As an investor and former startup operator, I’m often asked what startups should do in trying times. Two things spring to mind immediately: nurture your core business and know your customer.
Even the most successful organisations endure significant highs and lows. As a startup, that rite of passage hits harder. At times, you’re running out of money, at others you have plenty. It’s just what happens when you’re building something from the ground up.
Here’s how I believe founders can navigate turbulence and come out stronger.
Stick to your super-strength
In those times of plenty, you feel comfortable - strengthening your core, experimenting more and trying to outdo the competition.
But when times get tough, the greatest companies are quick to double down on what they do best, quick to cut down on experiments and less essential activity.
It is possible to expand your core, or create another, as Paytm showed. But it is rarely done successfully. The key is to know your super-strength and stick to it. Apple’s “core” is great user experience on its devices. Even if a new model’s technology isn’t that well received, the quality of its UX remains unchanged. Amazon never deviates from its promise of great customer experience, nor Flipkart from its message of affordability.
These “survivors” have always understood the importance of maintaining their core. They shed excess baggage quickly, emotionlessly.
Letting go like this requires the right organizational mindset. You must be able to shift seamlessly between “peacetime” and “wartime” modes. Without them, you won't have a simple, repeatable framework which enables you to execute your plans expediently. It’s not a time for questioning or debate.
Adapt or die. It’s a cliché, but a cornerstone of corporate survivorship. If your organization finds it difficult to adapt, so will your team. Disaster awaits.
Just ask Blackberry’s leaders. They had a great devices business, but what people really valued them for was the secure messaging service that came with the devices. The leadership knew WhatsApp was coming for them but still chose not to unbundle their messaging business – missing the chance to render WhatsApp redundant at birth.
Seek success through disruption
I relate it to cricket. As a batsman, you know tricky conditions overhead or underfoot mean it’s a good day to be a bowler. You have two options - sit in, ration your stroke play, and concentrate on survival or counterattack and try to smash the bowler off their line and length. Those are the innings that tend to be immortalised.
Put differently, opportunity can be found in adversity, provided you’re open-minded enough to see it and brave enough to take it.
Back in 2015-16, India’s e-commerce sector was stagnating, with growth and innovation slowing. Prices plunged as consumers lost interest. Collectively, its leaders realised their next step should be to attract international brands to their platforms. Where electronics company Xiaomi led, fashion brands soon followed.
Being pushed into a corner prompted a crucial burst of growth – without costing too much to deliver. Not everything demands huge digital marketing spend.
My advice to startups is to seize the day. Look inwards to figure out how to be lean, efficient, and more creative – how to maximise your existing resources. Look outwards to your value chain. Are there tie-ups you can make with bigger companies in that chain to improve your service offering? Can you find ways to obviate the need to build something on your own? Are you nimble enough to externalise non-core activities and derive revenue from them, rather than cease them entirely?
It amazes me how few companies look out like this.
Reorientate to customers’ new needs
Knowing your end customers intimately is non-negotiable, whatever your business. They all have their own needs, and those needs evolve as economic circumstances change.
During downturns, people will continue to buy essentials like groceries and medicines, but discretionary goods are different. It’s not rocket science to think it might be time to stack the shelves differently.
Similar things happen in B2B SaaS businesses. When a crisis hits, service providers in HR or marketing tend to see projects pulled and funding fall. But it doesn’t have to be that way. Adaptable HR service providers know there will always be something customers need, often something as simple and necessary as payroll processing.
The rewards for reorienting towards the customer are great. Customer loyalty in the B2C and B2B spaces tends to last longer. The shopping websites able to provide groceries during the pandemic continue to enjoy overwhelmingloyalty today.
Being known for solving short-term needs is a compelling long-term advantage.
Stick to your promise and stay honest
Parts of your business will feel less measurable in terms of commercial impact. They could therefore be simpler to streamline. Some however are still fundamental to your core.
Take your marketing and brand value proposition - the promise you’ve made your customers. You can choose not to spend billions on billboards, but never break that promise. Any brand loyalty you’ve built up will soon wane if you do.
Trade-offs do need to be made. Employee welfare is unfortunately often one of them, but there are limits. You can’t have people working 20 hours a day, or withdraw basics like health insurance. You can look elsewhere for savings; to lavish offsites, unnecessary travel, and so on. You can also look at other incentives such as more ownership in the company in lieu of salary cuts. But beware: done wrongly, it will be detrimental to your business and demotivate your team – a sure way to lose top talent.
That’s where great communication from you as a leader comes in. When forced back to your core, clarity, transparency, and honesty with your team will foster trust and instil a greater sense of purpose.
Understanding how to get the best out of your people is crucial.
Recognise opportunity in regulation
Indian industry is currently at the most exciting stage of its evolution yet. Regulators are more agile, constantly seeking new ways to understand industry-specific issues and their impacts, measure them against governance standards and amend regulations to provide more clarity or open up new opportunities.
Keep a close eye on regulatory developments because they may provide the potential for disruption, say in a new market, product or a business structure. For example, the recent update on allowability of direct listing of public companies in India on foreign stock exchanges could create real opportunities for Indian founders to tap the global markets.
Planned well, this could provide a more level playing field for those Indian businesses seeking global recognition, helping them reach newer markets and customers with confidence.
Nishit Garg is Partner, Asia investment team, RTP Global.
