This document summarizes key points from a workshop on helping companies grow from Rs. 10 Crores to Rs. 50 Crores. It discusses visualizing and identifying constraints to growth. Identifying the main constraint and focusing on strengthening that area is critical. It also discusses positioning for growth, getting the right people and culture, understanding cash flows, capital needs, and exit strategies. Overall it provides advice on the mindset, strategies, and actions needed to scale a business from Rs. 10 Crores to Rs. 50 Crores.

1. Crossing the 50 Crore ChasmAnand Deshpande and Ashok KorwarApril 2011

2. Workshop to help Companies grow from Rs. 10 Crores to Rs. 50 Crores

3. Know our biases …Our view from the fish tank. 3

4. Ashok Korwar Independent management consultant based in Pune ashok@yourgrowthcatalyst.com Professor at IIMA, 1990-2000 Strategic Advisor to Chairman of Polaris Software, 2000 – 2007 Division VP at EDS, Dallas Ph.D. – UCLA B. Tech, IIT Bombay

5. Anand Deshpandeanand@persistent.co.in Founder, Chairman and Managing DirectorPersistent Systems Limited. Persistent is a 6000 person; Rs. 850 Crore NSE/BSE listed Company. Techie background B. Tech, MS, Ph.D. all in Computer Science (Databases) http://www.linkedin.com/in/ananddeshpande

6. Believe in nothing, no matter where you read it, or who said it, no matter if I said it, unless it agrees with your own reason and your own common sense. Gautam Buddha

7. Growing a business is a matter of choice. Before deciding to grow, be sure you know why you’re doing it.

8. What is Rs. 50 Crores? When you visualize, you materialize!

9. Rs. 50 Crores Rs. 50,00,00,000 Rs. 500,000,000 Rs. 500 Million Rs. 5 x 108

10. As of May 30, 2010

11. Infosys Rs. 5 Crore in 1991 and Rs. 50 Crore in 1995. Cognizant Persistent did Rs. 10 Crores in 1999-2000 and Rs. 50 Crores in 2002-2003

12. From Rs. 10 Crores to Rs. 50 Crores:How fast will you get there? 50 10 time

13. Visualize your Rs. 50 Crore Business

15. Visualize your business at Rs. 50 Crores

16. Eliyahu M. Goldratt Applying Goldratt’s Theory of Constraints http://www.goldratt.com/

17. What determines your speed on the road?

18. Every System.. Has one constraint That chokes throughput The ‘Bottleneck’

19. What determines the strength of a chain?

20. External Constraint? The market? Do you have 50% market share? If not… Internal Constraint? Who will bell the cat?

21. Constraints … What prevents a bonsai tree from growing?

22. Identifying Constraints.. Depends on the business model.. Use common-sense, it does not take statistical analysis! Thought experiment: if throughput goes up by an order of magnitude (10x) where will my system break down first? If I strengthen x function, will throughput go up?

23. Mental blinders we put on ourselves ... But also the most common dominant constraint.. Policy Constraints ...

24. Policies as Constraints.. .. I will hire only people from IIT ? .. every project must earn 40% margin? .. I can trust only Indians in the field? .. I can’t pay more than.. …CEO must see every customer communication …people must be kept busy all the time..

25. How does it help..? Ok, so I found the constraint..

26. Constraint Is also Lever

27. What should the CEO focus on?

28. Goldratt’s 5 step process Identify the constraint Squeeze the most out of the constraint Subordinate everything else to the constraint Elevate the capability of the constraint Go back to step 1!!

29. What is holding you back? What’s your constraint?

30. Identify your constraint

31. How do we select which vendor to work with?

32. 32 We do business with people we trust!

33. For a small company, strategic positioning is critical for growth! Positioning establishes trust.

35. Small Companies have limited management bandwidth.

36. To Grow.. Vertical positioning is always better than horizontal Except in very early stage – technology enthusiasts.

37. Case Study Company Documentum. $2 million revenue for 3 years in a row Document management technology Potential: all people in all companies who manage complex documents

38. What did Documentum do? Focus on pharma companies, management of regulatory affairs. Applications to be submitted to over 100 regulatory bodies around the world! Takes one year to submit an application! (not to get it approved, to submit it!) Documents come from clinical studies, written reports, mails, databases…

39. With whose support? Technology departments? No – content to work with existing vendors Function head and his bosses

40. In one year.. Demonstrated that problem could be solved Signed up 30 leading pharma companies’ regulatory affairs departments Revenue to $8 million $25 million the next year

41. Analyzing Market Share and Segmentation

42. Defining entirely new markets. Blue Ocean Strategy.

43. It helps to catch a wave.

44. “Simplified” Pencil Sharpener Open window (A) and fly kite (B). String (C) lifts small door (D) allowing moths (E) to escape and eat red flannel shirt (F). As weight of shirt becomes less, shoe (G) steps on switch (H) which heats electric iron (I) and burns hole in pants (J). Smoke (K) enters hole in tree (L), smoking out opossum (M) which jumps into basket (N), pulling rope (O) and lifting cage (P), allowing woodpecker (Q) to chew wood from pencil (R), exposing lead. Emergency knife (S) is always handy in case opossum or the woodpecker gets sick and can't work.

45. Ensure that the troops are aligned with the message!

46. Define the Battlefield.. To YOUR advantage

47. Your elevator pitch: Framing is key.. Serving the same need as.. (in some other industry) Like.. Established Competitor, only better because.. Competitors are extremely useful for FRAMING!

