in Gmail) whenever you want to access an old email, and search works too.

But this is not enough. Which brings me to the 4th hack.

4. Triage your email with Google Inbox / Mailbox

The freedom that you feel when you first archive your inbox is great. But it won’t last – it still doesn’t solve the problem of your pending emails, which can quickly pile up. Let’s say there’s an email task that you need to get to two days later. It’ll sit in your inbox till then, serving as a constant reminder (and distractor), till you actually do it and archive it with a victorious flourish (before flopping down in your chair in sheer exhaustion).

People solve this problem by ‘starring’ emails they need to take care of, but can’t or don’t need to do today. If you’ve tried this, you’ll know (and if you’re going to, you’ll find out) that this can quickly get out of hand. Very soon, you’ll visibly cringe whenever you hear the word ‘star’ – a painful reminder of the toxic underbelly of your inbox that the Starred folder has become. But you’ll have to go back there soon, with full knowledge of the tsunami of to-reads that will deluge you.

Waxing poetic aside, there’s an easier way. What if emails show up in your inbox only when you need to act on them, and not a moment sooner? Don’t have time to respond to a data request today – wouldn’t it be nice if it came tomorrow after your big presentation, instead of staring at your face till then? If you use Gmail, you can do just this with Google Inbox / Mailbox. Using these, whenever you check email (hint: do this at specific time slots only), you can first triage all your new email:

Respond if it will take 2 min or less. Once it’s done, click on Archive / Done.
If it’ll take longer, schedule the email for whenever you’ll work on it (make sure you block time for it!). The email will disappear from your inbox, and automagically reappear when you’re ready for it.
Similarly, if it needs to be done later (like an email follow-up), schedule it to reappear on the day and time when you’ll act on it.

With these tools, your inbox will be nice and sparse at all times, easy to navigate. And hey, if you’re lucky, you may even read the much-fabled Inbox Zero at end-of-day. Enjoy it while it lasts, my friend. The battle may have been won, but the war will rage again tomorrow.

Quick note – If you work out of Gmail and want to try Google Inbox, let me know in the comments / over email. I have a bunch of invites. But if you use Outlook, such plugins aren’t available yet. You can try this Getting Things Done method though.

5. Manage your subscriptions better with Unroll.me

You know that ‘Quirky News of the Day’ newsletter you thought was fun and subscribed to yesterday? In two months, your inbox is going to drown in unread editions of the newsletter. And this is saying nothing about the newsletter you subscribed to a year ago that you find useless today. But you won’t unsubscribe because who knows, you might need it again next year.

Unroll.me is one of those miracle services you don’t realize you need till you hear about it. When you first register, it scans your inbox and lists all the emails you’re subscribed to. You can then unsubscribe with one click. And Unroll.me retains a record of these, so you can re-subscribe anytime.

But you don’t have to unsubscribe from everything (especially my newsletter. Please?). The service removes newsletter emails from your inbox automatically, and puts them in a separate Unroll.me folder. So you can check them whenever you want to do some leisure reading.

6. Make less email

The reason you receive so much email is because someone else is writing them. So be a dear and stop contributing. No need to brightly respond, “Welcome”, whenever someone sends you a thank you email. And please, please – don’t acknowledge receipt. Reply when you have a response / answer / update ready. This is important enough to be a Golden Rule of Emailing:

[Tweet “Send only emails to others that you would have them send to you.”]

7. But, be nice and manage expectations

At the same time, it is good form to reply and manage expectations. If you’re going to respond to an email today or tomorrow, it’s fine. But if you’ll need more time to get to it, dropping a short email saying when you’ll look at it is a nice touch. And people don’t mind nice guys writing in (nudge nudge).

That’s it! Do some or all of these, and you’ll be well on your way to email nirvana. I actually had 3 more tips, but I’ve got to run. Got some… err… emails to write.

I would love your feedback in the comments – do these work for you, are there any other ways you manage email, etc. And if I can help in any way, don’t hesitate to comment here / email me at [email protected] / tweet at @jithamithra.

How Uber solved its chicken and egg problem (and you can too!)

jithaMarch 9, 2015 7 Comments

What comes first, the chicken or the egg? An idle question on which children (and sometimes adults) can spend hours shooting the breeze. The question is, however, not so innocuous when it comes to businesses.

Some of the most exciting ventures today have a unique characteristic – they’re multi-sided businesses. What’s a multi-sided business? It’s one which connects two or more distinct user groups that provide each other with benefits. Think of Uber – it connects cab drivers and passengers, who benefit each other. E-commerce marketplaces are also examples – they connect buyers with sellers.

Such companies, once established, have a high barrier to entry. While that’s wonderful, it also means that they’re incredibly hard to build. Users on one side of the business model find the platform useful only if the other side also exists. For example, people buy video game consoles only if there are games they can play. And game designers make games for a console only if there are enough people who own it. The proverbial chicken and egg problem. How do one solve this impasse?

