SCALING UP YOUR BUSINESSRamki
SCALINGUPYOURBUSINESS
Whatistheprofitmarginofthisbbusiness?
Itcharges0(Zero,Zilch)for27%ofcustomersg ( , ) Itchargesafractionofmarketpricefor26%ofcustomers
Itchargesmarketratefor47%ofcustomers
What is the profitWhatistheprofitmarginofthisgCompany?
Its profit margin is:Itsprofitmarginis:
45%!45%!It makes $13M on aItmakes$13Monaturnoverof$29M!!
Forbes:aperformanceth f i lworthyofanycommercial
venture!
Magic of scaling up!Magicofscalingup!
Welcome to the magic world of Welcometothemagicworldofscalingup!
AnnualgrowthofthisCompanyYOY:10% in volume much more in sales!10%involumemuchmoreinsales!
Thevisionofavisionaryinvision Aravind eyehospital!
NotaRupeeoftheturnoverisdonation!
The best example of scaling upThebestexampleofscalingup
A58yearolddoctorfoundeda11bedeyeclinicin1976 Hismission:Togivesightforall By2010Aravind eyecaresystemwasleadingtheworld:
Theworldslargestandmostproductiveblindness preventionsystem Treated32millionpatientsandperformed4millionsurgeries! PerformseyeoperationononeoutofthreepeopleinT.Nadu ;5%of
alleyecareproceduresinIndia! Its quality is in some cases better than the British medical system and It squalityisinsomecasesbetterthantheBritishmedicalsystemand
Aravinds costis1%ofBritainscost!(C.K.Prahlad inBottomofthePyramid)
Aravind isoneofthegreatestsuccessstoriesinallofmedicine(Dr.D id F Ch th Mi h l J d f t t i USA)DavidF.Chang theMichaelJordonofcataractsurgeryinUSA)
Manyaretreatedfreeoratverylowprice paywhatyoucanafford!
How does Aravind do it?HowdoesAravind doit? Missionandmaniacalfocus AgreatMentorSirJohnWilsonhimselfablindman andDR.V Fightingspirit/Grit/Perseverance/HARDWORK/Empathy Greatsacrificesoftime,effortandmoney tookdecades Not incremental innovation break through solutions Notincrementalinnovation breakthroughsolutions Consistency,reliability,clearstandards,lowcosts,dataanalysis SCALElikeMcDonalds The mantras The more you do the better you get; get less do moreThemantras Themoreyoudo,thebetteryouget ; getlessdomore Streamlinedworkflow,wellcraftedprocesses Reducingmainsurgeonstime;waittime=0 Networkscampsponsoring;localhelpp p g; p Monitoring Aravind Parameterprogram qualityaudits TRANSPARENCY TRUST
Dream visionDreamvision
Dr.V journalentryin1970swhenhewasstillj ypayingoffthemortgageforthefirsthospital,wherehewrites:
of his intention to set up 100 hospitals across the ofhisintentiontosetup100hospitalsacrossthecountry
Ofthepossibilityoftrainingvillagewomentoassistsurgeons
Oftheurgentneedforgoodadministrators Ofplansforbuyinglandp y g Ofthenatureandpotentialsofyoungstaffmembers AndofatargetofdoingaMILLIONsurgeriesayear!
Vision and realms of possibilityVisionandrealmsofpossibility
Fred Munson on Dr.VFredMunsononDr.V
ThroughoutthetimethatIhaveknownDr.V,hisvisionfor what was possible wasforwhatwaspossiblewasbeyondwhatwasanythingy y greasonable.
Can do attitudeCandoattitude
We need to do what we need to doWeneedtodowhatweneedtodo Whenyoubegindoingtheworkyouaremeant to do unexpected resources will findmeanttodo,unexpectedresourceswillfindyou
A i d i h i f Aravind operateswithaveryuniquesetofselfimposedconstraints;Thatautomaticallyli i di l i CEO f IDEOeliminatesordinarysolutions CEOofIDEO
Manufacturing revolutionManufacturingrevolution
WHOsaidUsingIOLsindevelopingcountrieswasnotmerelyunsustainablebutirresponsible.
