The ecosystem: Creating the biggest defensibility for your business

08 October, 2012

Many entrepreneurs think that the secret sauce lies in a piece of technology or sales and marketing strategy etc. that helps them to succeed. While these are usually key ingredients, it is not sufficient to have them in isolation, as sooner or later someone else will either copy it or build something better.

The biggest defensibility a business can build in my opinion, is the ecosystem and it’s culture. It’s probably the most difficult thing to build as it cannot be built overnight, cannot be copied and you cannot throw money at it to build it.

The ecosystem that one needs to build consists of many players. Employees being the key. It also includes vendors, partners, and investors! They all have a role to play in the ecosystem and their quality and synergy impacts the overall success of your business. I will cover all these with real examples that I have experienced first hand.

Employees

One thing every company needs to understand very very clearly: Employees are assets, not commodity. Assets that grow in value over time. Any asset that grows over a period of time requires upfront and ongoing investment. The employee is exactly that type of asset. Each time you lose an employee, its an investment you need to write off. And each time you retain the employee, the value grows almost exponentially. Why? The cost of replacing an employee is HUGE. Not just in terms of the money required to hire and re-train another one, you lose a piece of your soul or DNA.

The momentum is broken, it slows you down. If that same employee continues to work in the company, he or she requires less hand-holding and management bandwidth, can take ownership of larger areas and can train 10 other employees about the business, culture etc. thus strengthening the DNA of the company.

As employees spend more years at a company, it becomes extremely important to keep them motivated and excited. They need to look forward to come to work every day. This is easy when a company is growing, as there are newer opportunities created. Its not so easy when the growth is slow. Hence it is very important that employees believe in the long term value they will get by staying. Its also important to educate them about the ups and downs that businesses go through, and discuss the longer term plans and vision of the business with them.

At Canvera, we have tried to inculcate a culture of Ownership, Customer Focus, Commitment and Innovation. This culture is not driven only top down. It exists at all levels and the flow can be bi-directional. In fact, many of our long term employees strengthen and spread the culture across the company.

Partners

Partners play a very important role in a company’s ecosystem. Quality of your partners determine how much you can focus on your core. If you can outsource non core functions to partners it frees up your bandwidth to focus on developing your core products or services. Simple examples include accounting and finance functions, data center management, legal counsel, recruitment, procurement, facilities management etc. It’s very important to remember though that outsourcing is not about saving money. It’s about freeing yourself to focus on your core and leveraging your partners to deliver based on their core competency. Imagine trying to build out all these functions in house and the amount of mental bandwidth your management team will have to put in. Also, the best partnership is when the success of your partners depend on your success. This helps aligning interests and working towards a common goal.

We at Canvera have been blessed with an amazing set of partners. They understand our business needs and share similar set of values and culture in their organizations. To name a few, we work with Ujwal Management Services for finance, accounting and statutory compliance, K-Law (formerly Krishnamurthy & Co) for legal services, Netmagic for datacenter management, Excetra for facilities management, Careernet and HirePro for recruitment, Valuepoint for IT infrastructure procurement. All these partners have been with us for almost 5 years (which is about when we started Canvera). And the relationships have grown and become stronger with time.

Investors

Good investors deliver much more value than the money they put in. Institutional investors like Venture Capitalists (VCs) usually have the advantage of experiencing different business models and related issues since they usually invest in multiple companies and domains. Investors can help you identify potential issues, bottlenecks both from a market and delivery standpoint. They can also help create strategic relationships with partners through their vast network. However, it’s very important to remember that you have to run your own business, make decisions and be accountable for those decisions.

While VCs usually invest across multiple domains and industries, strategic investors invest in companies that complement their domain or industry. The advantage of strategic investor is they have deeper knowledge in the domain and industry, and can add very concrete value to your business through partnerships and resources.

Again, we have been extremely fortunate to have investors like Footprint Ventures, DFJ, Info Edge and Mumbai Angels. They not only helped us refine our go to market strategy in the early days, they are also helping us now on execution and strategy for the second phase of our growth. These investors also share similar values and culture and it was apparent to us when we engaged with them.

Value your ecosystem. The relationships and culture within the ecosystem is built with a lot of hard work over a period of time, and this to me is the biggest defensibility you can build for your business. If you get this right, all other things (Product, Strategy etc.) will fall in place.

(Peeyush Rai is CTO & Co-founder of Canvera.com, an online Digital Photography company based out of Bangalore. This post has been reproduced from Peeyush’s blog with his permission”.)


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The ecosystem: Creating the biggest defensibility for your business

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