Chhotu – The Logistics Startup (Part 2)

(Part 1 Here)

Today & the Future

Chhotu today has over 160 employees, with 11 warehouses and is present in 9 major cities across India. It does over 1000 transactions a day and though I don’t wish to give you their growth stats, they would probably blow you away. They plan to grow to 20 cities, with 40,000 transactions a day and employ over 400 people by mid of next year. To put this in perspective, in Apr 2012, Flipkart was reportedly shipping 17,730 products a day.                                                                             

After getting their angel funding from Super Angels of India, founded by Rajesh Sawhney, they have been scaling up at a frantic pace while also ensuring that they don’t leave quality behind. It’s the kind of outlook that has helped great businesses persevere. 

Both Co-Founders continued to work based on a strict division of responsibilities and reporting lines for their HODs. Navneet as CEO interfaces with the media, investors, customer service, finance, sales and technology as CEO while Aadhar as COO looks after operations and warehousing.

Aadhar Aggarwal Co-Founder & COO

They now define themselves as an ‘Ecommerce Enabler’ – a startup which looks at logistics, payments, customer support and vendor management for various ecommerce players.

Their mission is to support ecommerce players in doing business in India.

Over the last many months they had to let go of various customers because of a shift in focus. However, they have also had no issues in getting their last 7-8 customers as they were all in-bound leads through the Chhotu website.

Chhotu is now slated to raise its Round A of funding, an unspecified amount, to fuel its blistering growth and scale.

 

The Business Model

In today’s date eCommerce companies have limited choices in logistics. They may develop their own end mile delivery capabilities, develop the entire end-to-end delivery capability or depend on logistics service providers. The first two options are cost intensive and the third is what most players have been relying on. It must be noted here that with over 300+ ecommerce players in India and over 1,00,000 transactions carried out by non-travel ecommerce companies, there is a long tail of players which need support and enablers like Chhotu, if they have to survive.  

The established courier companies consider ecommerce to be only 1%-3% of their total business. So while companies like DHL have created offerings for eCommerce, most haven’t aligned themselves with eCommerce realities. 

Chhotu has created a niche and a business model by keeping various issues faced by ecommerce players, in mind. Commercial and

Navneet Singh – Co-Founder & CEO

performance terms for Chhotu are aligned with the success of the ecommerce player. Delivery in many cases is based on the value of the product, return forward charges are discounted or done away with and the organization understands that when they go to deliver a product at someone’s doorstep it is still a sale in progress. Their delivery boys are trained to ‘sell’ the product rather than just ‘deliver’ it. And commercial terms for the eCommerce companies are created keeping in mind their products, ticket size, category etc.

They have created an in-house customer care department which shows how seriously the organization takes ownership of the delivery item. Technology has been created to track and support various functions so that eCommerce clients of Chhotu can track their shipments, understand any delivery issues and also receive analytics on a regular basis. One would assume that all Logistics players would be doing the above, but as I learnt from my Chhotu interviews, the answer is shockingly No.

 

Challenges of the Logistics World

There are many major logistics players out there who in theory commit to servicing eCommerce players. Over the years they have picked up fancy eCommerce terms, tweaked their existing model of business to service ecommerce players.

This tweaking usually means that they now undertake COD exercises and charge a bomb in return, almost ensuring that COD becomes unprofitable for most players. Charges may be as high as 100 Rs. just to perform COD and then forward return charges in case of returns.  It may be shocking for some to note that certain categories of products have return rates as high as 40%.

To tell you what that means is that if you were to buy a T-Shirt online for say Rs. 400 and select COD as payment option, it means that someone like Blue Dart might charge about 150 Rs. just to deliver the product, then charge Rs. 50 for COD facility and then if the item is not accepted by the customer and gets returned, they charge a return forward charge i.e. money for the item to be delivered back to the eCommerce company. Back journeys mean more profit for these organizations.