I face this problem too, in the product that I’m building – connecting advertisers with consumers (launch coming soon – watch this space!). How does one break the deadlock between the two sides? Unlike the philosophical question of which comes first, here the only right answer seems to be both!

There are four ways in which successful multi-sided platforms have overcome this stalemate.

Slow and steady: Build the two sides together in lockstep
Jumpstart: Get one side up quickly, and then build the other
Fake it till you make it: Build one side gradually with a makeshift offering, and then bring in the other
Bait & switch: Start with a single-sided value proposition to build one side, and then introduce the multi-sided offering

1. Slow and steady

In such a model, your offering needs to be valuable to your very first customers on both sides. One way to achieve this is to start small – very small – at a level where it is possible to get both sides onto the platform and provide the necessary cross-network effects. Focusing on a single city, area or even a neighborhood first can help you prove the model to both sides. Once that happens, you can expand gradually, building the two sides in lockstep one neighborhood at a time.

This is what Uber did in San Francisco – getting the model going in one city, and then applying it to other cities one by one. Going small could also mean focusing on one specific customer or product segment before expanding to others. Amazon, and more recently Flipkart, started with selling just books, building a user base and brand recall before expanding to other products.

Tinder, the dating / swiping app, built initial traction in a very creative manner. In its early months, the marketing lead toured several college campuses. At each campus, she first convinced the girls to download the app. After that, when she showed the app to the male fraternities, they quickly jumped on, seeing the number of girls they knew on the app.

2. Jumpstart

Growing both sides of the business slowly in sync is great, but what if you want to speed up growth? Speed is often critical initially – given the high barrier to competing in this space, multiple people with the same idea would try and hustle into pole position. Maybe you don’t need to have both sides up and running from the get-go?

There are many ways one can quickly get one side of the value proposition up, and then build the other gradually.

a. Partner with someone who already has a large user base

One way to break this stalemate is to opportunistically partner with someone who already has a large user base on one side of the platform. This could be another product with mass acceptance in your target user base, or someone who has strong existing relationships that could be leveraged. Once one side is thus engineered into being, you can then build the other.

Google hacked its way to an initial user base using partnerships. It partnered with Netscape to become its default search engine in the late 90s, and also tied up with Yahoo! to power searches on that platform.

b. Make it easy, low-cost and low-risk for one side to come on board

At the same time, you need to make it as easy as possible for one side to say ‘yes’. Drivers are much more open to trying Uber when all they need to do is accept a phone from Uber and keep it on. It’s simple, and it’s low-risk – there’s plenty of upside if any ride requests come on the app, but there’s no downside at all!

Belly, a loyalty program for small businesses, did the same. It gave retailers a very low-risk, easy to install and low-friction loyalty solution. Once a critical mass of retailers had it, localized network effects began to take shape – customers and other retailers, noticing this in some shops, started demanding it of others.

c. Subsidize initial adoption for one side

A subsidy or ‘free’ offer always helps give the initial nudge. This is what video console companies like Xbox or Sony PlayStation do. The console is sold at a subsidized rate to users, and the company takes royalty on the flurry of games that follow. Uber subsidizes both users and cabs initially, to speed up adoption.

3. Fake it till you make it

Sometimes, it’s difficult to obtain one side of the model quickly enough. In this case, you have to build one side gradually with a makeshift offering, and then get the other.

a. Be the counterparty till the real counterparty appears

Most large e-commerce marketplaces started with an inventory led model, where they stocked products themselves. Once user base was built, they found it easier to make the shift to the more lucrative marketplace model, connecting product suppliers to buyers.

b. Use existing systems or services

Sometimes, you don’t need to build the entire solution for all sides of your platform – winging one side of the platform is an option, at least until you demonstrate user traction. I’ve heard the story, possibly apocryphal, of how the Flipkart founders would actually go buy books from stores to fulfill their initial orders. Look for a repetitive, non-scalable way to fulfil one end of the bargain initially, rather than investing in building service infrastructure, supplier base, etc. for a model that is yet unproven – not only is the latter risky, it also delays your product’s launch.

4. Bait & switch

A very nifty way to build a multi-sided platform is to first offer a single-sided service, that doesn’t need a counterparty. Once a user base is built, you can layer on the multi-sided service. Sounds complicated?

a. Build a user base on one side with a focused (different) offering, then introduce the second side

Square is a payments solution for small businesses in the US. It’s really cool – a small chip-sized device that plugs into a mobile’s headphone slot and allows you to start accepting credit card payments. At least this is what it was initially. Once it built a sufficient scale of retailers, it added a second business model. Today, Square also runs a discounting app offering consumers great deals at its partner retailers, card-less transactions, etc.