WhenAravind wantedtomanufactureIOLsinAurolabthey were told they were crazytheyweretoldtheywerecrazy
Aravind wantedtodoitsotheycanofferIOLtothepoorat$10 importprice$80to$150B 2009 A i d d i 2 illi IOL By2009,Aravind wasproducing2millionIOLsperannumandowned10%ofglobalmarketforIOL,exportingitto120countries!
Dr.DavidJ.Apple Aurolab lensesclearlymeetandoftenexceedthestandardofmanylensesmanufacturedinUSandEurope.p
Appropriate size for scaling upAppropriatesizeforscalingup
Dr Aravind of Aravind eye hospital says:Dr.Aravind ofAravind eyehospitalsays: Doapilotandifthatworks,thenbuildit.Forusscale has always come late Building in phases isscalehasalwayscomelate.Buildinginphasesismorepractical.Yourtimeandenergyneedtobeinvestedininspiringpeople,patientsandstaff.Startwiththemicrocosmofwhatyouaredreamingof.Seeingitinmotionwillgiveyouthe
d d C ienergyyouandyourteamneed.Commitmentonthegroundgoesalongway,evenifitsamodestefforteffort.
Essence of scaling up summed upEssenceofscalingupsummedup
Dr.Venkataswamy summarises thesuccessofyAravind beautifullytoJustinHuggler ofTheIndependent,UK
We did good quality work Wedidgoodqualitywork Sotherichpeoplecameandpaid Andwecouldtreatthepoorpeoplewiththemoneysaved
Thepoorpeoplebroughtmorepoorpeople The rich people brought more rich peopleTherichpeoplebroughtmorerichpeople Sonowhereweare!
Simple,elegantandthatsallyouneed!
Money Money
SwamiVivekananda:whenIaskmoneywillpoury pfromtheheavens!
Dr V:Youmustdothework.Themoneywillfollowfollow
Ifamanhasgoodcornorwood,orboards,orpigs, to sell, or can make better chairs or knives,pigs,tosell,orcanmakebetterchairsorknives,cruciblesorchurchorgans,thananybodyelse,youwillfindabroadhardbeatenroadtohishouse though it be in the woods house,thoughitbeinthewoods.
RalphWaldoEmerson. ThisiswhatStevejobsdidtoo!j
Narayana HrUdhayalayaNarayana HrUdhayalaya
Doing an Aravind in heart surgeriesDoinganAravind inheartsurgeries 15%ofallheartsurgeriesinIndia
li l h k h i l MortalityratelessthanNewYorkhospitals 5outof6donefree BloodgasanalysiscostsRs8.50againstNormalRs350
AppliesWalMart tohealthcare
Before 1980Before1980
IdidmyCAarticlesinChennaiin1970s Atthattimeifyouwantedgoodvegfoodyoumainlywent
toWoodlands driveinorthemainhotelinMylapore Good medical attention meant Isabels, CMCVellore, LadyGoodmedicalattentionmeantIsabels,CMC Vellore,Lady
willingdonetc(mostlymissionary) Woodlandshadagoodnameandcouldhavescaledup They did not and it was left to a cleaner boy/ grocery owner Theydidnotanditwaslefttoacleanerboy/groceryowner
withgreatvisiontodothatwhoopenedarestaurantin81 Andayoungdoctorforesawwhathealthcarewouldmean
in future and started a private hospital in 83infutureandstartedaprivatehospitalin 83 Restastheysayishistory~
1981 dawn of a restaurant chain1981dawnofarestaurantchain
ThefirstSaravanaBhavanbornwithonee st Sa a a a a a bo t o erestaurant Letscometo2013
Now70plusrestaurantsand16moreopening Saidtobetheworldslargestvegetarianrestaurantchain
Over7500employees TO$200M PerWikipedia 11countriesandgrowing,growing
1983 dawn of a corporate hospital1983dawnofacorporatehospital
First Apollo hospital is bornFirstApollohospitalisborn Letscometo2013
Now 52 hospitalsNow52hospitals Over8500beds One of the largest in healthcare in India OneofthelargestinhealthcareinIndia GlobalreputationTO 12 13 R 3768 TO1213:Rs3768crores
