In the last post (Segmenting the market – Part I), we had taken a look at some of the mistakes that companies commonly make when segementing the market. Now, let’s look at ways to avoid those mistakes. A company need to starts with deciding if it is going to be a specialized player or a generic player. A candid and critical assessment of one’s capabilities is in order to determine the strengths and gaps. This will give insights into what markets are addressable for the company. For instance, one of our clients had positioned themselves as a generic player whereas their track record and capabilities suggested otherwise.
By doing a detailed assessment of their expertise, experience as well as the profile of the company, we suggested that they focus on a certain segment of companies and offer end to end services for this segment. Now, to offer end to end services, this company would have to build capabilities in areas where they did not have expertise/skill sets. This is a better option than appearing as a confused player with pockets of expertise. So, based on the assessment, some of the alternatives are -
a. Zero in on a certain segment of companies (SMB, large) and focus on select verticals for your go to market and offer them end to end services – for example, ADM, testing, package led, IMS and BPO services to the SMB segment
b. Freeze on select services and offer them to all customers in select verticals – e.g. – offer package led/IMS/testing services to all sizes of customers across geos etc
c. Take a domain focused approach and offer domain specific solutions and other services to say the Retail vertical in a specific geo.
You get the picture – the possibilities are endless and you can have various combinations of services, customer segments, verticals and geos. This has to be finalized before the company goes to market so that the sales force gives a consistent message to your prospects.
Segmenting the target market and crafting a go-to-market for each segment is a crucial step in every company’s business strategy. If enough attention is not played to this exercise, then sub-optimal business growth is a sure possibility. What are some reasons why companies fail to do this?
- Lack of knowledge on how to go about this
- Inadequate management push on developing a clear strategy
- Cowboy/opportunistic attitude -chasing specific opportunities without evaluating if it is scalable
- No clear speciality/focus area
What happens then is that, the company struggles to break past a certain level of growth and starts getting into smaller and smaller opportunities. Does this sound familiar? Would like to hear similar examples from you.
Let’s discuss how to avoid such things in the next post.
Citibank is starting a large trial of the use of mobile phones to make credit card payments at retail outlets and other points-of-sale in Bangalore, which the company is branding as “Citi Tap and Pay”.
The trial will cover 3,000 to 5,000 mobile users and about 500 merchants.
The trial is a production-scale pilot to find the appropriate business model for payments using NFC (Near Field Communications) and mobile phones. Citibank has already tried smaller pilots in Singapore and New York.
NFC is a short-range wireless connectivity standard for communication between electronic devices. It is expected to be used widely for so-called “contactless” transactions such as payment and fast data transfers.
NFC is an alternative to blue tooth and many applications are being piloted using this technology:
- Mobile ticketing in public transport — an extension of the existing contactless infrastructure.
- Mobile payment — the device acts as a debit/ credit payment card.
- Smart poster — the mobile phone is used to read RFID tags on outdoor billboards in order to get info on the move
As an aside, Singapore has become the first country to get all key players to sign up for the creation of a fully interoperable multi-app national NFC ecosystem.
I was speaking to the CEO of a leading IT services company yesterday on what emerging technology companies could do to transition to the next phase of growth. One of the ideas he proposed was collaborative selling. Partnering model to reach new markets in not a new concept by itself, but what we were debating was whether emerging companies with complementary skills and competencies could team up for better reach, scale and a stronger customer value proposition? The idea is very interesting, but I was wondering what may be the pros and cons in implementing such an approach. For one, will companies consider this a viable strategy? What will be the modus operandi to find complementary companies? How will they allocate the effort and share the returns?
This said, if you look at how global organizations are now collaborating with their suppliers and made the concept of an extended enterprise a reality, nothing is really impossible. I would be interested to hear views on this, and more importantly, any examples of such collaborations.
The recently launched Forbes India carried a cover story on the Infosys transition leadership plan. It makes for an interesting read; as always, Infosys, which has been at the forefront of pushing the bar with respect to management practices, has articulated a transition plan, over the next 10 years, from its original founders to a group of professionals who are now a part of the Exectutive Council. The article also says that Mr Murthy and Nandan are mentoring this group actively.
I read this article with great interest as an ex-Infoscion, having worked closely with the current founders as well as the members of the EC,(many of whom were my peers). I recall some of my ex-colleagues’ impatience with Infosys’ conservative approach- be it the longevity of tenure of the original founders, or their conservative approach to business (ex- debt free, cash accumulation, reluctance to adopt an aggressive acquisition strategy etc). In the last eight odd years, as a consultant, I have met over a 100 or more companies, and I realise that the one reason for Infosys’ success is the continuity in management, and the complementarity in its founding team. Likewise, other conservative policies have stood the company in good stead, especially as the global economy goes through troubled times.
It remains to be seen how the transition actually plays out, and whether the new management, whenever it takes over, will stay true to the orginal philosophy, or modify the same. Either ways, it will be interesting to watch from the sidelines.
