“Eight Forces that will Shape the Future Consumer”
Owing to the rapid pace at which technologies are advancing, it is next to impossible to comprehend the developments and keep a track of the changes. Rate of changes in technologies and their adoption by the consumers is at an unprecedented speed. Adoption is becoming a very important imperative for the entrepreneurs, since it is throwing huge opportunities for them. At the same time, it is going to completely decimate the companies which are unable to transform themselves to be relevant in the ever changing environment.
EY continuously undertakes leading research to bring useful perspectives for the entrepreneurs. Recently, I have come across this great report by Kristina Rogers on “Eight Forces that will Shape the Future Consumer”. It says that consumer-facing industries will change beyond recognition over the next 10 years. It has identified eight hypotheses about the forces that will drive this change and transform the way companies create and capture value.
The eight hypotheses describe deep changes that will fundamentally reshape the lives of future consumers. New ways of creating and capturing value will emerge, and companies that get ahead of the curve now will have a clear advantage. Find the factors shaping the eight hypotheses, and the key questions entrepreneurs should be asking themselves:
- When Bots do the Buying , Where is the Value in Shopping? — Most of the purchases we make today require some element of conscious choice. But as AI bots, concierge services and smart-home systems become more intelligent, they will complete many of these transactions for us. This will disinter-mediate transactions, payments, fulfilment and brands. We will be completely disengaged from most of the products and services we buy and super-engaged with a few. What happens when buying is no longer shopping?
- Will you Sell Products or Access to Lifestyles? — With the rise of the gig economy, future consumers will continue to move away from owning things. Instead, we will trust on-demand services to meet our needs — as they arise, and just in time. Businesses will need to reflect the new ways people live and work. The places we live and work in will morph to reflect the needs of the moment, with our homes becoming larger or smaller to reflect who’s at home. What happens when lifestyles replace products?
- When Health is Passively Managed, How active can Brands be? — Today, from following an exercise program to reading the nutritional labels on products to booking an appointment with the dentist, we need to actively take care of ourselves. In the future, once we establish a trusted relationship with providers to share our data, we will be able to connect to a sophisticated infrastructure of technologies that actively and automatically monitor, improve and maintain our health and well-being. What happens When Healthy is the Default?
- When Data reveals the Impact of every Meal, How will you Help Consumers make better Choices?— Today, what and how we eat is steeped in complexity and shrouded by uncertainty. We don’t really know where our food has come from or how its made its way to the table. What we consider to be a good meal will change, as blockchain technology facilitates a completely transparent food system. The impact of each food choice we make will be clear. As a result, we will eat far less meat and much more plant-based food. What happens when data determines what you eat?
- How will you Make your Technology so Smart it’s Invisible?— The technologies we use today are interactive and integrated with daily life, but we are still aware of them. In the future, we will be far less of technology — many of the services or devices we rely on will become invisible. We’d never have to carry IDs, bank cards or door keys; every service we receive can be personalised and adapted to our specific context. This shift would have a massive impact. What happens when technology becomes invisible?
- When Life is Gamified, Where will Brands play?— Augmented and virtual realities will become an interactive part of everyday life, across content, media, games and entertainment. As the technologies involved become more complex and relevant, user experiences will evolve to gasify routine behaviour, transforming the mundane into the spectacular. Media will merge into e-commerce as our “brand experiences” become a growing source of entertainment. What happens when life is gamified?
- How will you Build your Corporate Culture when you don’t Employ your Talent?— Sixty five percent of children starting school this year will assume careers in jobs that don’s yet exist. Instead of being a potential employee in a fixed-skills workforce, more people will become contractors or freelances through “cognitive network” platforms. What happens when you don’t employ your talent?
- How will Smarter Infrastructure simplify Transport?— If one in four cars on the road are autonomous by 2030, the number of vehicles that can use a road at one time will increase, as will the scope to reflow traffic. Equally, if more employees are working flexible hours and locations, then peak-time pressure points will lessen. Today, just 15% of millennials feel it’s extremely important to own a car. What happens when travel becomes seamless?
It’s very important for any serious entrepreneur to have informed understanding of how the future is going to look like. I think that this report is a great read for anyone who is curious about the future. Complete report is available on EY website. If you face any difficulty in locating it, please let me know.