LinkedIn also did something similar. It started as a pure play network for professionals. Today, a huge user base allows it to be much more – it now offers unique solutions to recruiters, job seekers, and professionals.

b. Start as an information portal

Another way to do this is to start as an information portal for one side of the platform, offering users a directory of information about the other side. Zomato started as a pure-play information source on restaurants in your neighborhood. Gradually, as user base grew, they started overlaying restaurant promotions. I bet they’ll add other services soon – allowing you to book a table, pay after your meal through the app, etc.

These are the four different approaches that companies have used to resolve their chicken and egg deadlocks. What do you think? Have you faced chicken and egg situations of your own? Would love to hear from you – mail me at [email protected], tweet at @jithamithra, or comment here on this blog. And do subscribe here – I post roughly once a week, on startups, business models, consumer behavior, etc.

PS. In the actual chicken and egg problem, the egg comes first (there’s absolutely no doubt about that).

No, you don’t need a business model.

jithaMarch 2, 2015 5 Comments

Roughly a year ago, Facebook bought Whatsapp for $19Bn. When I heard, my first reaction (as it was for many others) was, “What!!! 19 billion? 380 million per employee. And they don’t even have a proper business model!”. And this was after Evan Spiegel of Snapchat (poster-boy of the business model-less) refused a $3Bn offer from Facebook. Today, their search for the elusive business model just begun, Snapchat is also planning a raise at a $19Bn valuation, and Spiegel looks like a visionary. What’s happening here? Is a business model expendable?

Amid the spate of headlines screaming bubble, I read a couple of articles by Andrew Chen on how the business model is not the main bottleneck for a startup at all. It’s the audience. As Andrew says, the biggest risk, regardless of your monetization model, is whether you can get millions of users or not. This sounds like a corollary of the power law – whether you succeed will depend far more on the size of your audience than on what you sell. If you have the users, you can find the money. So go build that audience instead.

The biggest risk isn’t your business model. It’s whether you can get millions of users or not.

Wait, are we saying you do not need a business model at all? Of course not – you do need to make money. But the point is that it’s not your critical constraint. Build a product that enough users want, and there are any number of off-the-shelf business models you can tag on to it.

Take Facebook – even a year after its IPO, people were concerned it didn’t have a solid business model. Today, Facebook is hitting annual revenue of over $12Bn not due to any innovative business model, but driven by its user base and growth alone. Maybe I’m belaboring this a bit, but especially for a consumer startup, it’s often far more valuable to focus on growing user base from 100K to 2 million, than to try and optimize revenue per customer.

OK, this is all talk – every business can’t use the same models that Facebook does. What are all these off-the-shelf business models we’re blabbering about? Well, I looked around online, but couldn’t find a comprehensive list. So I chose the next best option – I built it myself. I’ve listed 25 business model patterns below, that you can plug onto your business.

But first, you need an audience. And for that, you need a value proposition. Let’s say that you’re a platform where users come for widgets – these widgets could be physical objects (e.g., furniture, books, etc.), or digital ones (photos, updates from friends, online services, etc.).

This entrepreneur has bigger problems than his business model.

Now, if the widgets have direct monetary value, the business model options are fairly straightforward:

1. Manufacture and sell directly to customers
2. Outsource manufacturing, and sell directly to customers
3. Manufacture and list on other marketplaces
4. Become a marketplace and collect brokerage

But I’m guessing that if the widgets have physical value, then the business model wouldn’t be as big a question. Amazon India and Flipkart don’t take much ‘brokerage’ today on their e-commerce marketplaces in India, but their belief is that they can in the future.

It becomes more interesting when the product that your audience comes to you for may not be a physical one with direct value – how do you make money then?

A. Advertising

Ever since Google revolutionized search by putting ads next to search results, advertising has become a default monetization approach. And let’s not forget that the newspaper industry has revolved around ads since forever. The digital advertising industry today has matured considerably, offering several options to tag onto your product / service.

5. Ad networks: Ad networks collect an inventory of ad content from advertisers. You can tie up with one as a publisher, and the network will then start showing banner ads, pop-ups, etc. on your platform. For every ad seen or clicked on, you collect. A lot of mobile apps today, especially games, use this as an earning model. There are over 200 ad networks around the world today, that you can partner with – Google AdSense, Tribal Fusion, InMobi, etc.

6. Affiliate networks: Fundamentally similar to an ad network, but here the focus is more on driving actual sales. You showcase product ads on your website, and you get a percentage of any sale originating from a click here. Some companies do only affiliate sales – check out Cashkaro.com, for instance. Anyone can become an affiliate to one of the large e-commerce players, or join an affiliate network – just search for ‘Affiliate network’ on Google, and a bunch of them show up.

7. Promoted Content: Ads that look native to your website / app, rather than banners. This is the Facebook model – where your news feed also contains a few ads in the same format. Twitter does the same with Promoted Tweets, and Snapchat Discover is also a variant of this. Some of the smaller apps also do something similar – QuizUp, from time to time, has Quizzes on upcoming movies – these are likely promoted.

