Indian Startups and the Perception Factor

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With the number of startups growing at an exponential rate in India and never ending predictions of this continuing trend, it is worthwhile to reflect on the impact of this startup boom. The startup trend in India originated when expats who passed out of premier institutes , and working in posh jobs around the globe returned to the country, and tried to replicate the idea of a successful US startup. Be it Bazee replicating eBay, or jobsAhead replicating Monster, to recent ones like Flipkart replicating Amazon’s model, Ola replicating Uber’ model or OYO rooms replicating AirBnb. The strategy worked well to generate the desired perception.

Is the cloning hype justified?

My article in this context.

Then followed PR and promotions, when Indian startups started publicising themselves through different social media channels, recruiting from top colleges in the country, and highlighting their working culture to sculpt their public image.

Smells of the current Bollywood scenario. Days before a movie is released, starts the explosion of advertising on different media channels to create a grandiose image . The film gets released and finally an announcement of over 100+ crores profit is published. Sounds quite intriguing.

Are we getting into a perception war?

 Perception for Investors

The perception that parameters of success for a startup is defined by its capability to be VC-fundable coupled with the quantum of capital raised, poses a few questions .

  • Is there an over-emphasis on venture capital funding and funded companies, primarily in technology businesses?
  • Are these tech companies showcased as role models?

Relentless focus on market share expansion by Indian startups to attract investors attention is a never ending struggle. It is no surprise that startups in eCommerce, hyperlocal groceries, and food delivery industry expanded exponentially to grab market share. Needless to say, such forays can be short lived, especially as investors get pragmatic and focus on profitability. It is important that the perception created by startups to get funding should include the plan to actually show profits in any form and the potential to be sustainable and value creating ventures. Of course technology and scale are good things. But as startups battle out to win the funding game, the bigger question should be if the core principles of business are being compromised in this web of perception. Indian eCommerce is a classic victim of this perception. While SnapDeal, Flipkart, Ola and others get into x rounds of funding on one hand, they are also incurring losses due to discounting and hype-based strategies on the other.

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Do startups remind us of stock market? Highly volatile stocks!

Can Indian startups transition from the hyper growth-driven to being more value-driven?

The core of any business is to earn profit, by providing value to customers with cost at the minimum.

A perception of incurring losses on the pretext of market-capture, or getting back to shape eventually, or any reason whatsoever is not great news for developing the ecosystem.

Customer-driven Hype

Michael E Porter in his classic book, The Competitive Advantage, highlights that buyers, in general, evaluate whether or not to buy a product by using two different sets of criteria: use criteria and signaling criteria. Use criteria are actual product realities (i.e. features, benefits, quality, etc.) while signaling criteria are purchase criteria which are subtle perception-driven factors to infer or judge what a company’s actual value is. Typical signals include reputation or image, age of business, customers list, market share, size of business etc. Consumer behaviours are strongly influenced by perception-driven factors than ‘actual product realities’. Customers purchase on perception rather than reality. They make purchases based on brand image, brand value, popularity, slick advertising, etc.

A perfect example is how Indian consumers love, love and love Maruti car, and prefer it over many other sedans available in the Indian market (Hyundai, Nissan, Chevrolet, Fiat and others). Maruti created the perception that its customer service is always accessible along with low maintenance costs, and masses just rely on Maruti. Most importantly, perception is reality in this case.

Zomato, an Indian unicorn, started just as a restaurant listing startup but created the necessary buzz to attract investors. Mumbai based startup housing.co.in, a property listing service, bought the domain Housing.com and a national number for a whopping $1 million to go global. But, not for long as the initial euphoria subsided.

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Breaking of perceptions did lead to Zomato’s scale down. Snapdeal reduced its workforce, not to mention Flipkart’s famous delay in joining dates of IIM-IIT grads.

Shaping consumers’ perceptions by adapting the “fake it until make it” mantra is the strategy being followed by most startups.

Talk the walk to woo customers till the startup walks, i.e .build a product that actually walks the talk.

Perceptions work long-term as long as there is no dilution in focus on the core product.

Although it’s true that subtle perception-driven factors, such as the signal criteria defined by Porter can play a big role in consumers’ behaviours, but, finally perceptions projected need to become reality for eventual success of the startup. Not just a charlatan!

Hiring Buzz

Startups stashed with investor money buy in experienced people from the market and competitors at exorbitant salaries. They set up their teams by recruiting people from their earlier organisations by doling out high increments and ESOP. Besides, fresh graduates from IIT/IIM are given opportunities with outrageous pay. Well, it is the beginning of a perfect storm!

Futuristic Implications- The Winning Paradigm

The need for Indian startups to focus more on innovation, game changing technologies and advancements in different verticals can facilitate in actually turning perception into reality. Thanks to introduction of cloud technology and ease of access to technology, hence reducing costs and overhead, startups can now amend the way in which they build their business models, focusing more on actual product and customer experience right from the start.With limited marketing budgets, Indian startups need to leverage creativity and agility to create the desired hype and position their brand to establish themselves as competitive leaders. Creating the “right” perception can happen in different ways, well-designed websites, videos , marketing collaterals with clear messaging, compelling value propositions or a convenient lead conversion process that quickly turns leads to actual customers.

Building perceptions can influence long term only if it is coupled with development of a successful product or service.

Can Indian startup eco-system develop as a creative group of innovators, radical thinkers and entrepreneurs ready to disrupt the market, and alter the way technology is used, and hence resulting in high-quality entrepreneurial ventures beyond just perception?

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For starters, can any Indian startup become a real market leader in e-Commerce, and not just a hype?

Realistic perception —-> Successful execution

Building perception into reality is the only way!

What do you think? Is there an art or science or even a math to perception by startups?

Reminds of a famous quote“It isn’t what you don’t know that gets you into trouble, it’s what you know for sure that just isn’t so!!”

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