Passion, Perseverance and Grit
As Julie Andrews said, is perseverance about failing 19 times and succeeding the 20th? Is it many short races one after the other? Is it the hard work you do after you get tired of working hard? Yes, it is all of these. While passion is what makes a startup founder an entrepreneur, perseverance is what keeps him going as an entrepreneur.
After the initial excitement of starting up, a startup founder has to navigate unchartered territories, day in and out. Before he realizes, he would have spent many months in that journey. As he gives up on friends for his passion in startup, he becomes more and more lonely. He puts brave face under trying circumstances. His hunger is visible in the eyes but the pockets are empty. He works constantly against the time and deadlines. Eventually, he and his team has hardly any runway left and any takeoff attempts get grounded. Burn rates give him heart burn. Run rate seems like a small walk on a treadmill. Not going anywhere, not being fast enough. meanwhile, competition seems catching up.
He could read his friends and family foreseeing his downward spiral. Then the shocker comes that pilot customer declines to become a paying customer. Team starts to express their own fears while he keeps the brave face. Key employee resigns. Adding fuel to the fire, potential investor chooses the competitor in the last minute. He even sells his last asset to pay the salaries of team. Final big blow comes when his girlfriend gives up on him to settle in her life.
As the going gets tough, the tough gets going. His perseverance finally starts paying off. Long-term prospect customers turn to paying customers. One thing leads to the other and now he has a handful of paying corporate customers. He sees light at the end of the tunnel when his 107th pitch finally gets him the investment he badly needed. Famine days of not long ago turn to a huge downpour. Investors start sending expressions of interest. One investor even offers a blank check with no questions asked. Another will come and say, I would like to be part of your success, and you choose the terms. Friends, and even the girlfriend who deserted him start calling him back. Strangely, recognition doesn’t excite him. While pockets are full of money and company is looking ahead to scale, founder stays grounded. He gets this deep sense of achievement, yet he remembers his earlier struggles. He knows he has more struggles to come and more miles to go. His perseverance transforms him, his business and the stakeholders around him.
While passion drives the startup founder daily, perseverance takes care of his goals and obstacles at sight, grit is what takes a startup founder to unsighted places.
Pradeep Mittal, a happy-go-lucky one with broad grin and open arms, is a thorough family man. A serial entrepreneur, Pradeep’s first venture was a product startup before he switched to people-centric services. When he exited the same, he switched back to a product company, giving him the dexterity to balance intelligent quotient and emotional quotient.
Started as a coder since his days at CMC, he helped develop a fixed asset system in Canara Bank in 1985. He then moved to the US to work for Unisys in Salt Lake City. When he moved to IBM in east US, he was passionately involved in coding for a memory chip. “We developed a product which when in production, it got zero support calls. It was that good,” he beamed proudly. While at Prodigy, among the early large ISP provider in USA, he built a survey product in 1995.
As an entrepreneur
“We started Magna in 1995, when everybody told us the staffing market was not mature, then in 2000, we developed a practice management software for doctors. In 2001, we deployed the product at a practicing doctors office. We spent $2 mn for the product, but we needed two more for marketing which we couldn’t,” he summarised.
Pradeep sold Magna to Quess Corp for a valuation of Rs 100 cr. when Magna was clocking Rs 89 cr and employed 5000 resources. “It was a decent multiple, but I sold it because I was bored,” he shrugged as if to indicate that his heart was elsewhere.
Great going with Great Four
At the time of Magna’s sale, Pradeep had invested and was already on board with Goose. The company ran for 10 years on investors money and Pradeep acquired it in 2013 after buying out all other investors including the founder and Arun Kumar of Strides who owned 48%. Goose had a clientele that paid for its services. “It took me 18 months to understand the pharma domain where Goose operated. We had a great product, and very little competition globally. We renamed the company Great Four. The sales cycles are lengthy, typically a year. In September 2015, we gave ourselves two months to shut shop or continue. But things turned around quite brightly,” he reminisced.
Great Four’s product, Harmony helped Pharma companies in ensuring compliance. The company run rate from 2015, when it was Rs 25 lakh has grown 10 times, and will be profitable in 2019. The product generates margins of 80-90%, with very low support pressure. One client is on cloud and the remaining 25 are in India, US and Europe.
The journey ahead is quite exciting. The optimal systems guy that he is, he spends only 20 hours a week at work focusing on strategy. All other functions – HR, Finance, Recruitment including equipment are outsourced except the technology. The company employs 32 people, the same number it had four years ago. Pay has risen by 20%, but revenues by 10 times. The core engineering team is under 10 but is very talented hired from IIT and IIIT, Hyderabad fostering a strong culture of using Interns from IIIT or IITs. Great Four aims to be a $2-3 million by 2021, “a good inflection point to be acquired,” he mused.
