Lessons from slowdown survivors
Sanjeev Bikhchandani, Founder & CEO of Info Edge (naukri.com) and Deep Kalra, Founder & CEO, makemytrip.com, are in an enviable situation.
Sanjeev Bikhchandani, Founder & CEO of Info Edge (naukri.com) and Deep Kalra, Founder & CEO, makemytrip.com, are in an enviable situation. They are “slowdown veterans” having weathered the storm in the last downturn (dotcom bust) and, hence, betterequipped to deal with the current one. The duo has remarkable similarities. Both are from IIM-A (three batches apart), both are dotcom czars—Bikhchandani has founded India’s only listed dotcom company and Kalra, the country’s largest travel portal. In separate conversations with BT’s Saumya Bhattacharya, Bikhchandani and Kalra come up with strikingly similar responses to queries on the challenges that companies face during slowdown and the road ahead. Excerpts:
Are there any similarities between the last dotcom bust and the current slowdown?
Sanjeev Bikhchandani: There are some similarities and some differences. The big difference is that at that time, there were only four million Internet users. Now, there are 60-70 million. So, the potential market is much larger. What happens in a bust is that first, funding dries up and second, demand contracts. There’s similarity in terms of a much tighter funding environment now, but the demand contraction will be on a much higher base. Therefore, it is possible for businesses to make money on operations without getting any incremental funding. Another similarity is that businesses with models that have revenues 3-4 years away will be in trouble again.
Deep Kalra: I think a comparison is quite relevant. In fact, it feels like déjà vu because a lot of similar things are happening. A lot of things changed after the dotcom bust and all of these impacted the travel and tourism industry. The first storm was the dotcom bust, and then 9/11. Then, there was the attack on Parliament on December 13, 2001. We might be very differently poised right now, but the environment is going to become quite tough. And when the tide goes down this time, only the toughest players will survive.
How are you positioned in the current environment?
SB: We have got a growing, profitable business and we have got funding. So, that’s not a problem; we are very well-placed. There is an opportunity for us to diversify and acquire over the next 12 months.
DK: Ironically, we are getting more business than expected. In fact, people are coming online, more and more, to economise their travel. In these troubled times, we have overachieved our targets and are recognising and celebrating that fact. We sense an opportunity in this crisis. We are on the frontfoot this time while the last time (2001), we were on the backfoot. We have company-owned travel stores in 20 top cities across India; we are also looking at franchising. We might even make an acquisition.
What were the challenges you faced during the last downturn?
SB: The key (in times of a slowdown) is to drive sales and focus on activities that drive revenues and keep costs under control. During the last slowdown (2000-02), we added people and services to the sales team. We did not invest too much in technology products. As sales came in, we started to invest more and more in technology.
DK: During the last slowdown, there was a situation where we were sitting on cash that would last us only three months. It became a question of survival. We were dealt another blow; our venture capitalist pulled out of the country. We went through a re-organisation. Initially, my plan was to address both markets— the US and India. But the market in India was such that people were ready to research online, but not buy, while NRIs were responding. So, we decided to focus on the US market while all our competitors kept pouring money into India. That was a serious error of judgment (made by others)—you cannot change customer habits overnight.
How do you see business getting impacted now?
SB: Our business is in a different stage right now and the challenges are diverse. The key is to control cost and increase revenue. We have been focussing on innovation for the last 5-7 years and we see product innovation as a big way forward. It’s business as usual for us, but we are keeping an eye on cost. If you look at our growth in Q2 2008-09, we grew at 24 per cent year-on-year. We are growing a lot slower than earlier. We need growth to come back to the economy for hiring to pick up.
DK: We are still talking growth. India is not in recession. The growth rate is projected to fall from 9 per cent to 7 per cent , which is significant but not drastic. In this environment, within every industry, there is going to be a shakeout. About 18 months ago, we set up 20 travel stores. Will we set up new stores? May be a few but not a lot more. But, will we stop new hires in these stores? Absolutely not! There is going to be a cutdown in travel but it’s not that people will stop travelling. We aren’t only focussed on air travel; we also sell a large volume of other products like hotels, holidays, packages and bus and car rentals. We are close to the customer, which is what matters the most during a slowdown.
Is there a rationalisation in terms of hiring?
SB: There’s no right-sizing or jobcuts. We are, however, closely scrutinising the need to hire afresh.