PAT1213:Rs304crores
Scaling up success saravana bhavanScalingupsuccess saravanabhavan
T i d hTripodapproachdProduct
CustomerEmployee
ProductProduct
Goodquality InitialtimeofmanyhourswithchefbypromoterRajagopal
perfectingtaste Bestingredients
Initiallymadelossformanymonths Customerfeedbackandattendingtothat
Consistency/stadardisation sameprincipleofMcDonalds Dosa weighs60gms maybemorebutneverless
Highhygiene Bananaleavesontheplate(alsoeasytowash)p ( y ) Employeesbathebeforework
Haircutonceamonth;nailtrimmingonceaweek Brand buildingBrandbuilding
Product and service extensionsProductandserviceextensions
New food itemsNewfooditems Fastfoodclosesafterrestaurantsleftoversofrestaurants can be usedrestaurantscanbeused
Ownicecream Both sit in and stand up customers (R K Salai) Bothsitinandstandupcustomers(R.K.Salai) Murukku makingusingladiesVill f d it Villagefooditems
Outdoorcateringforaslowas25people
CustomerCustomer
Uniforms for employeesUniformsforemployees QuickserviceC i Courteousservice
Nodrinkingbyemployees Nolatemoviesforemployees Customer complaints listened to and attendedCustomercomplaintslistenedtoandattended Regularexpansionatgoodlocations
employeeemployee
Jobsecurity nobreakinservicey Higherpay payaccordingtoneeds Accommodation Singaporetripforselectemployees Abusivecustomerreportedtomanagerwhowilldi tl d l ith hi k t t ldiscreetlydealwithhimevenaskcustomertoleave
Closeinteractionwithworkers(Rajagopal saysheistheunion leader)unionleader)
Clearpromotionpolicy Employeebenefitsgalore seelistp y g
Employee benefitsEmployeebenefits Annualfaretogotonativevillage 2childreneducationuptopostgraduation sameschoolastheone
ownerschildrengoto Newclothesduringfunctions/festivals;alsoforspouse Life and medical Insurance policyLifeandmedicalInsurancepolicy EmployeeESIpaidbycompany Attendantandfoodiffamilymembergetssick Hospitalisationbenefitsinprivatehospitalp p p ParentsgetRs200pm InvestmentofRs10kperdaughterformarriage(Maniammal
marriagescheme) onedaughteronlyperGovt policyi h f id IncentiveschemeforTV,Fridgeetc
Vehicle aspercategory Phoneathomeforkeyemployees
Proposed house buying scheme Proposedhousebuyingscheme
SAS best company to work for in USASAS bestcompanytoworkforinUSA
CEO says:CEOsays:
Contented cows giveContentedcowsgivemore milkmoremilk
justtakecareofyouremployees everythingl ill b t k f!elsewillbetakencareof!
Interviewwithapartnerofmr.lrajagopal
1)Annachi Rajagopal,isadetailsperson,andhencesetab h k i F d T t Q lit H i d S i Thi tbenchmarkinFoodTaste,Quality,HygieneandService.Thissetthemarketafire,andestablishedhisbrand.
2)Heisagreatvisionary. Hescaledhisbusinessslowly,ashe) g y y,hadtoparallelly developateam,whosemembersinternalisedhisobsessionfortaste,quality,hygiene,andservice.
3) Hiscoreteamofabout2000people(Managers,Chefs,andS i S i St ff) h d l d hi litiSeniorServiceStaff)havedevelopedownershipqualities,and runtheorganisation now.
4)Annachi takescareofhisemployees,ashefirmlybelieves) p y , ythatwhentheyaretakencareof,theyinturntakecareofthebusiness.
Interview with a partner..contd.Interviewwithapartner..contd.
5)Annachi hasmadegreat contributionstothe) gSocietyatlarge,bycreatingthousandsofjobs,groomingseveralrestaurateurs,anddevelopinghis native land which is a very arid districthisnativelandwhichisaveryarid district.