8. Sponsored Content: Sometimes, your regular content can also be sponsored. This is the model sometimes followed by digital magazines / newsletters – an issue may be sponsored by a particular company, and free to the user.

Now, let’s get into slightly more complicated advertising solutions:

9. Offer Wall: Sometimes, rather than showing banner ads (which can be distracting), mobile games allow you to gain virtual assets (say a missile launcher in a first-person shooter game) by watching a few ads, downloading promoted apps, etc. For each ad you interact with, the game gets paid by the advertiser, and you get that missile launcher! This is called an Offer Wall – Tapjoy is one of the biggest providers of this service.

10. Retargeting: What users do on your site can be valuable to advertisers, even if they don’t actually advertise on your site. For example, the kinds of pictures you pin on Pinterest could be valuable information for an e-commerce player – they can then offer you the right deals when you visit them. You could help make that connection by integrating with a retargeting solution like Adroll or Perfect Audience.

11. Special Offers: You can also run exclusive offers from time to time for your users, in collaboration with advertisers – e.g., a special discount code that they can use in shopping. Often, this can be designed in a way where you get a cut for every user that converts.

12. Special Campaigns: Similar to the previous solution, you can also run special campaigns for advertisers to drive engagement. “Do you love Coke Zero? Upload a video telling us why, to win an exciting hamper!”

13. Behavioral Analytics: Observing how users engage with your platform and with other users on it can be very helpful in understanding their behavior. And this behavioral understanding could be very useful to corporates. Sharing this data with them could be a good way to monetize. Now, this is not really advertising, but it’s similar in that a separate entity pays you for your users and their actions.

B. Charge the User

The other option is to charge the user herself. Of course, setting an upfront fee for usage could scare away a lot of users, and hence the need for more creative solutions.

Some of the business model patterns that exist here are:

14. Rent / Subscription: A simple monthly subscription fee for use of the service – users are more likely to convert for this, as it’s a smaller amount than buying the software outright. This is a primary model in SaaS solutions, but it’s also used by others. World of Warcraft, the hugely popular multiplayer online game, charges $14.99 per month for usage.

15. On-Demand / Pay as you go: The opposite of the Subscription model is the On-Demand one – users pay only when they actually use a service. Cab services like Uber and Ola are great examples of this – you pay only when you use the service.

16. Bait & Hook: The bait and hook model involves having a low entry barrier for users, with regular, high ongoing charges. Printers and razors popularized this model, with relatively low-cost devices and high cartridge costs. But this is something we see among newer companies as well – US telecom players sell mobile handsets at a loss but have expensive paid plans with lock-in periods. Video game consoles are similar – cheap consoles, costly games.

17. Retainer + Usage: Another model to reduce upfront costs (and increase adoption) is to charge a low retainer for accessing the product / service, and then pay-as-you-go, depending on the amount you use. This is halfway between subscription and on-demand, and hence potentially less attractive to users than either.

Freemium business models

Freemium business models, where some consumers use the product for free and others pay a premium and cross-subsidize them, have gained a lot of traction over the years. There are several examples of the freemium pattern:

18. XX no. of uses free: Many services allow you to use them a certain no. of times per month for free, beyond which you need to pay. For example, the Financial Times website allows you to read 3 articles a month for free, after which you need to pay a subscription fee. Tinder is experimenting with this – it is considering limiting free users to only 100 swipes a day, with an option to upgrade to Tinder Plus. Some of us will now need to find something else to do at lunch unless we’re ready to pay.

19. XX no. of users free: An app that involves collaboration could limit the no. of people collaborating on the free plan. For example, an office chatting app could limit the number of colleagues you can add on one account to five. Todoist, the task manager that I use, allows you to add only 5 people to a project in the free version.

20. Limited scope for free users: Services sometimes limit scope of use for a free user, and you need to upgrade to do more. Taking the example of Todoist again (I love the tool, btw!) – the free version allows you to list and complete tasks and projects, but you need to pay if you want to label tasks, write comments, etc. Similarly, many content websites allow you to see the latest reports for free, but you have to become a paid member to access their archives. LinkedIn also uses this freemium model to great effect – they have different premium plans for job seekers, recruiters, and so on.

21. In-app purchases / virtual goods: This is popular among mobile games. Reduce the entry barrier by keeping it free, and allow users to purchase virtual goods within the app. If you’ve played Angry Birds, you’ll remember the Mighty Eagle. In a particularly difficult level, you can buy the Mighty Eagle (only $0.99) to kill all the well-sequestered pigs. And the stickers that you can buy on WeChat or Viber are also examples of in-app purchases.

22. Trial period: A variation on freemium is to allow consumers to use your product for free for 1 month, and then start paying. Most online software tools offer this – in fact, even if they are freemium and have a paid plan, they offer a trial period on the paid plan. The trick here is to use this first month to really sell your product and convince the user that she can’t live without it. A good onboarding process, assuming your product really adds value, can work wonders.

