change tracks

May 25, 2017

Times have not been better for Indian startups and MSMEs. Volatile policies in foreign lands, government initiatives to propel growth, and an ambitious young generation spell good times ahead for these sectors. Reduction in corporate tax and soon-to-be implemented GST will add to the optimism. India is also poised to become a $5 trillion economy by 2025, for which the backbone is the MSME sector. MSMEs and startups are touted to spur jobs, entrepreneurship, innovation, and disposable income.

However, the picture is not all rosy. Over 40% startups have failed since 2014, according to startup tracker Xeler8. The average age of these ventures is just over eleven months. Kishore Biyani stated that 90% startups he has seen have no meaning. Kris Gopalakrishnan observed that around 70% startups will fail and 20% will remain as small enterprises—far from promising numbers for a country which boasts the highest youth demographic in the world.

So, where are startups and MSMEs going wrong? We can attribute their failure to many factors. However, the Pareto Principle can be applied here too. Almost 80% failures occur due to 20% reasons.

The gravest error is business modeling, or the lack of it. Businesses try adopting ideas from the West without understanding what their customers want. Or they fall hook, line, and sinker for motivational speakers who dish out mountains of wisdom, but skip out on steps to implement those. This absence of a business model also causes startups to burn cash fast. Eventually, funds dry up sooner than anticipated, resulting in failure, according to Rishabh Lawania, founder of Xeler8.

What can be done to develop effective business models? How can startups and MSMEs grow larger by design, with owners guiding them skillfully like Captain Spock?

the propel excellence method

This method for fundamental rethinking addresses the most important components of a business:

01 growth planning

02 problem solving

03 performance management

It empowers them to set long-term goals and keep their short-term strategies in line with these. Here are three reasons why PEM is popular among organizations which want to scale up:

01 It enables businesses to retain their competitive edge. It helps them resolve glaring gaps in their business, people, processes, infrastructure, and measurement. Thus, it saves them from being swept away by competition.

02 It enables businesses to function without the everyday involvement of promoters and the senior management. Thus the C-suite gets space and time to focus on larger goals.

03 It increases efficiency. Bill Gates said, “The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.” The Propel Excellence Method is effective because it introduces automation after it makes a business efficient.

Here is how PEM helps organizations grow by design and not chance:

growth planning

For companies to scale by design, planning growth is mandatory. Growth is not about funding or employee strength, but revenue and profitability. It does not matter how much a company raises through funding. Without a compelling growth plan, it exhausts its cash flow fast and eventually folds up.

Growth planning involves evaluating a business’ offerings. Those who implement the PEM in growth planning have an astute understanding of why their customers buy from them. They also track metrics like cost of acquisition, cost of value delivered, and market size. As a result, they set realistic prices which their audience accepts and which maintain their profitability.

problem solving

Most organizations tackle problems based on their present circumstances. But this method is highly ineffective since it just sweeps those problems under the carpet until they reappear.

PEM, on the other hand, provides tested and proven techniques. It first accurately defines the root cause of a problem instead of skimming the surface. Next, it dives deeper to identify influencing factors and gaps—whether in people, performance, infrastructure, management, or all of them. This saves businesses from wasting precious time and resources on addressing frustrating problems which arise repeatedly. Instead, they channelize those resources towards business growth.

One of our clients wanted the CRM software to be able to provide answers to the customers calling to know the status of their orders. By deploying PEM we realized, that a CRM would not solve their problem. Inefficiency existed in the time it took from receiving an order to dispatching it and that was the reason why customers kept calling. Deploying a CRM would have simply helped manage the problem better but not address it. We addressed the inefficiencies in the system. The result was an instant improvement in the organization’s logistics and the calls to our client reduced to zero.

performance management

The significance of people in an organization cannot be understated. Most business executives and advisors consider performance management as another term for a traditional appraisal system. But it is much more.

Through the PEM, businesses can set up a system to define a role and measure its effectiveness to align it with organizational goals. This is done through a scorecard which gives each role a clear idea about their goals.

Performance management is the process of creating a culture in which people do not develop a product or service directly. Instead, they contribute to a system which develops it. The system is simple enough for a person with minimum required skills to contribute to it and achieve the desired outcome. It also drives individual performance in the right direction, ie, one which is aligned with the needs of the organization. If performance does not move in that direction, the system raises a red flag. To a large extent, this is how the PEM streamlines performance management. These red flags are then addressed and remediated using the problem-solving techniques mentioned in point 2.

A business contacted us and stated that one of their key employees had quit unexpectedly. Upon investigation, we realized the employee was successful because he was selling only one of the many products in the portfolio. From being a super performer, the employee became a non-performer when the product lost its demand and manufacturing stopped. We developed a robust scorecard that motivated the employees to deliver on all products equally to make incentives. This made sure no employee depends on the sale of one product to become a star and move in the opposite direction with his/her performance when things go south with that product line. Now, they can hire quality candidates on short notice, and bring out the best in their employees.

The time is right for Indian businesses to be on par with global ones. They can turn their unique areas of expertise into advantages by deploying the Propel Excellence Method. They can pivot swiftly when needed and innovate quickly, which in turn will keep them ahead of competition.

All they need is to empower their people to trust a system. This will help them develop irresistible business offerings and turn their businesses into global superpowers.

* https://www.forbes.com/sites/suparnadutt/2016/09/13/indias-startup-ecosystem-scales-up-with-widespread-government-initiatives/#5d7c646a5f35