People Management is also not a great strength of this Industry as attrition is high, employee engagement is low and skill levels are really not an issue. Lately eCommerce companies have also been affected by the fact that many of their Senior Management and Mid level guys have been directly recruited from major Logistics firms. Sometimes the quantum and level of experience works against a startup organization’s goals where openness to innovation, new ideas and sometimes throwing out due process in return for results is the order of the day. Chhotu has also been affected by these issues, as such employees, with senior positions in distribution are not receptive to new ideas and concepts of doing business. The Co-Founders of Chhotu were quick to let me know that such employees are difficult to deal with even though the top management show great understanding and support. Needless to say, Chhotu refrains from hiring ‘Grey Hair’ from this and other similar industries.

 

The Yapper Analysis

1. Successful Startups may have major business model shifts but not commitment shifts.
2. Delimitation of responsibilities and roles is pre-requisite to a startup gunning for great results.
3. There is always value in experience, though not in ways in which we may imagine.
4. If a bunch of your existing customers aren’t in line with your business model then you either have the wrong target audience for your product/service or you need to lose those bleeding you/those who create a loss of focus
5. Try and move up the value chain – Service Provider to Partner – when working in a niche area
6. Hustle and Talk. All the time. That’s the only way to develop great contacts and unearth opportunities.
7. Chhotu has never had an issue in attracting major investors. The secret is but obvious. Build something great. Solve real world issues. Be the Band-Aid for someone’s pain. And then go out and Talk about it.
8. You need co-founders (Mostly). You need a great team (Always).
9. There is great value in working in a messy market with messy opportunities. Embrace them.
10. Getting Funded is not just about the money, it’s about the Big Boys aka Investors who offer advice, contacts, connections and rock solid belief on days when you are down and out.

Multitasking – The downfall of an Entrepreneur

We are in a fantastic age.

Unlike the past centuries, our heroes aren’t generals, revolutionaries, statesmen, politicians, scientists, editors, doctors or writers (to an extent). Today pop stars, rock bands, actors, sportsmen, businessmen and CEOs have taken their place.

Our adulation, concern and awe is reserved for these new champions of the new world. As expected, folk lore has grown based on such individuals.

Like the Rapper who lived a life of crime, selling drugs and finally finds real meaning in his life when he starts rapping after a new-death encounter. The CEO who fought rules, regulations, an old guard, unknown credentials etc to lead a dying organization to a phoenix like re-birth. The PE fund manager who lives on coffee and sleeps 3 hours a day. The Investment Banker who makes a 100 million $ a month and still finds time to train for the Iron Man. The dyslexia or ADHD afflicted entrepreneur who makes a billion dollars by establishing a technology company. The sports star who has been training for 6 hours a day since the age of 4.

Just like every folk lore and story that exists about larger than life figures, there exist a number of facts and details which are often misrepresented. One of the biggest issues is the portrayal of these heroes with an almost maniacal dependence and skill using multi-tasking.

 Before I go any further I would like to underline the difference between what is assumed as multi-tasking and what it really means.

Most people look at multi-tasking as a form of virtue which is usually associated with qualities of flexibility, high IQ, street smartness, focus and great resourcefulness.

My qualitative assessment of the above is that what people really know about Multi-tasking may be encapsulated in one word.

Bullshit

What multi-tasking really means in today’s context is to be able to develop a reputation and presumed super-human ability of doing multiple tasks at 100% efficiency without sacrificing the quality of end result.

As the above statement infers, the actual execution of multi-tasking is humanly impossible and is done so at the expense of details and quality.

However, the ‘appearance’ of multi-tasking has become as essential quality for would be CEOs, Bosses, Entrepreneurs, Consultants and great thinkers.

Why?

Because general wisdom now states that this ability to multi-task is an essential skill to handle complex and comprehensive activities, operations and teams.

This disconnect between what is required/portrayed and what is really done, has lead millions of entrepreneurs handling businesses and their time in the most inefficient way possible, while ensuring a perpetual lack of sleep.