Great Four has a global product, with less than a handful for competition. One company with a competing product was recently acquired at 44 times its EBITDA. “We tried to acquire a European company for 10 mn euros but we were outbid,” he said wistfully.
Pradeep divides his time well between business, philanthropy and investing…and golf (he winks). “I spend 30% of my time on Great Four, another 30% on education/philanthropy and the remaining 30% on golf,” he added.
Pradeep is a board member of D-labs at ISB, two incubators at IIT Hyderabad and IIIT Sri City. He teaches two courses at IIT., Hyderabad.
He has invested in 14 startups and two funds. One that he is very excited about is VideoKen, a startup founded by Manish Gupta an ex-IBMer. He decided to invest in his startup after an interaction with him at ISB. “I invested in him, not the company.”
GreyCampus is also among his my early investments. At one point in time, he gave up on his investment, but the company has now turned around. Pradeep believes its the founders that matter the most to make an investment decision.
“I am trying to aquire one more in education space,” he concluded without disclosing much.
What do I bring
“I am phenomenally focused, have lots of patience. I am pretty good in hiring people, moulding them and retaining them for long. I excel at enabling and executing strategies,” he adds brightly to a question on what he brings to the table. Pradeep’s first instinct is not to raise funds. He invests in time and watches competitors very closely and calibrates benchmarks accordingly.
Transformation from Magna to Great Four
Magna was dynamic, and Great Four is about research and reading.
Pradeep invests time in learning the domain before venturing further, and has had to gather a lot of insight into the Pharma business. He manages a minimal work operation model, “I spend mornings in my office, do the payroll once a month, rest is all outsourced,” he said adding that Great Four is a lot more challenging intellectually and is largely metrics-driven, the way he likes it best.
“At Magna, we onboarded 1000 people a month with zero errors. That is how we leverage systems. Magna in my time had about 15 complaints while we staffed 35,000. In Great Four or Magna, growth has always been organic. Our clients become our ambassador. I have built a very strong support metrics that helped our customers refer customers to us. This is how I operate,
- Define metrics
- 18 months to stabilize the metrics (time driven)
- Use the metrics
USP of Great Four
– High focus
– High productivity culture
– Above the market pay for key employees
Great Four Systems
Truth Labs (non-profit)
Pradeep is married to Chitra from Hyderabad. He was brought up in Rajahmundry, Studied in Kakinada. Their elder daughter is married and lives in London. Younger daughter is studying for her masters in water engineering.
Bhat: Describe yourself in three words
Pradeep: Focus. Respect to people. No expectations.
Bhat: What would be your lifelong dream?
Pradeep: Impact to people around me with no returns.
Bhat: If you are stranded on an island, what two things would you take with you?
Pradeep: As much food as I can so I survive. My golf kit. Golf makes me think positive. My sister, a phenomenally positive one, lasted 38 years after diagnosed with brain tumor. I like her and golf.
Bhat: What compliments do people give you the most?
Pradeep: People like to hang around with me.
Bhat: What have you done that you are most proud of?
Pradeep: Magna. I changed IT staffing industry in India. People thought I was crazy. I fought the system. I make sure my employee gets the respect in front of the client. We tel the team to be aggressive but never arrogant.
Bhat: Leader or a follower?
Bhat: Define happiness?
Pradeep: Take each moment at a time.
Bhat: When was the last time you laughed out loud?
Pradeep: You should ask the other way around. Laughing is my signature. Cukture in Whisper Valley is to laugh and have fun. Whisper Valley is one of our strengths. We have men’s only party. Men know each other. No cross talk gossips. We have underlying rule that noone talks negative about other residents.
Bhat: Four things you would change about yourself?
Pradeep: Spending more time with family. I wish I had people invested in Magna so I would have kept the company to myself. My role model is my dad to large extent. Reason is 1) honesty 2) zero expectations. I added diplomacy to honesty. I don’t care outcomes but I work towards outcome. I put efforts. In 2002, we came close to bankruptcy as we got impacted worldwide by IBM. I am trying to become thick skinned. Work for the government. I am part of social venture partnership (SVP) for NGOs.
Bhat: What is the first thing you think of in the morning?
