Will take on India when we consider ourselves ready: Chauhan of Obi Worldphone

With the launch of two new handsets, Obi Worldphone is set to hit various emerging markets around the globe with its new image of being a design-led company. Neeraj Chauhan, co-founder and CEO, Obi Worldphone, and a serial entrepreneur who has run IT and telecom distribution companies, explains the strategy of the new Obi brand to Business Today's Manu Kaushik. Edited excerpts:

Q. Moving from IT distribution business to selling smartphones, how has been your journey so far?

A. I started working with John Sculley in 2007 when I went to London Business School for a fellowship programme. I have been in the IT distribution business, and at that time, John Sculley as well as other Inflexionpoint partners Shane Maine and Gordon McMillan, decided to found businesses that acquire and aggregate IT distribution companies in Asia. Starting 2012, we acquired we acquired a couple of large businesses.

As an extension of our distribution business which was essentially focussed on IT products, we [thought about] launching a mobile phone brand. The world was moving towards mobility. It looked fairly simple. We had operations in China which was in a way working with component ecosystem. We had a distribution company in India which had all-India distribution channel. We hired a team and launched Obi phones last year.

We tried to follow the same model which was happening in India. It's ODM (original design manufacturer) model where you go to factories, look at products, pick and choose, put a spec and price, place the order and come back. In 45-60 days, they will deliver the product. It was very efficient. There was nothing negative about the model. It was scalable.

We launched those phones. There were some 8-10 devices. We had a reasonable response but at the same time, India was very competitive. We started with India and then launched in Middle East and Africa. When we were launching those phones in India, John Sculley was there. We tried to convince him about the market and price points. He said that if we really want to do mobile phones, let us do it proper way.

We took a step back. John offered to open the network of his connections. He called Ammunition's Robert Brunner, Satjiv Chahil [former Apple marketing chief] and people who could help us on the engineering side. We took an aggressive decision at that time. We totally withdrew from the Indian market. We were successful in the UAE with the same phones and have more than 5 per cent market share. The way the Indian market is, it needed much larger investments or positioning. I don't know where the gaps were. We continue to sell in Middle East and Africa but even there, we decided that we will not continue with those products beyond what we had already committed.

Q. When did you start working on the product?

A. We had Ammunition travelling to India to understand how things work. Their designers [also] travelled to Middle East and China. We issued them (Ammunition) equity. It started as a design assignment but we saw that we need a more long-term relationship and brought them as a partner.

We saw the [first] samples of phones in January 2015. They started working before that. They presented six-seven options out of which we picked two. After that, it was mostly execution of design.

Q. What are the target markets for Obi?

A. The way we have designed Obi organisation now [is that] we are positioning ourselves as a global company. We have experience in managing and running distribution business all over the world. We are approaching multiple markets at one go. Within next quarter, we will launch the phone in 12-13 countries. We have identified around 70 countries, mostly growth markets where the [significant] shift will happen from non-smartphones to smartphones. We look at these markets from two angles: a significant amount of population is young and the market is growing.

We have identified and appointed 20 distributors in different countries. We are working with large distributors of the world.

Q. What's your game plan for the fastest-growing smartphone market India?

A. We consider India to be a great opportunity. We think seriously about India. At the same time, we will take a conservative approach when we look at India. We [will] tackle India when we consider ourselves fully ready. We will not put all our eggs into the Indian basket. I am sure we will start India within this year but India will not be our first market.

India at this moment is the largest smartphone market and the largest growing smartphone market. The people who participated in China and gained their experience in terms of execution. In China, there are more than 15 companies who have expertise of producing million units a year. They have capabilities and resources, and suddenly, the home market for them is saturated. Where do you go? You can go to 20 small markets. It's hard work. Or you can focus on India. Then, everybody has their own appetite for investments and marketing strategies. Some people are tackling India with product strengths, some with distribution strengths, and some are purely tackling with price.

Currently, for the Indian consumers, the spec-price proposition which is being presented is immensely attractive. Nowhere else does a consumer get same proposition which they get in India. Now, couple that with the emergence of online markets where the cost of doing business in India has been significantly reduced. The online has created a model where it is possible to take product from customs door to a consumer in an extremely low-cost basis. The whole process is quite efficient. It leads to competition.

Q. Tell us about your product line-up.

A. There are two design centres. Within this quarter [till December], we will have a couple of more devices coming within these design centres. We probably will be launching twice a year as we go ahead. A couple of devices every six months.

Q. How are you going to ensure quality and consistency of the devices?

A. We are working with contract manufacturer on a very clear agreement where they have to strictly follow each element - colour, material, finish and specification. Ammunition has great expertise in specifying those parameters. There's no detail which is minor. Nothing is left to a decision which will happen at the contract manufacturers' level.

We are working with two contract manufacturers. We don't have plans to manufacture in India.

Q. How much investments you have made so far?

A. We funded this business from our internal resources until now, and it's only now that we have raised first external round of investment from Generali. The size of our IT distribution businesses is billion dollar revenues. We have three companies.

We went out to raise our first external round that was 100 per cent picked up Generali. We didn't need to go to anyone else. It's a reasonable amount - mid double digits in million dollars.

Currently, we have four founding partners. We brought in Ammunition as equity partner. We have other small stakeholders - key employees and advisors.

Q. What are the revenue targets?

A. If we want to go to that many countries, and if we have to have that [kind of] investments then it needs to be supported by significant revenues. It will definitely be more than $1 billion.