Ramki

SCALING UP YOUR BUSINESS

SCALINGUPYOURBUSINESS

Whatistheprofitmarginofthis
business?
Itcharges0(Zero,Zilch)for27%ofcustomers
g
(
,
)
Itchargesafractionofmarketpricefor26%of
customers
Itchargesmarketratefor47%ofcustomers

Whatistheprofit
What
is the profit
g
marginofthis
Company?

Its profit margin is:

Itsprofitmarginis:

45%!
45%!
Itmakes$13Mona
It
makes $13M on a
turnoverof$29M!!
Forbes:aperformance
worthyofanycommercial
th f
i l
venture!

Magic of scaling up!

Magicofscalingup!
Welcome
Welcometothemagicworldof
to the magic world of
scalingup!
AnnualgrowthofthisCompanyYOY:
10% in volume much more in sales!
10%involumemuchmoreinsales!
Thevisionofavisionaryinvision
Aravind eyehospital!
NotaRupeeoftheturnoveris
donation!

The best example of scaling up

Thebestexampleofscalingup
A58yearolddoctorfoundeda11bedeyeclinicin1976
Hismission:Togivesightforall
By2010Aravind eyecaresystemwasleadingtheworld:
Theworldslargestandmostproductiveblindness preventionsystem
Treated32millionpatientsandperformed4millionsurgeries!
PerformseyeoperationononeoutofthreepeopleinT.Nadu ;5%of
alleyecareproceduresinIndia!
It
ItssqualityisinsomecasesbetterthantheBritishmedicalsystemand
quality is in some cases better than the British medical system and
Aravinds costis1%ofBritainscost!(C.K.Prahlad inBottomofthe
Pyramid)
Aravind isoneofthegreatestsuccessstoriesinallofmedicine(Dr.
D id F Ch
DavidF.Chang
th Mi h l J d
theMichaelJordonofcataractsurgeryinUSA)
f t
t
i USA)
Manyaretreatedfreeoratverylowprice paywhatyoucanafford!

How does Aravind doit?

HowdoesAravind
do it?

Missionandmaniacalfocus
AgreatMentorSirJohnWilsonhimselfablindman andDR.V
Fightingspirit/Grit/Perseverance/HARDWORK/Empathy
Greatsacrificesoftime,effortandmoney tookdecades
Not incremental innovation breakthroughsolutions
Notincrementalinnovation
break through solutions
Consistency,reliability,clearstandards,lowcosts,dataanalysis
SCALElikeMcDonalds
The mantras The
Themantras
Themoreyoudo,thebetteryouget
more you do the better you get;;get
getlessdomore
less do more
Streamlinedworkflow,wellcraftedprocesses
Reducingmainsurgeonstime;waittime=0
Networkscampsponsoring;localhelp
p p
g;
p
Monitoring Aravind Parameterprogram qualityaudits
TRANSPARENCY
TRUST

Dream vision
Dreamvision
Dr.V journalentryin1970swhenhewasstill
j
y
payingoffthemortgageforthefirsthospital,
wherehewrites:
of
ofhisintentiontosetup100hospitalsacrossthe
his intention to set up 100 hospitals across the
country
Ofthepossibilityoftrainingvillagewomentoassist
surgeons
Oftheurgentneedforgoodadministrators
Ofplansforbuyingland
p
y g
Ofthenatureandpotentialsofyoungstaffmembers
AndofatargetofdoingaMILLIONsurgeriesayear!

Vision and realms of possibility

Visionandrealmsofpossibility
FredMunsononDr.V
Fred Munson on Dr.V

ThroughoutthetimethatI
haveknownDr.V,hisvision
for what was possible was
forwhatwaspossiblewas
beyondwhatwasanything
y
y
g
reasonable.