If you’re deploying a freemium model, you should initially assume that only 0.5%-1% of your users will convert.

Offering other services

Sometimes, you can offer other products / services to your customers to earn revenue.

23. Value added services: Offer users tools or services to help them better use your core offering, which remains free / inexpensive. For example, a photo-sharing software could offer certain paid filters that you can apply to your photos before sharing. Similar to the many paid Instagram filters that exist for iOS and Android today.

24. Diversified services: Sometimes, companies also offer completely unrelated services to their user base. WeChat has gradually added a myriad services to what one thought was a messaging app – mobile games, peer-to-peer payments, e-commerce, you name it.

25. Events: An offering which has a community built around it can also monetize by running events or get-togethers. And if the company can procure advertising / sponsorship for the event, that’s an additional revenue stream. VCCircle, a content company in India focusing on startups and investing, runs a large number of information / networking events that its subscribers and others can attend for a fee.

Thus, there are several business models that you can use, provided (and this is the million dollar question repeated for the millionth time) you have a large enough audience. Can’t find one that fits your offering in this list? Don’t fret – continue to build your product and user base. As long as you add value, you’ll eventually find a way to share part of it.

What do you think – is a business model a commodity yet? Would love to hear your thoughts. And if you want more information on any of these – how they work, how you can integrate them, tools you can use, etc. – do comment here / email me at [email protected] / tweet at @jithamithra. And yes, do subscribe to this blog – I post roughly once a week on startups, consumer behavior, books, etc.

5 things I learnt from talking toilets in rural Bihar

jithaFebruary 21, 2015 6 Comments

Over the past year, sanitation has hogged headlines in India like nobody’s business. And rightly so – it’s everybody’s business. Two out of three households in rural India don’t have a toilet. And many of those who do don’t use them. Against this intimidating backdrop, over two years ago, my colleagues and I at Monitor / Monitor Inclusive Markets set out to develop a market-based solution to the sanitation problem in rural Bihar. And over these two years of selling the idea of a toilet to rural consumers and working closely with people selling toilets there, I’ve learned a lot regarding consumers and how to sell to them.

With the Swachh Bharat Abhiyan (the new avatar of the Nirmal Bharat Abhiyan, itself a new avatar of the Total Sanitation Campaign), the government wants to make India open defecation free by 2019. In less than five years, all 1.2 billion of India’s population will use a toilet. Today, we’re at least 600 million shy of that. In fact, as people in the sanitation sector often say:

[Tweet “India has a majority of the world’s open defecators, and a majority of Indians open-defecate.”]

According to the 2011 Census of India, Bihar is a laggard in toilet coverage – only 18% of rural households have toilets. In 2012, we set out to develop a market-based business model to resolve this – could we harness market forces to drive adoption of toilets? After talking to 1000+ villagers in Bihar, meeting 150 value chain players and visiting sanitation interventions in many other areas, we developed business models that are now being implemented in parts of Bihar (see post-script for more details on the models). It has been fascinating to put together a business model and see it take shape on the ground. Along the way, I have also learned a lot about how consumers think, and how to sell to them.

1. Your value proposition needs to be concrete, tangible and real to your consumers

Your product’s value proposition has to make sense to the user, which means three things:

Concrete: Your product’s benefits can’t be nebulous – they need to be specific. For example, just telling consumers that using a toilet is good for health is not convincing – you need to explain step-by-step how open defecation means you’re eating your own shit.
Tangible: Sanitation NGOs today are doing a good job of making the health benefit concrete. But it’s not tangible. Even after you explain the benefits, people still need to be able to see it – just logic won’t do. And health benefits are particularly hard to demonstrate because (a) they start accruing only after a majority of the village stops open defecation, and (b) even after safe disposal of faeces, people still fall ill due to unsafe drinking water and other factors. And if something so axiomatic is hard to prove statistically, try convincing your village consumer anecdotally! Instead, what we found from speaking to people is that they want toilets for safety (vs. traveling early in the day / late at night for open defecation), convenience (especially when ill / for the elderly), and privacy – all far more tangible.
Real: While the benefit may be tangible, it’s important that there be a need for it – else you’re just a very good solution in search of a problem that may not exist. A hallowed business model in rural sanitation is that of a one-stop shop, and one of its main value propositions is convenience. Of course it is more convenient, but do consumers value that? What we saw was that farmers or agricultural workers finish their day’s work in the morning and have a lot of free time later – they’d rather use this time to buy all the materials, than pay someone a commission to do it for them.

[Tweet “Your value proposition needs to be concrete, tangible and, most importantly, real.”]