6)WhileAnnachi hashadthevisionindevelopingp gahumongousbusiness,healsorecognises thechallengesgoingforward,forthenextgeneration,he already has plans in placehealreadyhasplansinplace.7)Ihavenot metanotherperson,whohassomuchclarityofthought.
A manufacturing co who is our clientAmanufacturingcowhoisourclient
Grew500%inlast5years! 10%netprofit! Hugeappetiteforgrowth 25% of revenue is from new productslast 3 years 25%ofrevenueisfromnewproductslast3years Widearrayofproducts;widerangeofcustomers Productsmadetoorder Notmorethan10%saleswithonecustomer;notmore
than30%withoneindustry Exportsandlocalsalesp Specialpurposemachinessuppliedbycustomer! Greatquality,designandR&D manyawards Owns up mistakes Ownsupmistakes
A manufacturing company contd.Amanufacturingcompanycontd.
Perfectmanufacturingatcentralfactoryandshifttosatellitefactorytnearcustomer
Takepowerintensivemanufacturingtostateswithsurpluspower Sweatassetsfully
h k l ff f Morethanmarketsalariestostaff;freecanteen;nounion CEOwearssameuniformasworkers;moulds people MarketingthruJVs Preventivemaintenance spareschangedafterstatedno.ofhours
evenifgood Setanexample personalexpensesseparatedfrombusiness
G d h h l P i ! GoodgovernanceeventhoughonlyPrivatecompany!
Modern day scaling upModerndayscalingup
YouTubeYouTube Firstvideouploaded2005 BoughtbyGooglein2006for$1.6B Todaywortharound$20B! RevenueCY:$3.6B! Unique US viewers per month (excl mobile) 133 millionUniqueUSviewerspermonth(excl.mobile)133million AverageUSusageminutespermonth(excl.mobile)31.7B Monthlyvideosviewedglobally:130B!
h i b h h i h MoresearchesinYouTubethanonanysearchengineotherthanGoogle!
100hoursvideouploadedeveryminute!
How did YouTube do it?HowdidYouTubedoit?
Byteamingupwithotherswhohavetheirowny g ployalfollowing
InOct11theyhelpedfinance100neworiginalchannels from celebrities online video creatorschannelsfromcelebrities,onlinevideocreatorsandHollywoodstudios
Spent $100MSpent$100M Nowcalledthemostefficientspendinhistory!
Example: Machinima caterstogamingcrowdandhas14.5msubscribers
its videos have been watched 2 Billion times a month!itsvideoshavebeenwatched2Billiontimesamonth!
Howdoestheworldslargestrestaurantcompanybyit l ?unitsscaleup?
YUMwith39000KFCs,PizzaHutsandTacoBellsistheworldsl tlargest;
Operatesin130countries Openedonenewrestaurantevery14hoursforlast16years!
i h ld b b ildi Itistheworldsbestteambuildingco. HasworldfamousleadershipprogramcalledTakingpeoplewith
youM t i t t l t I t t iti ! Mostimportantelement: Instantrecognition!
ProgramslikeWalktheTalkaward,Rubberchicken,PlasticHog! CEONovak:Imonearthtoencourageothers,liftlives,helpcreate
leaders inspire people recognize others leaders,inspirepeople,recognizeothers.
Few examples around the worldFewexamplesaroundtheworld
McDonalds quality, service, cleanliness andMcDonalds quality,service,cleanlinessandvalueformoney(RayKroc founder)
Cirque Du Soleil a $1B circus company!CirqueDuSoleil a$1Bcircuscompany!(Innovationandgreatestshowsonearth)
Southwest (Pick up assets in downturn, beSouthwest(Pickupassetsindownturn,bedifferent,actdifferent)
Netflix (cannibalises its own good businessNetflix(cannibalises itsowngoodbusinesskilleditsownDVDbusinesstostreamvideo)
Apple (Customers as roving fans)Apple(Customersasrovingfans)
Should you scale up?Shouldyouscaleup?