Can do attitude
Candoattitude
We
Weneedtodowhatweneedtodo
need to do what we need to do
Whenyoubegindoingtheworkyouare
meant to do unexpected resources will find
meanttodo,unexpectedresourceswillfind
you
Aravind
A i d operateswithaveryuniquesetof
ih
i
f
selfimposedconstraints;Thatautomatically
eliminatesordinarysolutions
li i
di
l i
CEO f IDEO
CEOofIDEO

Manufacturing revolution
Manufacturingrevolution
WHOsaidUsingIOLsindevelopingcountrieswasnot
merelyunsustainablebutirresponsible.
WhenAravind wantedtomanufactureIOLsinAurolab
they were told they were crazy
theyweretoldtheywerecrazy
Aravind wantedtodoitsotheycanofferIOLtothe
poorat$10 importprice$80to$150
By2009,Aravind
B 2009 A i d wasproducing2millionIOLsper
d i 2 illi
IOL
annumandowned10%ofglobalmarketforIOL,
exportingitto120countries!
Dr.DavidJ.Apple Aurolab lensesclearlymeetand
oftenexceedthestandardofmanylenses
p
manufacturedinUSandEurope.

Appropriate size for scaling up

Appropriatesizeforscalingup
Dr.Aravind
Dr Aravind ofAravind
of Aravind eyehospitalsays:
eye hospital says:
Doapilotandifthatworks,thenbuildit.Forus
scale has always come late Building in phases is
scalehasalwayscomelate.Buildinginphasesis
morepractical.Yourtimeandenergyneedtobe
investedininspiringpeople,patientsandstaff.
Startwiththemicrocosmofwhatyouare
dreamingof.Seeingitinmotionwillgiveyouthe
energyyouandyourteamneed.Commitmenton
d
d C
i
thegroundgoesalongway,evenifitsamodest
effort.
effort

Essence of scaling up summed up

Essenceofscalingupsummedup
Dr.Venkataswamyy summarises thesuccessof
Aravind beautifullytoJustinHuggler ofThe
Independent,UK
We
Wedidgoodqualitywork
did good quality work
Sotherichpeoplecameandpaid
Andwecouldtreatthepoorpeoplewiththemoney
saved
Thepoorpeoplebroughtmorepoorpeople
Therichpeoplebroughtmorerichpeople
The rich people brought more rich people
Sonowhereweare!
Simple,elegantandthatsallyouneed!

Money
Money
SwamiVivekananda:whenIaskmoneywillpour
y
p
fromtheheavens!
Dr V:Youmustdothework.Themoneywill
follow
Ifamanhasgoodcornorwood,orboards,or
pigs, to sell, or can make better chairs or knives,
pigs,tosell,orcanmakebetterchairsorknives,
cruciblesorchurchorgans,thananybodyelse,
youwillfindabroadhardbeatenroadtohis
house though it be in the woods
house,thoughitbeinthewoods.
RalphWaldoEmerson.
ThisiswhatStevejobsdidtoo!
j

Narayana HrUdhayalaya
DoinganAravind
Doing
an Aravind inheartsurgeries
in heart surgeries
15%ofallheartsurgeriesinIndia
MortalityratelessthanNewYorkhospitals
li
l
h
kh i l
5outof6donefree
BloodgasanalysiscostsRs8.50against
NormalRs350
AppliesWalMart tohealthcare

Before 1980
Before1980
IdidmyCAarticlesinChennaiin1970s
Atthattimeifyouwantedgoodvegfoodyoumainlywent
toWoodlands driveinorthemainhotelinMylapore
GoodmedicalattentionmeantIsabels,CMC
Good medical attention meant Isabels, CMCVellore,
Vellore,Lady
Lady
willingdonetc(mostlymissionary)
Woodlandshadagoodnameandcouldhavescaledup
Theydidnotanditwaslefttoacleanerboy/groceryowner
They did not and it was left to a cleaner boy/ grocery owner
withgreatvisiontodothatwhoopenedarestaurantin81
Andayoungdoctorforesawwhathealthcarewouldmean
in future and started a private hospital in 83
infutureandstartedaprivatehospitalin
83
Restastheysayishistory~

