Aug 15, 2014
Published By : Economic Times
A few years ago, marketing maven Seth Godin wrote a book based on the simple, if counter-intuitive idea - winners do quit and quitters do win. According to Godin, it's people who know when to quit a tough situation, and what dips to persist through who are the superstars. This is familiar territory for most entrepreneurs.
Six months on he realised that while the problem they were solving was very complex the market they were catering to wasn't very big. "It was a trade-off between the business hat and the PhD hat in terms of what to do next, but eventually, we changed what we were doing," he says.
The move paid off and two years after making the switch, the business was acquired in what was among the biggest acquisitions in Silicon Valley at that time. The experience taught Jakatdar some valuable lessons which have since held him in good stead.
"We realised that you cannot be too wedded to your technology and concept. Is your objective to show how smart you are or put in efforts that will be valued by the customer? Once your mindset is clear, it is easy to change tracks," he says.
Godin writes that what sets superstars apart is their ability to quickly escape the dead-ends. The dip is an inevitable part of doing something, not just in business. People often find their careers going nowhere, but persist in a dead-end job because of the comfort factor.
Groupon COO Kal Raman says that you tend to get emotionally attached, especially in a startup. "You attach your self-worth and dignity to your job. It's actually about being detached and doing a genuine biopsy," he says.
"I consider myself a problem-solver. The moment I solve the problem that excited me, I say that's the time. It comes with a risk the moment I take a big problem statement, for there is a probability that I could fail. And I have been shameless in accepting my failure," he says.
At video rental chain Blockbuster, Raman was given the opportunity to fix a situation but the management was against the idea. He could've continued in that role and tried to work through this dip but he realised that he wouldn't achieve much.
Instead, he quit and moved on. Godin says that anything worth doing is controlled by the dip and an important aspect to surviving a dip is also being able to anticipate and plan for it. It's important to remember that the dip isn't necessarily a bad thing. It's a Darwinian world and it is about the survival of the fittest.
Going through a series of struggles builds better immunity and these companies are more likely to survive in the long term as strong, stable businesses. In its original avatar, Fractal Analytics was a website aimed at helping consumers making better purchase decisions.
"We were doing well and getting great reviews but we realised that while it was a cool and popular idea, monetising it would be difficult," says Srikanth Velamakanni, co-founder & CEO.
From using maths to help consumers, the company switched to using maths to help companies make better predictions on consumer behaviour. It's a clear case of anticipating a dip and circumventing it in time by changing the strategy. It took a few months after the switch but the company soon had some of India's leading businesses on its client roster.
"There's a fine line between being persistent and stubborn. The objective has to be to build a successful company, not a successful business model - that may have to evolve incrementally or even change drastically," says Kunal Bahl, founder & CEO, Snapdeal.
Bahl would know, with Snapdeal having undergone six iterations before settling on its current model a couple of years ago. From selling coupon booklets to a discount website to now one of the country's leading marketplaces, the company has come a long way.
"Both of us (co-founder Rohit Bansal) are extremely numbers driven and analytical and took our decisions based on data. If we spend three months on something and don't see any traction then we think what are the factors that could change this drastically in the next three months. If there are no such parameters that we can predict then it's time to change the model," he says.
While it may all make sense in retrospect, when you are faced with a tough situation it's almost impossible to tell whether it's a dip or a dead end. Anand Deshpande, founder & CEO, Persistent Systems says, "Often you don't know if you gave up too soon or persisted for longer than you should have. You can set criteria and create a justification for it, but it's not enough."
While setting targets helps, when you are looking at data, there is no way of knowing at that point whether you've hit rock bottom. The entrepreneur's gut feeling plays a big role in these decisions.
FabFurnish.com is a case in point. The venture was started to sell furniture online, but initially, most sales were happening in the sub-Rs 2,500 space - more accessories than furniture.
"Deciding what to do next was difficult because at that time there was no concept of a marketplace and we were buying inventory. The lack of sales was impacting our capital allocation. We eventually decided to hold on to our initial belief and said that if people weren't buying furniture online, we needed to work to fix it," says co-founder Vikram Chopra.
So while the company started offering better assortments, Chopra feels that the environment too started organising itself in their favour. Ikea started talking about setting up operations in India and Facebook launched their new newsfeed which enabled them to display their products better.
While in most decisions the company tends to attribute equal importance to consumer feedback, this one time the founders decided to override that. "Our conviction that this model would work was strong so we let our views dominate. Today, about 60 per cent of the sales happen at over Rs 10,000," says Chopra.
Sanjeev Aggarwal, Senior Managing Director, Helion Advisors lists some typical situations where entrepreneurs need to determine whether it's more of a dead-end than a dip.
"When the business stops to grow after a few years it is a warning signal that something is not working. Or the company is growing but the unit economics, or gross margins, aren't. The third is not finding the right product-market fit. You have to look at the metrics of long term success and then decide what you want to do next," he says.
Velamakanni agrees that it helps to look at the situation objectively, maybe with the help of a third person. Is the market big enough to build a sizeable business? Do you have the resources and staying power? Are making any progress and are you are still passionate about the idea?
Answering these questions can help determine whether it's the right dip to fight through or whether you are better off quitting. In the end, it's important to remember that quitting is not the same as failing, and often quitting a tactic that's not working can end up being the best decision you take.