2. Even if affordability is an issue, people don’t want a ‘cheap’ solution

With toilets, as with cars, people want quality, albeit at a low price. ‘Cheap’ is not a value proposition, ‘value for money’ is. And when offered a cheap solution, people who otherwise wanted toilets did not buy. “If we have to get a toilet, it has to be a quality one”. Convincing people that your low-cost solution is also high-quality is critical.

[Tweet “‘Cheap’ is not a value proposition, ‘value for money’ is.”]

3. To convert customers, ability and triggers are as important as motivation

According to BJ Fogg’s Behavioral model, behavior change is driven by motivation, ability and triggers. This holds even for sanitation behavior – if you want a consumer to construct a toilet, driving ability and triggering purchase are at least as important as motivating purchase. One single step to increase ability to purchase – financing – has disproportionate impact on toilet adoption. Similarly, from a usage point of view, a household that constructs a toilet will not use it if procuring water is inconvenient – ability or ease of use is critical.

Financing also triggers purchase among households that can already afford toilets. One such household took a loan of Rs. 5,000 to construct a large toilet, with an attached bathroom, a shower, and a large septic tank – and they use it religiously (toilets vs. temples, anyone?). This cost at least Rs. 60,000 to construct – they could have, of course, constructed a toilet without financing, but that was the trigger.

4. Skin in the game is important, to drive usage

Over the last 10-15 years, toilets have been constructed with government subsidy for rural households across the country. But usage is markedly lower when households contribute neither materials or money, according to last year’s SQUAT report on sanitation usage – none or only a few household members use it. Financial participation keeps people’s skin in the game and drives long-term usage. Maybe it’s a good thing most people don’t understand sunk cost.

5. Choice is helpful. But don’t make a user choose between a Nano and a Mercedes

Giving customers choices (but not too many) is definitely more helpful than one-size-fits-all. This is not a new insight. But when you offer three toilets at prices of Rs. 10,000, Rs. 15,000 and Rs. 25,000 respectively, consumers buy none of them – this was an unexpected response during our business model pilots (easily explained in retrospect of course – hindsight is 20:20). The reason is that over 90% of people in most villages in Bihar cannot afford a Rs. 25K toilet – it’s the rural toilet equivalent of a Mercedes. And when you offer a middle-class prospective buyer a Nano and a Mercedes in the same choice, you cause decision paralysis. He may have come in considering a Nano, but he changes his mind on seeing the Mercedes – “Maybe I can save up over the next few years to get a Merc.” He may come back 5 years later or he may not, but he’s no longer a prospective customer today.

[Tweet “Choice is helpful. But don’t make a user choose between a Nano and a Mercedes.”]

Choices need to be from the same cohort – Nano vs. Alto vs. Indica is an easier decision to make, and even easier is a choice between A/C and non-A/C variants of a Nano.

As I’ve been setting up my own business, I’ve remembered each of these learnings multiple times – initially as rationalizations for observed user behavior, but later more and more to predict user reactions. But my most important learning of all – reinforced by every piece of user feedback I receive on my app and every user grievance I address every day – is that users are who they are, and they want what they want. Take that as a given, and try to deliver that value through your product. If you’re trying to tell a consumer what to want, well, good luck to you!

PS. You can read more about our Bihar work and the business models we developed here.

PPS. I must thank Monitor (now Monitor Deloitte) and Monitor Inclusive Markets (now FSG India) for the opportunity to work in sanitation for so long. Of course, this post doesn’t necessarily represent the views of these two companies, and the people I worked with.

Pregnant mothers – the holy grail of retail

jithaFebruary 15, 2015 2 Comments

Retailers try many tactics, some obvious and others devious, to take advantage of our buying habits and maximize how much we purchase. They also use purchase data and buyer demographics to identify their most valuable customers, and make them purchase more. Nothing surprising there. But what’s interesting is that across retailers, one customer archetype is consistently the most valuable – pregnant and new mothers.

I recently read The Power of Habit, which outlines the process by which we form habits and explains how we can modify them or create new, more constructive habits. It’s a fascinating and insightful read, and I’m going to try changing some of my habits using this framework (no more candy for me!). But this post is not about the habit process (read the book, lazy people!). The book had a very interesting chapter on retail habits, and how retailers take advantage of them.

Some of these retailers’ tactics are pretty obvious – think of how you have to walk all the way across the mall in search of a staircase. Studies have found that over 50% of your purchases are impulse buys – and this is if you made a list beforehand! So, making you walk across the mall, seeing more products than you would otherwise, will make you purchase more. Slightly more devious is how supermarkets keep fruits and vegetables right near the entrance. If we stock up on healthy stuff right at the start of a shopping trip, we feel great about ourselves and are much more likely to stock up on chocolates, biscuits, chips, ice creams, etc. when we encounter them later. There are many more such tactics employed by retailers to take advantage of our habits – you can see a few more here.

These habits – buying what we see, weakening after buying healthy products, etc. – are ingrained, as are our choices for where we buy specific products. Tactics to take advantage of these habits are now table stakes. But where retailers can make the most impact is when habits change. And even ingrained habits change – typically during some major life change or emotional upheaval.