1981 dawn of a restaurant chain

1981dawnofarestaurantchain
ThefirstSaravanaBhavanbornwithone
e st Sa a a a a a bo
t o e
restaurant
Letscometo2013

Now70plusrestaurantsand16moreopening
Saidtobetheworldslargestvegetarian
restaurantchain
Over7500employees
TO$200M PerWikipedia
11countriesandgrowing,growing

1983 dawn of a corporate hospital

1983dawnofacorporatehospital
FirstApollohospitalisborn
First Apollo hospital is born
Letscometo2013

Now52hospitals
Now
52 hospitals
Over8500beds
One of the largest in healthcare in India
OneofthelargestinhealthcareinIndia
Globalreputation
TO 12 13 R 3768
TO1213:Rs3768crores
PAT1213:Rs304crores

Scaling up success saravanabhavan

Scalingupsuccess
saravana bhavan

Tripodapproach
Ti d
h
Product
d
Customer
Employee

Product
Product
Goodquality
InitialtimeofmanyhourswithchefbypromoterRajagopal
perfectingtaste
Bestingredients
Initiallymadelossformanymonths

Customerfeedbackandattendingtothat

Consistency/stadardisation sameprincipleofMcDonalds
Dosa weighs60gms maybemorebutneverless

Highhygiene
Bananaleavesontheplate(alsoeasytowash)
p
(
y
)
Employeesbathebeforework
Haircutonceamonth;nailtrimmingonceaweek

Brandbuilding
Brand building

Product and service extensions

Productandserviceextensions
New
Newfooditems
food items
Fastfoodclosesafterrestaurantsleftoversof
restaurants can be used
restaurantscanbeused
Ownicecream
Bothsitinandstandupcustomers(R.K.Salai)
Both sit in and stand up customers (R K Salai)
Murukku makingusingladies
Villagefooditems
Vill
f d it
Outdoorcateringforaslowas25people

Customer
Customer

Uniformsforemployees
Uniforms
for employees
Quickservice
C
Courteousservice
i
Nodrinkingbyemployees
Nolatemoviesforemployees
Customer complaints listened to and attended
Customercomplaintslistenedtoandattended
Regularexpansionatgoodlocations

employee
Jobsecurity
y nobreakinservice
Higherpay payaccordingtoneeds
Accommodation
Singaporetripforselectemployees
Abusivecustomerreportedtomanagerwhowill
di
discreetlydealwithhimevenaskcustomertoleave
tl d l ith hi
k
t
t l
Closeinteractionwithworkers(Rajagopal saysheisthe
union leader)
unionleader)
Clearpromotionpolicy
Employeebenefitsgalore
p y
g
seelist

Employee benefits
Employeebenefits
Annualfaretogotonativevillage
2childreneducationuptopostgraduation sameschoolastheone
ownerschildrengoto
Newclothesduringfunctions/festivals;alsoforspouse
LifeandmedicalInsurancepolicy
Life and medical Insurance policy
EmployeeESIpaidbycompany
Attendantandfoodiffamilymembergetssick
Hospitalisationbenefitsinprivatehospital
p
p
p
ParentsgetRs200pm
InvestmentofRs10kperdaughterformarriage(Maniammal
marriagescheme) onedaughteronlyperGovt policy
IncentiveschemeforTV,Fridgeetc
i
h
f
id
Vehicle aspercategory
Phoneathomeforkeyemployees
Proposedhousebuyingscheme
Proposed house buying scheme

SAS best
SAS
bestcompanytoworkforinUSA
company to work for in USA
CEOsays:
CEO says:

Contented
Contentedcowsgive
cows give
more milk
moremilk
justtakecareofyouremployees everything
elsewillbetakencareof!
l
ill b t k
f!