 

Below are 10 reasons why and how Multi-tasking does more harm than good

1. The Devil and the Details – Remember how the US power pointed over the issues of IRAQ war and its aftermath. If the most well resourced government messes up on the details and suffers the deaths of thousands of soldiers, a huge debt and image issues, then startups fall in this trap all the time. Recent history is littered with startups falling by the wayside simply because their business models and operations were based on assumptions which did not cater to details. A part of problem has to do with investors and entrepreneurs not putting in the time required to come up with a solid business model. 

2. The Team – Nothing is most damaging for a team than to be made up of individuals who make decisions and execute activities, based on the surface details of an issue. For a young, inexperienced team, with no great gut instincts to talk about (since that is made up of experience too), it is imperative that a lot of attention is paid to various details.

3. The Customer – Ever sat across someone in office who claims to be there to serve you but is instead answering mails on his blackberry? What does that do to your confidence in him? We think we can suddenly turn off our instinct to multi-task when we meet someone important but we just can’t. And then we lose a customer because they will turn-off the moment they feel that you or your organization’s focus if not 100% meant for them.

4. Decreased Productivity – A cursory search on Google will throw up study upon study which proves how multi-tasking decreases productivity. 

5. Lack of Patience/Planning – Patience, perseverance and planning are the 3 Ps of a successful entrepreneur (Sorry for this, I hate this concept of 7Ps, 9Ss, 43Ds etc but I just couldn’t help it). All these qualities run contrary to multi-tasking as it programmes the mind to short bursts of work and activity. It’s like asking a 100 meter sprinter to compete and win a marathon… at the Olympics

6. Creative Solutions/Innovations – Will never happen when the mind is occupied by a million different things in the present and an equal number of things for the future. This ability needs time and some free RAM in the mind. Multi-taskers are bad creative thinkers because their minds are always busy with the ‘next’ activity or are processing parallel streams of info while the body is being ordered to work in sync.

7. The ‘Always On’ Tech – Smartphones, twitter, FB Apps, emails etc have made sure that we are always connected and hence are always expected to respond… right then and there. This ensures that the mind undergoes constant interruptions during a particular stream of thought. Coupled it with a mind which is trained to multi-task and we ensure that nothing of any importance ever gets done.

8. Unable to live in the Moment – Bad for you and bad for your team. It means you and your team will stop having fun and hence interest in the job at hand will fall. More than employee disenchantment, frustration and lack of engagement, this leads to stress. Basically a multi-tasking environment may lead to higher attrition and even health issues.

9. Eyes off the ball syndrome – Every Startup has at max 3 critical issues which it must tackle from a med to long term perspective. A Social Network knows that building and partnering for exciting apps, creating scalable infra and building a sustainable revenue model are its main ‘balls’. However, multitasking means that the management and the entrepreneur may take their eyes of the ball at various times leading to short-term decisions and activities which lead to long term problems.

10. Sleep/Chilling – You need it. You aren’t superman. And if you can look back at your day and remember large chunks of work done by you, you will sleep better and also find more time to do it. Most white collar workers have an issue with this because on looking back at their day, they realise that nothing of great importance has been achieved. Which really is a fact. And a pity.

 

What Multi-tasking really should mean

1. Flexibility – To handle various major issues, events and problems as and when they arise and become critical.

2. Multi-Skills and not Multi-Activity – To possess the ‘ability’ to do various things satisfactorily and to use this ‘ability’ sparingly.

3. Zoning In and Zoning out – To focus on what is important and leave the rest behind.

4. Dealing with chaos – To deal with chaos by singling out the important variables to control and handle. One can only deal with chaos when one has a calm and clear mind devoid of the need to act on multiple things at the same time.

5. Execution/End Results – To work so that the end results are fantastic and not based on our perception on what is efficient. To talk on the phone and write an email may ‘seem’ efficient. But if this means that the customer on the other end of the phone is left unhappy and our email is badly worded with lots of typos, then the end results do not justify multi-tasking.