At least two articles in the media seem to point to recovery signs in the BPO sector. The first, of course was Aegis’ upnbeat announcement of hiring 12,000 people over the next 12 months for its global operations. A less prominent – though more useful pointer – was an NYT syndicated article on BPO sector recovery. The article cited instances of both HP and Honeywell investing in India facilities while another debt collection agency from California – Encore Capital Group – said that in order to improve efficiencies, it had no choice but to outsource. These trends appear to bear out what most analysts have been saying – that BPO will lead recovery as US companies look to outsourcing for improving P&L in a slow market.
Overall business sentiment does seem to be up, as captured by the 3000 point salute from the stock market to the promise of political stability from the new Government. And if anecdotal evidence has any value, we have been seeing the traffic in Delhi inch up towards the frentic pace seen in the boom months of 2007-08!
The 100-year-old iconic car major which has been one of the most visible symbols of American capitalism and economic might enters into uncharted waters of nationalisation or government ownership from today.
This will be the third-largest bankruptcy filing in American history and the largest-ever US bankruptcy in the manufacturing arena.
It was in the offing, given the decline the company has seen for decades, as well as its inability to renegotiate terms with its union.
While the timing of this event may have been caused by the recent recession and credit squeeze, the company had this coming for long for two reasons- its poor response to the entry of foreign cars into the American market as well as its skyrocketing labor costs, mainly because of poor bargaining power with its unions.
Ironical given that competition and freedom to hire and fire are two tenets of capitalist economies.
There is a lot of optimism around this move; experts feel that the Chapter 11 filing will give the company a lot more freedom to restructure and become competitive once more.
Let us keep fingers crossed!
We recently met with a US based NPO called the Acara Institute. The concept behind Acara is really interesting – it aims to act as he a bridge between social issues and the resources that can potentially solve these issues. Let me explain – Acara picks on certain social problems faced by NGOs and who do not have the resources to get a quality solution for them. Acara has relations with a network of universities where students are offered courses on social issues. Students are posed this problem and they have to come up with a solution like coming up with a business case. The best part is they can participate in solving a social issue and still get credits for it. It is a win-win situation as these NGOs wil not have access to such resources.
Acara has piloted this initiative with IIT Mumbai, Univ of Minnesota and Illinois Institute of Tech, Chicago. They are currently working on solving the issue of clean water in Mumbai slums.
I thought this idea was pretty neat and sustainable. I guess, we need more and more smart ideas such as this to solve some of the burning issues of today. Also, collaboration is key to this idea which is what makes it more interesting.
This question has been doing the rounds ever since the downturn set in; in fact interest in the Indian market started a couple of years before as the economy was doing extremely well. But, then, it was global MNCs such as Microsoft, Cisco and IBM that betted on the Indian market and put in place programs to develop it. The Indian offshore players, particularly larger ones, still watched from the sidelines.
Now, with the markets in the west “misbehaving”, everyone is now turning their glance towards India. Even at the NASSCOM event, there were several speakers who spoke about ignoring this market at your own peril.
Let us look beyond the hype and examine some of the realities-
If one looks at the potential, the opportunities in India are still not comparable with those in the US, for example. In fact, the Indian market is an order of magnitude smaller. But, this may not be such a show stopper as the size is still meaningful enough for companies to focus on.
Next, let us look at market characteristics, and here is where companies so used to servicing mature western markets may hit roadblocks. We do work with a lot of companies targeting India, as well as talk to several buyers as a part of research engagements, and one thing is clear- the Indian market is tough- buyers expect a lot more out of a service provider (pure maintenance projects are hard to come by and many engagements are end to end), budgets are tighter, fixed price and risk-reward models are the norm and building a business case is an imperative.
Compare this with the scenario that Indian companies are used to- large maintenance and support projects, risk free time and material pricing, dealing with CIOs and Directors, IT who have signed off budgets and little or no reason to talk to businesses.
Hence, my view is that it is not so much the market size but the market characteristics which will make offshore players think twice about stepping into the Indian market.
That is why you see players like IBM making rapid strides – their program management skills and ability to manage ambiguities are far greater.
So, I would think that it will take a while before Indian service providers make a serious impact on the home market ( in the services business).
I attended a session on targeting untapped markets by Ravi Venkatesan (India Head – Microsoft) and Rajesh Nambiar (VP and GM, IBM India) at the Nasscom Leadership Summit last week. Ravi V spoke about MS’ reading of the India market especially the SMB market and the success of their S+S model in the Tirupur cluster. Tirupur is a town near Coimbatore, TN which focuses on garment export including labels like Tommy Hilifiger and Banana Republic etc. MS has implemented a SMS based solution that has reduced cycle time from start to finish by 30 days – from 90 days to 60 days. ANother area they will focus on is online marketing and search.
Rajesh Nambiar had a 3 pronged framework for unclaimed markets- instrumented, interconnected and intelligence.He spoke about technologies that manifest from these 3 aspects and some of the statistics were astounding – for e.g. it is predicted that there will be 33 billion RFID tags and 1 billion transistors/human globally by 2010, 2.2 M errors originate due to handwritten prescriptions, 67% of the energy loss in the US (can you believe it?) is because of grid inefficiencies and so on.
Very interesting sessions throwing open new perspectives. A takeaway – large companies such as MS and IBM are constantly thinking about new ways to grow/innovate. The willingness to customize and provide solutions that are market relevant (like the tirupur cluster) is fairly crucial – something to think about.