Interviewwithapartnerofmr.
rajagopall
1)Annachi Rajagopal,isadetailsperson,andhenceseta
b h
benchmarkinFoodTaste,Quality,HygieneandService.Thisset
k i F d T t Q lit H i
d S i Thi t
themarketafire,andestablishedhisbrand.
)
g
y Hescaledhisbusinessslowly,ashe
y,
2)Heisagreatvisionary.
hadtoparallelly developateam,whosemembersinternalised
hisobsessionfortaste,quality,hygiene,andservice.
3) Hiscoreteamofabout2000people(Managers,Chefs,and
S i S i St ff) h
SeniorServiceStaff)havedevelopedownershipqualities,
d l
d
hi
liti
and runtheorganisation now.
)
takescareofhisemployees,ashefirmlybelieves
p y ,
y
4)Annachi
thatwhentheyaretakencareof,theyinturntakecareofthe
business.

Interview with a partner..contd.

Interviewwithapartner..contd.
5)Annachi
)
hasmadegreat
g
contributionstothe
Societyatlarge,bycreatingthousandsofjobs,
groomingseveralrestaurateurs,anddeveloping
his native land which is a very arid district.
hisnativelandwhichisaveryarid
district
p g
6)WhileAnnachi hashadthevisionindeveloping
ahumongousbusiness,healsorecognises the
challengesgoingforward,forthenextgeneration,
he already has plans in place
healreadyhasplansinplace.
7)Ihavenot metanotherperson,whohasso
muchclarityofthought.

A manufacturing co who is our client

Amanufacturingcowhoisourclient

Grew500%inlast5years!
10%netprofit!
Hugeappetiteforgrowth
25% of revenue is from new productslast 3 years
25%ofrevenueisfromnewproductslast3years
Widearrayofproducts;widerangeofcustomers
Productsmadetoorder
Notmorethan10%saleswithonecustomer;notmore
than30%withoneindustry
Exportsandlocalsales
p
Specialpurposemachinessuppliedbycustomer!
Greatquality,designandR&D manyawards
Owns up mistakes
Ownsupmistakes

A manufacturing company contd.

Amanufacturingcompanycontd.
Perfectmanufacturingatcentralfactoryandshifttosatellitefactory
nearcustomer
t
Takepowerintensivemanufacturingtostateswithsurpluspower
Sweatassetsfully
Morethanmarketsalariestostaff;freecanteen;nounion
h
k
l
ff f
CEOwearssameuniformasworkers;moulds people
MarketingthruJVs
Preventivemaintenance spareschangedafterstatedno.ofhours
evenifgood
Setanexample personalexpensesseparatedfrombusiness
GoodgovernanceeventhoughonlyPrivatecompany!
G d
h
h l Pi
!

Modern day scaling up

Moderndayscalingup
YouTube
Firstvideouploaded2005
BoughtbyGooglein2006for$1.6B
Todaywortharound$20B!
RevenueCY:$3.6B!
Unique US viewers per month (excl mobile) 133 million
UniqueUSviewerspermonth(excl.mobile)133million
AverageUSusageminutespermonth(excl.mobile)31.7B
Monthlyvideosviewedglobally:130B!
MoresearchesinYouTubethanonanysearchengineother
h i
b h
h
i
h
thanGoogle!
100hoursvideouploadedeveryminute!

How did YouTube do it?

HowdidYouTubedoit?
Byteamingupwithotherswhohavetheirown
y
g p
loyalfollowing
InOct11theyhelpedfinance100neworiginal
channels from celebrities online video creators
channelsfromcelebrities,onlinevideocreators
andHollywoodstudios
Spent$100M
Spent $100M
Nowcalledthemostefficientspendinhistory!

Example:
Machinima caterstogamingcrowdandhas14.5m
subscribers
itsvideoshavebeenwatched2Billiontimesamonth!
its videos have been watched 2 Billion times a month!

Howdoestheworldslargestrestaurantcompanyby
unitsscaleup?
it
l
?
YUMwith39000KFCs,PizzaHutsandTacoBellsistheworlds
l
largest;
t
Operatesin130countries
Openedonenewrestaurantevery14hoursforlast16years!
Itistheworldsbestteambuildingco.
i h
ld b
b ildi
HasworldfamousleadershipprogramcalledTakingpeoplewith
you
Mostimportantelement:
M ti
t t l
t Instantrecognition!
I t t
iti !
ProgramslikeWalktheTalkaward,Rubberchicken,PlasticHog!
CEONovak:Imonearthtoencourageothers,liftlives,helpcreate
leaders inspire people recognize others
leaders,inspirepeople,recognizeothers.