 

My Conclusion

An entrepreneur must realise that his/her team and partners will be taking cues from his/her own behaviour on how they handle work. While inculcating a sense of being able to do various things and developing various and disparate solutions is a healthy and essential feature to create teams for the future, entrepreneurs would not like to have a team of professionals who shift from one job to another, form one idea to the next almost simultaneously in the name of productivity. 

We must realise that our definition of ‘productivity’ is extremely short term and shallow. For me a productive team is one which can consistently come up with well thought out, detail oriented results even if they do so once a month. A productive team is NOT one which can turn up with mediocre results on a daily basis.

We must start demanding excellence in a few things and not being average in many. This demand must be made not just of our team but also of ourselves.

For startups this detail oriented approach may be a great way of doing things since post funding scalability depends on a great fundamentally sound product, well thought out and allocated resources and an almost obsessive focus on building amazing aka wow iterations of your product/service.

This, in my view, can only be achieved when we stop multi-tasking and start focusing on the details (without getting caught in the paralysis of analysis).

10 Things YOU need to do before you decide to take the plunge (Full Time)

Let me begin with apologies. I was enjoying my little holiday in Delhi a little too much and couldn’t get into the flow of writing posts.

Here is a list of 10 things which I felt all aspiring entrepreneurs need to do before they decide to take the plunge into full time entrepreneurship.

This list has been created based on my interviews, informal chats, reading and experiences.

Just like everything in life (and my posts), this is indicative, not exhaustive, based on today’s context and doesn’t claim to be 100% spot-on.

But it’s still worth a read because unlike many other articles/posts I have read on this subject, this stuff isn’t philosophical. 

1. Money to survive – Most entrepreneurs I have spoken to have confessed, that if there is anything that takes their eyes off important and long term goals, it is the paucity of cash to survive. If and when you decide to take the plunge, be under no illusion that millions will start pouring on day 1. It’s a known fact that more than 90% of businesses make little or no money over their lives. If you are going to be slogging it off in meeting people, developing products, writing code, setting up offices, wooing customers etc you need to know that somewhere a bank sits with enough booty to let you do this for a couple of years. Everyone I have spoken to has said that a 2 year cash pile is a good idea and a 1 year buffer is essential. Hey, you might strike it rich real soon and never need that money ever. But I won’t bet on it. 

2. A Plan – Most plans don’t work, I agree. But what plans do, for the right person, is that it helps think up of all the stuff that needs to be put in place before making the play. Good plans work out contingencies and help plug leaks. These plans are required for investors, team members, interns, stakeholders to have confidence in you. Writing down what you want to do, how you want to do, when and where creates the kind of clarity which is almost impossible to pin down, when we let these ideas and thoughts roam around in our heads. 

3. Getting the Home Team Involved – There is a reason why sports teams usually perform better while playing at home. It’s because the Home Team i.e. the crowd, spectators, sponsors etc is firmly on the side of the team and that helps, even though they aren’t doing the playing. A considerable amount of time needs to be spent on letting your family, friends, stakeholders, well-wishers, bosses etc know why and what you are going to do as an entrepreneur. Many (probably most) won’t understand. After all, change is perceived as bad and change in a good situation (comfortable salary, position, perks, bonus etc) brought on by yourself is considered madness. But they will appreciate the fact that you decided to get them on board. Many will help out with contacts, introductions, ideas and even money (0% interest money with indeterminate payback period). And once you have a little success, creating a cult of evangelists will be easy. 

4. Team! Team! Team! – I know that most of us dream of being the sole commander of our forces in the quest for glory and money. But a look at startups and armies across the world may be instructive in lessons of having a team. Getting a good startup, up and ready, is a difficult stressful job which involves a lot of heart/headache. And no one has all the skills. Get a team of co-founders or management ready before you decide to get going. You will need it. And getting them on-board requires time and lots of convincing steam (meetings, presentations, trial and error etc). But it will all be worth it once you have the killer app/product/service up and running.
 