48. Home in on the differentiation..eg Market alternative: BPOs who are struggling to handle complexity Product alternative: like XYZ, the market leader in workflow Except that we are optimized for PPP pain area And we have the entire package ready

49. Example: Intuit For the bill-paying member of the family Who is tired of filling out the same old checks month after month It is a home finance program on your PC Unlike ‘managing your Money’ which is a financial analysis package We are optimized for home bill-paying (from Geoffrey Moore, Crossing the Chasm)

50. What business are we in? What are our competitive strengths and limitations? Do we have or can we develop a true market niche? What do we want to become in the long term? What is our strategy for competing effectively in our chosen markets and for achieving our long-term missions? What are the critical factors that will makes us successful or unsuccessful in achieving this long-term mission? What goals shall we set to improve our competitive effectiveness and organizational capabilities in each of these critical success areas?

51. In this growth phase.. CEO’s number one job is..

52. Win that first big deal .. Systems and Processes will get aligned to win it, to execute it..

53. The mountain will teach you what you need to know to climb it..

54. Ability to hire peers is the key to success.

55. Why should someone join you?

56. Your Company’s culture is the most powerful tool for finding and keeping great employees. Don’t miss opportunities to reinforce it.

57. Growing businesses can be thrilling!

58. You must use your passion to attract!

59. Wealth in the future?

60. What do you really need? You need a small and hungryteam that wants to go for it! 60

61. How you think is more important than what you know. Pick teammates for what they will do, not for what they have already done. 61

62. 62 The mountain does not give a damn about your resume. Without hunger, both skill and experience will remain in the base camp. There is nothing more dangerous than a moderate mountain. Only an ultimate mountain can forge an ultimate team. The only guidebook to your mountain is the one you will write. The best plan is the one that works.

63. Employee Stock Options are useful mechanisms as an incentive for attracting and retaining employees.

64. Vesting Plan 40% 30% 20% 10% ESOP Plan Basics Shares and Options Grant Price Exercise Price Gain Vesting Plan Cashless exercise Buy back – gain ESOP Trust 4 years

65. 1936 Indian Olympics Hockey Team Beyond the leaders; you need a team.

66. Getting the Organization Structure right is very important but rather difficult.

67. Hire good people even if you can’t figure out their role. By definition, they will find a way to contribute.

68. Difficult Decision:Should you hire a CEO?

69. Set up Internal Systems and Measures

70. Publish audited quarterly results within four weeks every quarter. Share them internally.

71. 71 Understand Cash Flows

72. Profit is an opinion cash in the bank is fact Old adage

73. Track what makes sense to your organization and your context.

74. Does your data help you make decisions? Align the granularity of your measurements and your decisions

75. Avoid borrowing from amateur money lenders.

76. Do you need money? How do you plan to use it? Can you borrow from customers?

77. Understand the VCs investment philosophy andmotivation

78. Beyond money.Be clear and upfront about what you are expecting from the VCs Attend Board Meetings Provide References – Business Personnel Help make understand industry best practices Freedom to operate No compete

79. Understand the Veto Rights VCs will Demand Board composition Change in management Changes in key resources Operational items – CAPEX / loans M&A Diversification Dividend above a certain level Appointment of Auditors – both statutory and internal

80. Understand and Beware!

81. Preference Rights Investor You

82. Have clear clauses for deadlock resolution, indemnities and warranties.

83. Exit is important. VC Funds have a time-frame. IPO Buy back Sale to third party with right of first refusal with Promoters Set criteria for exit and a formulae for valuation

84. Establish a network of mentors you trust.

85. Leverage Your Board. Independent Directors: your advisors and critics!

87. Have expertise that aligns with the needs of the business.

89. Relatives, friends

91. Read and understand legal documents carefully. Think through indemnities, warranties etc.

92. Think long-term. Run a clean business

93. 90 Make your contribution to the society. Commit to Corporate Social Responsibility

94. Failure defeats losers, failure inspires winners. – Robert T. Kiyosaki, author, entrepreneur, investor

95. Go for it!

96. Technology Market Development Life-Cycle

97. Do… Pragmatists reference Visionaries? Conservatives reference Pragmatists?

98. How do they Behave?Visionaries Can see the business value of a new product or technology Want to be the first Willing to champion a small company, if they see a fellow-visionary Are often highly ego-centric Don’t really care whether support exists or not (that is an SEP) Not price-sensitive (probably grabbed someone else’s budget anyway) But very heard to please: vision, after all! Project by project mode In a tearing hurry

99. Selling to Visionaries Give them the importance (they think) they deserve! Assign high-level executive to work directly with them Be willing to modify your product or service to suit them Manage expectations!

100. How does one find Visionaries? Industry conferences Often they find you, through their contacts in technology companies

101. How do they Behave?Pragmatists Want to buy from established leader Will take risks if required but will monitor, mitigate.. So don’t like single vendors Suspicious of breakthroughs, want to move step by step Want to standardize, standardize, standardize.. Usually network with peers in their own industry Have the big budgets!

102. Selling to Pragmatists.. Reassure them that your product/service will not disrupt their platform SoA Guarantee support and service Create competition if necessary! Create alliances to reassure them..

103. Product Market pragmatist visionary Technology Company experimenters conservative

104. BEST WAY TO BEGIN AND GROW IS…

105. Find One Good Customer and Grow With Him ! But remember to protect your IPR!

106. 103 Selling to Big Companies is important. How to Win and Keep BIG Customers Steve Kaplan The Difference Maker http://www.differencemaker.com

107. 104 You’ve Got to Believe Elephants need you, too

109. Make the big Company looked after and cherished. Return calls speedily, Answer questions quickly. Address problems immediately.