This post first appeared on the VCCircle blog here
One of the biggest challenges faced by any startup in any part of the world is earning customer trust at scale. Different economies offer different types of challenges; some of the challenges can be overcome by good execution, good timing and intelligent allocation of capital but some are out of the control of individual companies and depend more on the operating environment. Having lived most of adult life in the US (majority of it at startups in SV) and now running Canvera in India I can see how the operating environment in India makes it difficult for consumers & channels to trust up-and-coming brands.
Let me illustrate this with the example of the US mail order business transitioning to e-commerce. The Sears Catalog was first introduced in the US in 1888. From then to, say, 1995 when the internet started taking off, the entire eco-system of the mail order catalog business was built out. This included laws such as mail order fraud, privacy protection; it included development of a credit card payment network and consumer friendly business practices such as fraud protection; it included insurance products that would protect consumers and businesses; and it also included nearly all businesses adopting good practices to build trust in the mind of the consumer. With over a hundred years of “investments” it is safe to say that by 1995 calling a toll free number on a catalog and giving your credit card and contact details to an unknown person was a no-brainer transaction for nearly all consumers in the US. In spite of that, with the advent of e-commerce nearly every payment company – Visa, MasterCard, Amex – spent hundreds of millions of dollars in the late 90s telling consumers that it was OK to type a credit card number online offering $0 liability for online fraud. I remember my very first online transaction in 1996 when I was carefully looking if the connection was over SSL or not and then checking with the credit card company to make sure the right amount was charged. Whatever you might say of the late 90s tech bubble it definitely brought the whole category to the forefront and helped create consumer awareness and trust. That was a lot of hard work and a ton of investments (in the billions of dollars) built on a strong foundation of the mail order business that allowed e-commerce as a category to achieve reasonable scale.
India is an emerging economy and that level of maturity of good enforceable laws and business practices does not exist. My wife once unsuccessfully tried to take money out from the ATM of a well known bank but the amount was deducted from our account. When we reported the issue, we were told that it will take 6 months to correct it! I started sharing this story with friends and was surprised that nearly 50% said that they had faced some such issue which took a lot of time to correct. This average level of poor experience with national banks is bad for everyone, it makes the consumer gun-shy. If a national bank cannot be trusted, what chance does a small company have? It does not matter if one company follows good practices, everyone in the category must do the same. I am today spammed by SMS messages and emails from many companies that I can’t turn off even though I am on DND/DNC and have unsubscribed to the emails. And neither can I find a way to get the companies fined. This is bad for everyone in the eco-system. In the race to get “traction” when startups don’t behave well it hurts everyone.
Necessity is the mother of all inventions
While on one hand this sometimes feels like an insurmountable problem, it is also at the heart of the biggest opportunities that exist in India today: across categories we are witnessing the transition from unorganized fragmented businesses to national level brands that consumers can trust. As opportunity costs for individuals rise, more and more consumers will rely on brands to save them time and hassle. A bank that is able to quickly resolve issues in a friendly manner will get repeat and referral business because the consumer would much rather spend their time increasing their earning potential. A company which even without the stick of enforceable laws respects privacy of a consumer will find a much more willing audience to their marketing activities. So what specific actions can a startup do to earn this trust and build a brand?
Get the basics right
In my opinion it is really back to basics execution: focus on people, culture and processes. No secret sauce, no magic potions, just a simple nose to the grind stone acute focus on the building blocks. Long before a startup thinks about mass market advertising (appropriate at the right stage), long before it looks to celebrity endorsements, it must first get the basics right.
People: The founders and management need to spend an inordinate amount of time in the early days in hiring carefully and taking a “go slow to go fast” approach. In India companies become people heavy very fast and this is therefore even more critical to be done very early in the life of the company. There is no way to tell what is “analysis paralysis” during the hiring process and what is done in haste, it all depends on the situation, but a good hire is worth their weight in gold. This is Business 101 and yet very tough to do day in and day out.
Values based culture: It is also critical to communicate values constantly especially in the 1st year of the company. All early employees must be ambassadors of these values. Management must openly discuss the dilemmas the company faces in the market and why certain behaviors are OK and others not. The market will always tempt the company to take shortcuts and the management must make it OK for employees to resist, even at the cost of growth. All decisions must reflect these values; in fact unless management starts feeling that the company is behaving true to these values, there is no point in even putting up on rah-rah posters. Let the posters be a result of values becoming part of the DNA of the company. Let everyone feel them first.
Processes: If people are the sinews of a company, processes are its behavior. Management must be deeply involved to build each business process so that interactions by all constituencies (customers, channels, partners, suppliers) reflects the culture of the organization. A brand is not a marketing message, a brand is what people feel when they interact with the company. The marketing message is merely the ribbon on the package.
None of this is easy: Companies tend to get big quickly so maintaining hiring quality all through is a challenge; instilling the company culture to a larger group is very complex; and given operational challenges in India building good business processes that reflect the culture is that much harder. But in my opinion there is no other way. While none of these requirements are unique to India and probably should be followed by all companies world over, this is a lot more critical for a startup in India to get right early. Done correctly, in the long term this will most certainly be a competitive weapon.