5. Investor/Stakeholder Introduction – You may never require investments. Maybe you have enough. However startup history has shown that lack of financial capital is the No.1 killer of startups globally. So ideally one should start talking to investors long before one decides to enter the fray. How does that help when you have no service/product or even a good plan ready?

a. Knowing a person is underrated. If you know an investor, because of a past meeting, you won’t have to waste time doing the waltz when you have to ask for money.

b. Investors will usually help you understand and fine tune your idea at the outset for no extra charge. 

c. They may agree to be your mentors and help open other doors.

d. Hiring employees becomes easier.

e. They will let you know if your idea sucks and save you a lot of heart burn (Though I suggest you don’t listen to the first guy who says this, but if 10 of them say so, then a little thought is in order)

Stakeholders like distributors, channel partners, agencies etc will do the same and be ready to do business with you when you finally get your act together.

6. Market/Idea Research – Take a lot of time to understand the market you wish to operate in, understand the future, the technology and the skills required to make it big. Many times, people get into markets with this amazing mind-blowing idea, only to later realize that the market doesn’t want it, or worse, there are laws, taxations and bigger players making the entry barriers real high.

Do your homework, understand the market better than any expert, talk to players in this field and other stakeholders. Understand the issues, trends, technologies, legalities, costs, revenues, benchmarks of the market. All of the above will give your startup great confidence, flexibility and differentiation.

7. Prospective Customers – Though part of the above point, it was important enough to warrant its own place in this list. Talking to prospective customers not only gives you great insight into the market, but also increases their readiness to doing business with you, when you become a full time entrepreneur. Why? Because they know you and you have developed a product/service based on their feedback. Human beings are naturally helpful to those whom they have invested time and energy in. Talking to lead customers of a market also helps you create great focus and differentiation in the market.

8. Readiness to Fail – This is fairly counter-intuitive since all our lives, our parents, teachers, girlfriends, bosses, subordinates have been stressing on the need to ‘not fail’. This trait has a predominance in Asian cultures and promotes risk-averse excellence, especially in academic and corporate environments. Shaking off this mindset is of great importance and the lure of risk-aversion is sometimes just too tempting. Unfortunately most of us will be alone in this endeavour unless you have friends who are successful entrepreneurs. But if to-be entrepreneurs refuse to take calculated risks (which by the way is nothing more than enterprising work backed up with common sense, far-sightedness, pragmatism, ass busting work and self-belief), then you might as well put your savings in Fixed Deposits. Cause that’s the best returns you will ever make.

9. Bootstrap your life – Cut down on loans, don’t buy that new car, eat out lesser, rent out a smaller house, control your mobile bill, buy lots of work clothes on sale (since you plan to be working 18 hour days duh!), don’t plan that trip to Spain (watch ZNMD instead). Why? Because you signed up for this shit. I don’t want to explain this further than this quote.

“Entrepreneurship is living a few years of your life like most people won’t. So you can spend the rest of your life like most people can’t”

10. Plan B and Backup Plans – Plan B and backup plans are real important. Why? Well a lot of people recommend having a Plan B ready in case your startup fails (90% probability). I have a different take on this. 

I think it’s important to have a Backup Plan and not a Plan B. The difference? (I feel like writing a post dedicated to this one)

Plan B is the stuff you plan for which is just below what you actually wanted to achieve. Like running a marathon (42.195 km) and aiming to do so in 4 hours, but actually being able to run only 30 km and giving up. Why? because 30 km isn’t bad by any standards. It’s good enough. You went out to prove that you can run long distances, that you are fit, focussed etc and you did. To an extent.

Backup Plan is the stuff you plan for when you have crashed and burned in your endeavour to reach your aim. Like running the same marathon and getting really tired at 30km. But still continuing despite dehydration, cramps, pains, the wind, the sun, a bad stomach and making it in 6 hours. But making it. The backup plan comes into play when you let your friends know that you will probably require medical help and an ambulance to take you to the hospital once you finish. Then it’s not just good enough, its epic. 

Plan B is setting yourself up for being average. Backup plans are for those who don’t aim for second best.