For example, when people get married, they’re more likely to start buying a new brand of coffee. When they get divorced, there’s a higher chance of them trying different kinds of beer (and of course, more beer). And what’s the most major life change there is? No prizes for guessing (especially since I let the cat out of the bag in the title) – it’s the birth of a child.

Given the sea change in lifestyle that occurs with the birth of a child, new or expecting parents are particularly flexible to changing their buying behavior – more than any other consumer segment. As a result, they are a gold mine for retailers.

[Tweet “Pregnant and new mothers are the holy grail for retailers”]

They buy a lot of new products – diapers, wipes, cribs, prams, blankets, bottles, etc. – that they haven’t bought before. Surveys in the US have shown that new parents can easily spend over $10,000 on baby items before their child’s first birthday!
They’re less price sensitive: New parents are highly price insensitive; they’re less likely to cringe at high prices. When you’re heavily deprived of time and sleep, you want to make quick decisions on baby purchases – you’re going to buy a lot of them! Therefore, retailers always manage to sell such products at a hefty profit.
They prefer buying everything in one place: Being sleep-deprived also means that you value ease and convenience over anything else. Therefore, new parents tend to buy everything they need in one place. If they come to a particular store to buy diapers, they’re more likely to buy juices, snacks, groceries, clothes, etc. there as well.
And given that these new habits will also quickly get ingrained, they will remain loyal and valuable customers for years (till their next child, at least).

Given these factors, new mothers are the most valuable customer segment there is. Getting one into your store to buy just diapers today can have significant revenue and profit impact for years to come. Retailers, therefore, try a lot of different tactics to catch these customers in time. It’s easy to find new mothers – just go to a maternity hospital! The book talks about how P&G, Disney, and others have giveaways for new mothers at hospitals.

But if everyone is targeting new mothers, you need to target them even earlier to capture them – when the woman is pregnant. As a retailer, one can mine purchase data for different customers to know what people who are buying diapers today were buying six months earlier. Using these correlations, one can then start tracking families where the wife is pregnant, in real time. Of course, finding out that you know this can creep families out quite a bit. It can also lead to very sticky situations, like this one!

This is just one interesting tidbit from an excellent book. Do give it a read. Would love your feedback on this post – do comment here / email me at [email protected] / tweet to @jithamithra. And yes, subscribe – I write about startups, books, consumer behavior, etc. once a week, and I promise not to spam you.

How to destroy poaching and save our wildlife – a market-based approach

jithaFebruary 7, 2015 6 Comments

Two weeks ago, newspapers proclaimed that India may be winning the battle with tiger poachers. But, clichéd as it may sound, the war is far from over. Governments today have taken a ‘supply-side approach’ – making it more difficult to poach. But what if we took a demand-side approach? Could we do something to depress the market, i.e., the demand itself, for poached animal products?

(copyright Bharat Ram)

On Jan 20, newspapers in India (and indeed in many other parts of the world) proclaimed that India’s tiger population is now over 2000. It has risen 30% over the last count – the conservation efforts seem to be working (apart from the fact that the previous count didn’t cover some tiger populations). This is undoubtedly great news for lovers of tigers and the wild, but the war has far from taken a decisive turn. We’re still on course for the Sixth Great Extinction, and the first man-made one.

There are only FIVE northern white rhinos left in the world. Barring a miracle, they will be extinct soon
Wildlife of all kinds – sharks (for shark fin soup), elephants, tigers, leopards, etc. – are still being poached all over the world in great numbers
Of course, elephants, rhinos, and tigers are the poster-boys of anti-poaching drives. But even the unassuming and reserved pangolin is being hunted to extinction.

Now, governments have been making efforts to curb poaching. And the efforts have started bearing results. But these efforts have primarily been ‘supply-side’ – making poaching more difficult. Whether it’s better monitoring, tighter security or reducing overlap of forest land with human settlements, these measures constrain the ability of poachers to hunt. This is a battle of attrition (yes, one more war metaphor) – we cannot relax our efforts. The day the funding runs out, poachers WILL return. This is not a sustainable victory – for how long, and for how many animals, can you keep funding the effort?

[Tweet “Can we bolster supply-side protection tactics with market-side efforts that dampen poaching demand?”]

Market-side approaches offer two key benefits: (a) they give you leverage over the upstream value chain – a change here would reverberate all the way up to the first step of supply; and (b) they are more sustainable – reducing the motivation of poachers means that tomorrow, even if supply-side monitoring relaxes slightly, poachers may not return. Many industries have been created with such market-side approaches – think toothpastes (the tingling sensation makes you want to brush, but it has no role in cleaning your teeth), diamond rings (making wives and fiancées demand diamonds, rather than just selling them), etc. The question is, can you use a similar approach to destroy a market?