Daniel Isenberg HBR 2 minute checklistDanielIsenberg HBR 2minutechecklist Iveurgetomakesomethingtoimpactmarket Icansellthingstopeoplewhodontwantitg p p Ihaveagreatteam IvePolicies,proceduresandprocessesinplace, p p p IknowexpertsIcanturnto IknowMoneyisoutthereforagoodventure Iraisethebarallthetime;Imnoteasilysatisfied Iam/canhave thebestsalespeople
Should you scale up? Contd.Shouldyouscaleup?Contd.
Thinkingsmallisacrime Salesprocessstartswhencustomersaysno IfIstandstill,Iwillperish;Iscaleuporfadeaway Iknowhowtofindgreatpeopletoworkforme Closingasalegivesmethebiggestrush Itsimportanttoknowofabigproblemthecustomerhasand Lookforasolutiontothat
Itsnottechnologybutteam,organisation,marketingand Ambitiontosellthatareimportant
Ithinkandactlikeamarketleader Ivefireinthebelly
Ifyouansweredyestomostofabovescaleup!
Will I have obstacles?WillIhaveobstacles?
Ofcourse,yes, y Evenyourpartnermaynotwanttogrow AsGermanphilosopherArthurSchopenhauersaid Truthpassesthru3stages
First it will be ridiculedFirstitwillberidiculed Seconditwillbeviolentlyopposed Thirditwillbeacceptedasselfevident!
If you are scared of taking risks: Ifyouarescaredoftakingrisks: Youmiss100percentoftheshotsyoudonttake.
CanadasgreatesthockeylegendWayneGretzky
Whenmr.rajagopal scaleduphisb hgrocerybusinessinthepast
Toimprovehisgrocerybusinesshebuilta2storiedbuilding Itscostescalatedtoomuch Hehadtopledgeeverythingheandhisfriendhad Rentwasjustenoughtopayloaninstallment DailybusinessinstoreplummetedfromRs 5000toRs 500 Hedelayedpaymentstowholesalersandhadloanseverywhere Hecouldnotevengetriceforhishome Hiswifewept,whyisthissorrystateofaffairsinthishouse? Hesoldthebuildingultimately
Justtoshowallscalingupdoesnthaveafairytaleending! Dontbitemorethanyoucanchew!
How to scale up?Howtoscaleup?
Haveclearvision DoaSCOT(strengths,concerns,opportunitiesandthreats) DoaPEST(political,economical,socialandtechnological) Systematize have policies procedures processes Systematize havepolicies,procedures,processes GetaCEOifyouarenotCEOmaterial
GooglebroughtEricSchmidt;RedzoneroboticsbroughtChrisDunkerleyDunkerley
Hiretofillgapsinyourskillset Bringinpeoplewhoarebetterbutwhomeetyourculture Delegate Adequatecapital thinkVC,partners
How to scale up? Contd.Howtoscaleup?Contd.
ProductVservice Expandproduct/servicevGeography BrickandmortarVOnline Outsource
Ubiquiti networksisa$300MTurnovercompanywithover25% margin which outsources everything including SALES!25%margin,whichoutsourceseverythingincludingSALES! CEOsays:Myaimistobuildsomethinggreatasefficientlyaspossible
I f l k t l t f l Informalworkstyleto formal Properfinanceandaccounts Infrastructure including IT InfrastructureincludingIT
RememberRemember
Customersarenotsameasusers Ryanairwenttosmallmunicipalairportshungryforbusiness(cafes,taxis,stores)andtheairportsevenpaid them to start a service!paidthemtostartaservice!
Firstusersnotsameasscalingusers Mostgamesarefirstprovidedfreetoprofessional
h d d h f lgamerswhosuggestmodsandthenfinalgamegoesonline
FirstproductnotsameasscalingproductFirst product not same as scaling product BAANofferedafreeERPtoSHELLandafterincorporatingalltheirsuggestionstookittomarket
makemoremoneyasaminorityh h ld l lshareholder saletoscale
Paraspharmamakersofmoov,kracketc Familybusiness
Soldmajoritystake(63%)toActiscapitalaPEinvestor2008forRs600crores
Businessscaledup NewCEORaghunandan Streamlined distributionStreamlineddistribution Internationalexpansion SAP Umbrella branding etc Umbrellabrandingetc