DK: No, we are still hiring where required. During the previous slowdown, we did not lay off people, but we right-sized. We told our team about the situation. At that time, of our 42 people, we lost 16. Of the people who stuck around then, most are still with the company and occupying key positions. From that downsizing, the company has scaled up the workforce to 700. Right now, there are no cut-backs planned. We are still hiring and have some 55 openings for which we are looking for people.
Are there any similarities between the last dotcom bust and the current slowdown?
Sanjeev Bikhchandani: There are some similarities and some differences. The big difference is that at that time, there were only four million Internet users. Now, there are 60-70 million. So, the potential market is much larger. What happens in a bust is that first, funding dries up and second, demand contracts. There’s similarity in terms of a much tighter funding environment now, but the demand contraction will be on a much higher base. Therefore, it is possible for businesses to make money on operations without getting any incremental funding. Another similarity is that businesses with models that have revenues 3-4 years away will be in trouble again.
Deep Kalra: I think a comparison is quite relevant. In fact, it feels like déjà vu because a lot of similar things are happening. A lot of things changed after the dotcom bust and all of these impacted the travel and tourism industry. The first storm was the dotcom bust, and then 9/11. Then, there was the attack on Parliament on December 13, 2001. We might be very differently poised right now, but the environment is going to become quite tough. And when the tide goes down this time, only the toughest players will survive.
. Diversify. Don’t put all your eggs in one basket. |
How are you positioned in the current environment?
SB: We have got a growing, profitable business and we have got funding. So, that’s not a problem; we are very well-placed. There is an opportunity for us to diversify and acquire over the next 12 months.
DK: Ironically, we are getting more business than expected. In fact, people are coming online, more and more, to economise their travel. In these troubled times, we have overachieved our targets and are recognising and celebrating that fact. We sense an opportunity in this crisis. We are on the frontfoot this time while the last time (2001), we were on the backfoot. We have company-owned travel stores in 20 top cities across India; we are also looking at franchising. We might even make an acquisition.
What were the challenges you faced during the last downturn?
SB: The key (in times of a slowdown) is to drive sales and focus on activities that drive revenues and keep costs under control. During the last slowdown (2000-02), we added people and services to the sales team. We did not invest too much in technology products. As sales came in, we started to invest more and more in technology.
DK: During the last slowdown, there was a situation where we were sitting on cash that would last us only three months. It became a question of survival. We were dealt another blow; our venture capitalist pulled out of the country. We went through a re-organisation. Initially, my plan was to address both markets— the US and India. But the market in India was such that people were ready to research online, but not buy, while NRIs were responding. So, we decided to focus on the US market while all our competitors kept pouring money into India. That was a serious error of judgment (made by others)—you cannot change customer habits overnight.
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How do you see business getting impacted now?
SB: Our business is in a different stage right now and the challenges are diverse. The key is to control cost and increase revenue. We have been focussing on innovation for the last 5-7 years and we see product innovation as a big way forward. It’s business as usual for us, but we are keeping an eye on cost. If you look at our growth in Q2 2008-09, we grew at 24 per cent year-on-year. We are growing a lot slower than earlier. We need growth to come back to the economy for hiring to pick up.
DK: We are still talking growth. India is not in recession. The growth rate is projected to fall from 9 per cent to 7 per cent , which is significant but not drastic. In this environment, within every industry, there is going to be a shakeout. About 18 months ago, we set up 20 travel stores. Will we set up new stores? May be a few but not a lot more. But, will we stop new hires in these stores? Absolutely not! There is going to be a cutdown in travel but it’s not that people will stop travelling. We aren’t only focussed on air travel; we also sell a large volume of other products like hotels, holidays, packages and bus and car rentals. We are close to the customer, which is what matters the most during a slowdown.
Is there a rationalisation in terms of hiring?
SB: There’s no right-sizing or jobcuts. We are, however, closely scrutinising the need to hire afresh.
DK: No, we are still hiring where required. During the previous slowdown, we did not lay off people, but we right-sized. We told our team about the situation. At that time, of our 42 people, we lost 16. Of the people who stuck around then, most are still with the company and occupying key positions. From that downsizing, the company has scaled up the workforce to 700. Right now, there are no cut-backs planned. We are still hiring and have some 55 openings for which we are looking for people.