Few examples around the world

Fewexamplesaroundtheworld
McDonalds
McDonalds quality,service,cleanlinessand
quality, service, cleanliness and
valueformoney(RayKroc founder)
CirqueDuSoleil
Cirque Du Soleil a$1Bcircuscompany!
a $1B circus company!
(Innovationandgreatestshowsonearth)
Southwest(Pickupassetsindownturn,be
Southwest (Pick up assets in downturn, be
different,actdifferent)
Netflix(cannibalises
Netflix (cannibalises itsowngoodbusiness
its own good business
killeditsownDVDbusinesstostreamvideo)
Apple(Customersasrovingfans)
Apple (Customers as roving fans)

Should you scale up?

Shouldyouscaleup?
DanielIsenberg
Daniel Isenberg HBR
HBR2
2minutechecklist
minute checklist
Iveurgetomakesomethingtoimpactmarket
Icansellthingstopeoplewhodontwantit
g
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
AsGermanphilosopherArthurSchopenhauer
said
Truthpassesthru3stages
Firstitwillberidiculed
First it will be ridiculed
Seconditwillbeviolentlyopposed
Thirditwillbeacceptedasselfevident!

Ifyouarescaredoftakingrisks:
If you are scared of taking risks:
Youmiss100percentoftheshotsyoudonttake.
CanadasgreatesthockeylegendWayneGretzky

Whenmr.rajagopal scaleduphis
grocerybusinessinthepast
b
h

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 havepolicies,procedures,processes
have policies procedures processes
GetaCEOifyouarenotCEOmaterial
GooglebroughtEricSchmidt;RedzoneroboticsbroughtChris
Dunkerley

Hiretofillgapsinyourskillset
Bringinpeoplewhoarebetterbutwhomeetyourculture
Delegate
Adequatecapital thinkVC,partners

How to scale up? Contd.

Howtoscaleup?Contd.

ProductVservice
Expandproduct/servicevGeography
BrickandmortarVOnline
Outsource
Ubiquiti networksisa$300MTurnovercompanywithover
25% margin which outsources everything including SALES!
25%margin,whichoutsourceseverythingincludingSALES!
CEOsays:Myaimistobuildsomethinggreatasefficientlyas
possible

IInformalworkstyleto
f
l
k t l t formal
f
l
Properfinanceandaccounts
InfrastructureincludingIT
Infrastructure including IT

Remember
Remember
Customersarenotsameasusers
Ryanairwenttosmallmunicipalairportshungryfor
business(cafes,taxis,stores)andtheairportseven
paid them to start a service!
paidthemtostartaservice!

Firstusersnotsameasscalingusers
Mostgamesarefirstprovidedfreetoprofessional
gamerswhosuggestmodsandthenfinalgamegoes
h
d d h f l
online

Firstproductnotsameasscalingproduct
First product not same as scaling product
BAANofferedafreeERPtoSHELLandafter
incorporatingalltheirsuggestionstookittomarket

makemoremoneyasaminority
shareholder
h h ld saletoscale
l
l
Paraspharmamakersofmoov,kracketc
Familybusiness

Soldmajoritystake(63%)toActiscapitalaPEinvestor
2008forRs600crores
Businessscaledup

NewCEORaghunandan
Streamlined distribution
Streamlineddistribution
Internationalexpansion
SAP
Umbrella branding etc
Umbrellabrandingetc

ReckitBenckiserboughtco.in2010forRs3260cr
PromoterPatelmadeanotherRs900cr

Mantra for scaling up

Mantraforscalingup
1.Correctoldmistakes
1 Correct old mistakes
2.Scaleup
3.Makenewmistakes
3
k
i k
Gobackto1!

