It's very easy to criticise Snapdeal these days. All you need to do is Google “Snapdeal issues” or open the startup section of any newspaper to read what's wrong with the company.
But it's very hard to learn what not to do from these articles. For two reasons:
(a) They are largely common sense. Be frugal? Sure. When you opt for M&A, make sure to integrate properly. Geez, I'm sure the Snapdeal founders didn’t know that.
(b) They are utterly bereft of context. For what it's worth, Rohit and Kunal have built one of the largest new companies of the last decade. Funny that they suddenly lost common sense. And it's hard to conceive of the challenges and constraints a large company faces, if you've never helmed one.
Lack of Strategic Intent
An ex-VP from Snapdeal had this to say:
Snapdeal did a great job of building the Bachate Raho brand core. As the environment – internal and external – changed, the multiple shifts in consumer experience away from this core led to the business suffering.
Let’s dive deeper.
Within the last one year, SD shifted its strategic priority thrice – from a focus on GMV (Gross Merchandise Value) to NMV (Net Merchandise Value), NMV to users, and then users to net margins. That itself speaks volumes of the sheer lack of strategic intent, that wasn’t thought through well enough. These changes seem more reactionary than an outcome of internal hypothesis and clarity of thought.
Takeaway: Strategic priorities, while not set in stone, should not be dynamic to the point of changing too frequently. Take your time to think through your business objective and a strategy to achieve it – but once you have, stick with it long enough for you to actually cover some ground.
Execution Plan Missing
Several of the acquisitions and partnerships that Snapdeal forged, arguably served as distractions at best. It seemed the company lacked an intent and a solid plan to spend adequate time and effort required to integrate each acquisition to derive maximum value out of it.
One of the senior executives at the group, who had been associated with Snapdeal for over two years, said, on conditions of anonymity:
Every acquisition was made with a clear strategic plan and intent, but that was never backed up with an execution plan!
Takeaway: Acquisitions and partnerships, while adding value, have a lot of integration and management overheads. They make sense only when you can ensure you do justice to them to create further value. Having money in the bank is no reason to let go of a frugal attitude – which ensures a laser focus on the things that really matter. What are those things, one might ask.
- Ensuring that you focus on scaling with tech and processes, and not with people
- Aggressive tracking and monitoring of all marketing activities – ad spends, brand campaigns
- Rational hiring – both size of team, as well as compensation to the team members
- Avoiding fixed and recurring costs – whether building up excessive office space (let’s not talk about how much one spends on the interiors), too large a team, fixed assets, etc.
It was always clear – and still is – that e-commerce in India is a long-term game and one where it will be critical to survive as consumer behaviour gradually shifts to online purchase. Further, right off the bat, it was evident that Snapdeal would face stiff competition along the way. In such a context, survival should have been a priority for Snapdeal – and that’s built on a foundation of frugality.
Takeaway: Building a culture of frugality, and truly living it, will ensure the decisions made in your company are the most effective ones. If survival is going to be a critical medium-term battle to longer-term success, then that is your first priority.
Here’s the hard truth: size magnifies your faults. Just like wealth doesn’t make you a bad person but merely accentuates your vices, size amplifies issues in your organisation. It actually is a double whammy. Not only are the problems now larger, the organisation is also slower to move.
And the point to note is that size comes hand-in-hand with capital. The same ex-VP said the $650 million that Snapdeal had taken from SoftBank was possibly too early. The company wasn’t ready, processes and structures weren’t in place. When you raise large amounts of capital, your size will grow, one way or another. You’d do well to take the large cheques when you’re ready for them only then.
Lessons from Snapdeal
And that is the key learning from the Snapdeal journey I think every entrepreneur should walk away with.
On conditions of anonymity, a current Director at Snapdeal said:
Undeniably, a lot has gone wrong in the Snapdeal journey. However, in the last two months, we have taken a strong hard re-look and fixed various aspects of the business – employee costs, categories, admin costs and more. What is critical now is sticking to this execution plan.
Here’s hoping the team can pull through this trough and move onward to the next crest.
(Abhishek Agarwal runs Bold Kiln, a one-stop shop solution provider for startups, and is a partner at OperatorVC, an angel fund investing in early stage companies. Before this, he was a strategy consultant with Monitor Group for 5 years, and is an IIM-Ahmedabad, IIT-Delhi alumnus. You can follow him on Twitter @abhishekaggy. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)
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