Pradeep: Great Four
Bhat: What will you never do?
Pradeep: Hurt anyone
Bhat: What did instil going big in you?
Pradeep: Dreaming big. Keep making some impact. Keep adding value to ecosystem I am part of.
Bhat: The next big thing?
Pradeep) Industrial revolution 4.0 Good, travel and stay are no longer a requirement. You earn for tour experience
Bhat: What do you fear the most?
Pradeep: Nothing. I got no expectations.
Bhat: One final message for first-time entrepreneur.
Pradeep: Bootstrap till you get first few paid clients. Believe in yourself.
Future of Work and Workplace
If we compare today’s workplace to say 25 years ago, one can notice a significant transformation. While many corporates and futurists are predicting how tomorrow’s workplace may look and feel like, I believe that it is almost impossible to guess how exactly it will be. We can surely take some educated guesses at the direction in which this will broadly go.
As an example, we see that this generation of workforce take emails and work beyond work hours and into weekends and even vacations at times. The millennials are effortlessly extending work into personal time and personal stuff into traditional office time. The belief is that millennials work hard in any career they enter. Companies are having to compete in hiring by using more than just attractive salary packages or strong brand recognition. For today’s aspiring professionals, workplace culture and technology are increasingly important when considering career options.
In ten years from now, about 75% of the global workforce will be millennials. This generation’s habits and expectations will shape the work culture of most companies. For them, being happy with the environment, tools and people is super-critical. A workplace, where people can effortlessly collaborate to solve issues and strategize on business, is a fun place to work for this generation.
Physically this could manifest into three things:
- An open office layout which encourages the team to interact quickly and as needed.
- A flexible policy that allows people to work from home or wherever convenient.
- State of the art tech tools like video conferencing, productivity apps like Instant messengers.
Millennials are a generation that grew up with the Internet. For them, getting work done means using innovative tools that are accessible wherever and however the employee wants to work, whether at a computer, tablet or mobile phone, at home or the office.
Market forces such as technology evolution into AI, that is taking over most of the mundane tasks emphasizes two aspects of the workplace environment. One is having a significant emphasis on upskilling the workforce as nature of work changes. Two is having an eco-system that fosters creativity. The reason being, as mundane jobs get done by the machines, human(s) will have the luxury of applying her/his creativity at work.
Knowing or unknowingly companies seem to gradually develop the next generation workplace, which is a serious blend of a cool look, openness and loaded with tech tools. It sounds like we humans always had an innate sense of drifting into what works, with or without significant analysis behind our moves. Clearly those who don’t adapt, do not survive. If you haven’t yet, it’s time you tuned in soon.
Success with the ‘Right Things’
For someone who repeats to himself at every opportunity that, “it is the right thing to do,” Prasad Nimmagadda has proved to the world, and foremost to himself, that he indeed has the midas touch. On a pleasant evening of interaction with Kali Prasad, president of TiE Hyderabad Chapter, Prasad opened up to TiE members the inner workings and motives of his mind.
For someone with a keen eye that can peer curiously into the future, he is remarkably grounded to admit that it is less analysis and more gut instinct that has propelled him to the heights of success that he has achieved so far. He is hardly done yet. As a measure of his success, “the worst we achieved was a 26% IRR on an investment,” he said candidly.
This piece is written in his own narrative.
Hailing from a modest upbringing in the home or an army officer, I earned a masters degree in Physics from the University of Delhi and then an MBA from the Institute of Management Technology in Ghaziabad. I started my career in 1984 at Indian Molasses Company and moved into a sales role at Rhone Poulenc (which subsequently merged with Hoechst to form Aventis). I moved back to Hyderabad as a General Manager at Vorin Labs in 1993 and became its Managing Director in 1995.
When I moved to Vorin labs as an employee, the company’s owner handed over the reins to me. We had to start from scratch. Luckily, this was a time when ancillarisation was gaining in acceptance. This was inherited from the automotives industry and realigned how pharma businesses operated. It was an experiment that resulted in two things: we successfully sold the company to Ranbaxy (which was an existing investor), and I became an accidental entrepreneur.
The success Matrix
In 2000, I acquired Herren Drugs, a sick unit, which meant starting all over again, but my experience at Vorin gave me the confidence. I knew it was the right thing to do. I have an interesting anecdote on the branding for our company. I was at a hotel in Germany and saw a board that read ‘Herren.’ I wondered how my company’s name was so popular in Germany, only to realize that it was the men’s room (herren meant men in German).