ReckitBenckiserboughtco.in2010forRs3260cr PromoterPatelmadeanotherRs900cr
Mantra for scaling upMantraforscalingup
1 Correct old mistakes1.Correctoldmistakes 2.Scaleup3 k i k 3.Makenewmistakes Gobackto1!
Scaling up in todays hitech worldScalingupintoday shi techworld
Thenewwayofscalinguporevenstartingup:y g p g p Movie: Kathalil Sothappuvathu eppadi wasasmallYouTubevideodonewithnorealbudgetanditwenti l Th th h d it k d t kviral.Thentheguywhomadeitwasaskedtomakeafullmovieandrestishistory.
Songs: A 40 second clip in a HBO Movie catapulted "ISongs:A40secondclipinaHBOMoviecatapulted Iloveit'totopofthechartsfromnowhere
NewProduct:JustputyourideaonkickstarterPebble:$TheEpaperwatchgot$10Movernightforitsidea
makers(Theyjustwanted$100,000!)Imaginebeingamulti millionaire in a few hours!multimillionaireinafewhours!
Sir donald cohen apax founderSirdonaldcohen apaxfounder
Y b i illYourbusinesswillgrowtothesizeofgyour vision!yourvision!
From the biggest in this game..Fromthebiggestinthisgame..
SOURCESSOURCES
InspiringPersonality Mr.P.Rajagopal HotelSaravanaBhavan~GetI i d !!!!!!! D k R hInspired!!!!!!!DeepakRaghuraman
IsetmyheartonvictoryAutobiographyofMr.Rajagopal ownerSaravana Bhavan
Saravana Bhavan Wikipedia the free encyclopedia SaravanaBhavan Wikipedia,thefreeencyclopedia SaravanaBhavanAnnachiRajagopal Cleanerboytoownerof
mostsuccessfulchainofrestaurantChennaiStartup GreatMindsDiscuss IdeasDiscussIdeas
Howtotakeyourbusinesstothenextlevel ,Howtotakeyourbusinesstothenextlevel BusinessNews News MSNIndia
TakingYourHostingCompanytoNextLevelLearnfromMistakes,g g p y ,CorrectThem Rinse&Repeat!
PrivateequityfundActisCapitalhashelpedIndiancompaniesscaleuptothenextlevel
Sources contd.Sourcescontd.
FindOutifYou'reaScaleUpEntrepreneurwithThisp pTwoMinuteTest DanielIsenberg HarvardBusinessReviewI f il b i tti ht ith f il Isyourfamilybusinessgettingcaughtupwithfamilyissues
Million Dollar Tip #4 Scale Up Your Work PersonalMillionDollarTip#4ScaleUpYourWorkPersonalExcellence
ScalingUpWhenYoureStillSmallChiefExecutive.netChiefExecutiveMagazine
ScalingUpYourBusinessToAHigherLevel WhatCould Be Stopping You The Learning 2 Live BlogCouldBeStoppingYouTheLearning2LiveBlog
Sources contd.Sourcescontd.
AnEntrepreneursDilemma WhentoscaleupyourbusinessBPlanExpertsBlog BusinessPlanExperts,BusinessPlanConsultants,BusinessPlanWriters
ThebiggestchallengesforentrepreneursonstartupsBusinessToday
ScalingUpIntuitSmallBusinessIndia 3 Mistakes Made in Scaling up New Ventures Charles3MistakesMadeinScalingupNewVentures Charles
BadenFullerandIanMacMillan HarvardBusinessReview ScalingUpYourBusinessStartupKashmir! Eleven Lessons for Scaling Up Fast Company Business + ElevenLessonsforScalingUpFastCompanyBusiness+
Innovation WhyitssohardforsomebusinessestogrowinCanada
The Globe and MailTheGlobeandMail
Sources contd.Sourcescontd.
Infinite Vision by Pavithra K Mehta andInfiniteVision byPavithra K.Mehta andSuchitra Shenoy (StoryofAravind eyehospital)hospital)
HowYouTubechangeseverything FortuneAug 12 13Aug12,13
GreatJob FortuneAug12,13