Now, I’m no conservation expert, and poaching is a far more complex issue than it seems at first sight, but it would be interesting to try and answer this question, purely as a thought experiment. The first approach that comes to mind is to:

Change the market dynamics

With a purely supply-side approach, we gradually make poaching harder. This raises end-prices for smuggled animal products, in turn raising poachers’ motivations to grind on. Could we change the structure of the market in such a way as to reduce the attraction towards poached animal products?

Flood the market with fakes:

Bringing in fake animal products could make the market a lemon market, like second-hand cars – prices will naturally depress if the buyer is unsure whether what he’s buying is the real thing. This would, over time, reduce the reward for poaching, which, in tandem with tighter supply-side monitoring, could inhibit poaching. Let the bad drive out the good from the market.

This approach would be sustainable in itself – as long as even a tiny sliver of a market exists for poached products, entrepreneurs selling such fake products would have an incentive to remain in the market.

However, one important precondition is that supply constraints – monitoring and enforcement – need to make poaching hard and expensive. As long as poaching is relatively easy, this may only increase the demand and price of true animal parts. This is already happening.

Bring in farmed substitutes:

Another alternative is to try and bring in farmed substitutes. E.g., try and convince consumers who believe in the medicinal properties of tiger genitals (did you know the name Viagra comes from the Sanskrit vyaaghra for tiger?) that bulls’ private parts are just as good. I once went to a restaurant called Carnivore in Nairobi, where they served ‘ox balls’. Unsure whether I heard it right, I asked the waiter again. And he replied, in a dubious Caribbean accent – “Yes maan, they is ox balls … they increase your productivity”.

Of course, this is much easier said than done. It would need sustained marketing to cement this belief. Could we instead take a more direct approach?

Grow animals in captivity for such uses:

A natural extension of introducing farmed substitutes like cattle is to farm the endangered animals themselves. Abhorrent though the idea seems at first, it is only slightly different from farming cattle for food. The only reason this is not done traditionally for, say, tigers, is that rearing carnivores is very expensive – one would need to spend at least ten times as much to feed them vis-a-vis cattle (they’ll have to be fed the cattle).

But simultaneously with a supply side crackdown making poaching more expensive, this could become a viable option, in turn reducing the demand for poaching even more.

There are tiger farms in China already, doing exactly this. However, hunting animals in the wild is still cheaper than rearing them, so this has paradoxically just increased prices for wild animal parts (the poaching equivalent of free-range chicken).

Thus, each of these methods can have some unintended consequences unless all efforts work perfectly and in tandem with the supply-side. And as anyone who’s worked on a project of the smallest duration knows, nothing works perfectly, especially if heavy coordination is involved. And in any case, in a world where a single rhino horn can sell at tens of thousands of dollars, poaching will always seem worth the risk. In other words, one would need to:

Strike directly at demand for animal products

Strong social campaigns to reduce the demand for animal products and make it socially unacceptable would be harder but would have more lasting impact. Appealing to people’s altruistic tendencies is evidently working for sharks – total import of shark fins to China reduced by 70% in 2012.

However, this appeal to people’s better senses would not work in every instance. It would be far more effective to directly attack the reasons why buy animal products:

Prestige: Make showcasing / displaying animal trophies a signal of bad taste. This worked for minks in the US – sustained social activism reduced domestic demand for mink coats. Of course, the market is now skyrocketing, due to huge demand from China. Some things don’t change, I guess.
Medical benefits: Debunk myths regarding the curative properties of endangered animal parts. This will not be easy, especially in countries where people use rhino horns to even treat hangovers! But it would strike at the heart of the reason why poaching is such a profitable enterprise.

While this approach definitely seems to have potential, one can also attack the most upstream motivation – that of the poachers themselves.

Offer alternatives to poachers

Poachers today in many places have few alternative occupations. And even when they do, poaching remains far more lucrative. When supply side constraints are making poaching harder and more risky (shoot at sight?), poachers may be more amenable to steady jobs with decent pay. Creating jobs that locals aspire to or offering vocational training and incentives for migration may be a sustainable approach to reduce poachers’ motivations.

Another approach would be to educate communities on biodiversity being a form of wealth, and helping them take pride in their natural heritage. Educating communities thus and involving them in protection can be quite fruitful – this, among other interventions, helped Nepal achieve zero rhino deaths in 2011.

Will these work? Hard to say – obviously this is just a thought experiment in market-based approaches, without much understanding of the dynamics at play. But what is clear is that we need an alternative approach that attacks demand in some form, localized to the geography and the specific animal; in addition to the current policing model.

Coopting Anna Kournikova’s immortal wisdom, may only eggs be poached!

Would love your feedback on the ramifications of the above actions – comment here / email me at [email protected] / tweet at @jithamithra. Please also subscribe for updates from me roughly once a week, on consumers and markets, startups, books, etc.

Author: jitha