I wanted to give my company a modern name, something that resonated with the times. And I was mesmerized by the movie Matrix which was released about then. I had found a name for my company. Matrix had great phonetic vibes, but the business had none- zero market cap, non-existent R&D; marginal GMP. I started off with two important objectives – hire people with strong commitment; and grow inorganically. Organic growth was going to take too long, and I was in a hurry.
Our first success was with the USFDA when we got a clearance for our facilities. Once we stabilized operations at Matrix, we started acquiring companies that had good assets but were struggling financially. Money was a big challenge; we borrowed at an annual interest rate of 40% at times to move business forward. But it was the right thing to do.
I believe the best way to enhance knowledge and wealth is to share it. I pledged 20 lakh shares of Matrix to help fund our employees’ housing and their children’s education. We worked very closely with the Clinton Foundation on Project Hope, to develop low cost medicine for AIDS treatment. We developed an AIDS drug through our own R&D and helped lower the cost of the medicine from $1500 per year to about $180 per year.
Yet in 2006, we sold Mylan for a valuation of $1bn. I want to share a perspective that emphasizes on the strength of the acquisition: Mylan had a networth of a little over $3bn at the time of the acquisition. It is now worth $20bn. None of the staff we hired were replaced. As we speak, some of the top management in Matrix, now helm the company in global roles.
Post Matrix, we had evolved a strategy to invest in specific segments, a set of five each time (we call it Pancharatna). We decided to focus on Healthcare, Entertainment, Infrastructure, Education and Technology.
We had two good investment opportunities with Care and Asian Institute of Gastroenterology, both founded by doctors of eminence and passion. We participated as an investor and have had profitable exits when the institutions needed to expand and grow.
This has to be one of finest investments. In fact, I won’t call it an investment because it was a grant from the Nimmagadda Foundation. When Gopi approached me with a plan to set up an academy, I believed in his passion and ability. He got the land, but needed funding to create training infrastructure. We agreed to fund the academy by Rs 5 cr with no preconditions. Gopi has built a powerhouse of badminton that has produced world beaters like Saina Nehwal, PV Sindhu, Srikanth Kidambi. I believe this was the best return among all my investments.
We have made two other telling contributions through the foundation:
LV Prasad Eye Institute: To help eradicate needless blindness, which occurs due to non-use of spectacles when children suffer from eye sight issues.
Chennai Mathematical Institute: The only institute of its kind in India, we made a contribution along with a few other industry stalwarts. The institute is now a deemed university and is a unique institution.
A star called Maa
As part of the pancharatna ideal my vision was to create a channel that my family can watch comfortably. We acquired Maa TV, along with partners Akkineni Nagarjuna and Chiranjeevi Konidela, popular film stars. There were a lot of challenges – the branding/logo, production quality, and the roadmap the channel had. It did not have a sense of direction.
As part of Maa, some of the highlights include investing in the TV rights of Bahubali, which required us to make a big bet since we also signed up for the television rights of the sequel even before it was planned. When we sold Maa to Star for Rs 2300 cr, we had built an asset that required an enterprise larger than ours to manage it. Selling it was the right thing to do.
The Maa saga coincided with a personal struggle that I had to go through due to allegations against me for some of the investments I made in companies owned by YS Jaganmohan Reddy. Some of them included Bharathi Cements, which we sold to Vicat Cements.
We have had some setbacks owing to political turbulence but it is almost a thing of past and I won’t dwell further on the topic. It relates to my dream project called VANPIC (Vadarevu and Nizampatnam Infrastructure Corridor), where I had envisaged creating infrastructure and about 4 lakh jobs for people in the region. We decided to invest in one of the most backward area of the state, because it was the right thing to do. Ironically, the only risk that I didn’t factor into my plans happened – the death of the former chief minister.
Unveiling a new era
We have now embarked on a new set of investments with in the same areas but in all new generation businesses.
This includes some marquee investments in CallHealth among healthcare companies; Kerala Blasters and Tamil Thalaivas in sports and entertainment; BioMax in clean energy and Moschip Technologies and Kloneworld among technology.
We are constantly exploring newer ‘it is the right thing to do’ paradigms in entrepreneurship, investments and philanthropy. But foremost for me is the people that drive these initiatives. It is leaders that we want to support and make them successful.
Wages of Inequality
Leaps of faith
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