Strategies Entrepreneurs Must Take to Scale Up in the Digital Age – Fireside Chat with Dr. Ganesh Natarajan, Chairman-5F World, and Dr. Anand Deshpande, Founder & Chairman-Persistent Systems

In this interview Dr. Anand Deshpande shares with us the strategies for business growth in the digital age.

Dr. Ganesh: Where do you think large customers are going? Are they looking at digital as something very visceral to their business? Is it still ‘lipstick on a bulldog’ as one of my friends would say. But do you think they are approaching it the right way? What is your own view?

Dr. Anand: I think of course in all of these businesses, there are always the trend setters – who are thinking digital as a long term play where they are building incrementally and iteratively, and building out many different things. In many other businesses it’s a project at a time. Somebody thinks personalization of some data for employees is cool, so let’s go build one solution for that. Unfortunately, the big problem is that when you start to scale these things they become an issue. So how do you look at re-architecting your entire enterprise to look at the next generation? That’s a very tricky and a hard problem. I think we are just at the beginning of how people have started to do this. What I find is that most companies have tried out several experiments of products or solutions that they would call as digital. However, there is a lot of legacy data, there is a lot of applications that people run. If you were look at how the world is going to be in a few years’ time, you would want to run far fewer applications than you have today. So this whole journey of taking my existing stuff to something different, whether it’s going to come by building new stuff or migrating, the whole journey is where I think the opportunity is going to be there. And I think we are still at the beginning of it.

Dr. Ganesh: Digital Transformation is not just about technology. There is digital, there is business process re-engineering, there is analytics both predictive & prescriptive etc., and of course there is culture. So where do you think are the pressure points that you see large corporations or even medium corporations facing? Where do they get stuck in their digital journey?

Dr. Anand: We don’t really get involved in the cultural or the strategy aspects of things. We get involved more on the implementations of people trying to get to digital. And the place where we see people getting stuck is that due to multiple experiments in digital, the complexity of client’s operations is getting far more complex when really it should not. That’s sort of when we see lot more interest from people coming to us or talking to us saying how do I clean up my existing stuff or how do I look at my next few years of architecture and put this in together so that over a period of time I am going to be where I am.

Dr. Ganesh: But for a company which is offering digital solutions, isn’t it almost imperative that they need to step into the shoes of their customer and understand their business pain points as well?

Dr. Anand: Yeah it is important. We work in mainly three areas as far as industry segments are concerned. We have a good set of work going on in the healthcare area, financial services and banks and some in the industrial area. Most of our customers, don’t expect us to re-define their business. They need our support to implement the technology and the solutions to build their business. So we come in mostly at that point where we are working as their partners to help them build out their solutions and technology. Now, does that mean we don’t need to know anything about their business? That’s not true! Clearly, we do need to understand. We have several medical people or people who have had experience in that area who are part of the team.

But we don’t pretend to say that you know we understand your domain and we are going to define your next generation business. We get involved at a point where we understand that you know your business well. You know what you are trying to do, we also know our business well and we think there are many areas where you can take help from us, and that seems to work well. Because to get to a level of deep expertise, to be in a position to tell a person who is running a hospital for 20 years that I know how to run your hospital better is a very different kind of a skill. And we don’t pretend to be that.

Dr. Ganesh: That’s very pragmatic. A lot of much smaller companies might actually say that we understand this domain so well and we can almost tell the customer how to run their business. What you are saying makes tremendous sense.

However, shifting gears a little, we work with a lot of young entrepreneurs who are running 30-40 Mln dollar companies and want to scale and almost innovatively the conversation goes to digital. So where do you think is the play for a 20-40 Mln dollar company? What should they be thinking about? Should they be thinking that – look I just want to grow up and become a Persistent or is there a play where they can focus on something and make their presence felt in digital?

Dr. Anand: I believe that any business needs to be very focused and very clear about what they are doing. And here is what I tell people who are running like a 20 Mln or a 30 Mln dollar business. See the thing is in any market, there is only room for a finite number of leaders. Typically, two to three leaders will end up owing 20 percent of the market share each and then the rest are all bunched into that 30 percent bracket. Now as a small business, the key is to define the market to be no bigger than 200 Mln dollars. So the highest amount of work you need to do is to say – ok I am so specialized, I know exactly what I am looking at, where is the market size that I am going after as has been defined by me is of a size that I can be a leader in that market. That in my opinion, is the key to being successful in that market. Once you start to get to a point where you are 25 percent of the market then you can find a way to expand the market. Rather than trying to scatter throw into five different things.

Dr. Ganesh: So do you think it will be more advisable for them to go after the non-traditional domains or verticals rather than just chase after the banks and insurance companies and healthcare which everybody is?

Dr. Anand: I think it all depends on how you define your market. So even in a bank or in a financial institution, there are gaps or there are areas where you can say that this part of the bank I am the leader in that market. So it’s not about the size of the companies that you are going but it is about your offering as a context of where the things are in that context. And if you have clarity in terms of what you are selling and may be a few washers but that’s fine. But if you are the only washer player in their market everyone needs then you sell the washers. So it’s a function of how you define it. So, it also has to do, you know if you are already a 20 Mln dollar company you probably know your customer base anyway. You know some entry points and all that, so do you go deeper?

Somehow I don’t buy this thing that ok for a company of that size you need to have only a few customers that give you a lot of business. And that’s not the key thing. The key is to have a way where you are able to sell very effectively because you already have many things that are aligned. So if I am the guy who does, let’s say, cost optimization in a certain kind of function within a hospital, I am really the best at it and every hospital should want it. Then you are selling may be you know few hundred thousand dollars in each hospital but total will add up.

On the other hand, if you say I am the specialist in Cancer hospitals in the east of Mississippi or in New York area, then that’s fine. Meaning, you are the king of that zone. But unless you have market that is defined, where you are positioning is so perfect that you know what you are doing, everyone knows why you are where you are, only then as a small business you have a chance of success. I find diversification as the worst thing that a small business can do.

Dr. Ganesh: But then how does one look at marketing? Because most of the people we talk to say oh, how do I sell in the U.S.? So how would you suggest they look at ok you have a great solution may be in a sub-domain but its only working for let’s say 2 customers, how do they scale that part of the business?

Dr. Anand: I think if you are very specialized in terms of what you are doing, then you know what are the specialized hang out points for those people. Because if you are doing, let’s say, we were doing query optimization for databases, there are only a limited number of people who do this kind of business. Because it’s so specialized its exactly this kind of work. There are 20 people who would buy from you. And you know who those guys are. Now the question is to going at them one at a time. And if you do two of them then they tell you who the third, fourth, and fifth are also. So you have to use your existing network to get to that.

The biggest problem that companies have is that oh the U.S. market is 7 trillion dollars or something, very ridiculous large number. And if I show up and wave my flag somebody is going to give me something. Unfortunately, nothing like that happens. So you have to be very specialized, very focused and then you know the game. If you know that game that you’re in, which is very clearly defined, then you would know the surround in that area. And the people you work with would know who the other people are? It’s in my opinion, in this whole market in the tech and IT, a lot of it has to do with references. Who your network is and who is willing to give you a reference. Because no customer today buys without checking. So it’s all about do you know the right people in the market or that eco-system? So to be successful specially in the U.S. type market, being specialized is the key.