Scaling up in todaysshi
Scalingupintoday
hitech
techworld
world
Thenewwayofscalinguporevenstartingup:
y
g p
g p
Movie: Kathalil Sothappuvathu eppadi wasasmall
YouTubevideodonewithnorealbudgetanditwent
viral.Thentheguywhomadeitwasaskedtomakea
i l Th th
h
d it
k dt
k
fullmovieandrestishistory.
Songs:A40secondclipinaHBOMoviecatapulted
Songs: A 40 second clip in a HBO Movie catapulted "II
loveit'totopofthechartsfromnowhere
NewProduct:JustputyourideaonkickstarterPebble:
TheEpaperwatchgot$10Movernightforitsidea
$
makers(Theyjustwanted$100,000!)Imaginebeinga
multi millionaire in a few hours!
multimillionaireinafewhours!

Sir donald cohen apaxfounder

Sirdonaldcohen
apax founder

Yourbusinesswill
Y
b i
ill
g
growtothesizeof
your vision!
yourvision!

From the biggest in this game..

Fromthebiggestinthisgame..

SOURCES
InspiringPersonality Mr.P.Rajagopal HotelSaravanaBhavan~Get
I i d !!!!!!! D
Inspired!!!!!!!DeepakRaghuraman
kR h
IsetmyheartonvictoryAutobiographyofMr.Rajagopal owner
Saravana Bhavan
SaravanaBhavan
Saravana Bhavan Wikipedia,thefreeencyclopedia
Wikipedia the free encyclopedia
SaravanaBhavanAnnachiRajagopal Cleanerboytoownerof
mostsuccessfulchainofrestaurantChennaiStartup GreatMinds
Discuss Ideas
DiscussIdeas
Howtotakeyourbusinesstothenextlevel ,Howtotakeyour
businesstothenextlevel BusinessNews News MSNIndia
TakingYourHostingCompanytoNextLevelLearnfromMistakes,
g
g
p y
,
CorrectThem Rinse&Repeat!
PrivateequityfundActisCapitalhashelpedIndiancompaniesscale
uptothenextlevel

Sources contd.
Sourcescontd.
FindOutifYou'reaScaleUpEntrepreneurwithThis
p
p
TwoMinuteTest DanielIsenberg HarvardBusiness
Review
Isyourfamilybusinessgettingcaughtupwithfamily
I
f il b i
tti
ht
ith f il
issues
MillionDollarTip#4ScaleUpYourWorkPersonal
Million Dollar Tip #4 Scale Up Your Work Personal
Excellence
ScalingUpWhenYoureStillSmallChiefExecutive.net
ChiefExecutiveMagazine
ScalingUpYourBusinessToAHigherLevel What
Could Be Stopping You The Learning 2 Live Blog
CouldBeStoppingYouTheLearning2LiveBlog

Sources contd.
Sourcescontd.
AnEntrepreneursDilemma Whentoscaleupyour
businessBPlanExpertsBlog BusinessPlanExperts,
BusinessPlanConsultants,BusinessPlanWriters
Thebiggestchallengesforentrepreneursonstartups
BusinessToday
ScalingUpIntuitSmallBusinessIndia
3MistakesMadeinScalingupNewVentures
3 Mistakes Made in Scaling up New Ventures Charles
Charles
BadenFullerandIanMacMillan HarvardBusinessReview
ScalingUpYourBusinessStartupKashmir!
ElevenLessonsforScalingUpFastCompanyBusiness+
Eleven Lessons for Scaling Up Fast Company Business +
Innovation
WhyitssohardforsomebusinessestogrowinCanada
The Globe and Mail
TheGlobeandMail

Sources contd.
Sourcescontd.
Infinite
InfiniteVision
Vision by
byPavithra
Pavithra K.Mehta
K Mehta and
and
Suchitra Shenoy (StoryofAravind eye
hospital)
HowYouTubechangeseverything Fortune
Aug 12 13
Aug12,13
GreatJob FortuneAug12,13