Forty years ago, Steven Smith stood up at a meeting of disgruntled Oregon farmers and offered them an alternative to the falling price of peppermint oil. He bought up their mint leaves and began selling them to tea giants Celestial Seasonings and Lipton. Eventually, he sold the leaves as bagged tea under the Stash Tea Company name, which he helped grow from an $800-a-month botanicals supplier into a multimillion-dollar brand. Then he created and built a company called Tazo, which he sold to Starbucks. After that, he moved to France to live the good life.

It didn’t last. Today he dips a spoon into the first of a row of small, handle-less cups of white porcelain, lined up like chess pawns on the counter in front of him. He lets the tea, a green blend flavored with jasmine, flood over it. Then he brings the spoon to his mouth with a loud sound, like a vacuum seal opening. He nods approvingly, clanks the spoon against an open jug to remove remaining droplets and leans over to try the next.

Creative spirit

A lithe 62-year-old whose features might remind you of Bill Clinton’s, Smith has been running tea companies for pretty much his entire professional life, all of them within a few miles of the combination workshop, factory and tasting room he now rents in a semi-industrial neighborhood of Portland, Oregon. A serial entrepreneur who won’t take yes for an answer, he’d clearly rather be in his workshop, slurping and nodding, than lolling about on the Cote d’Azur.

“I’ve seen Steve in many iterations, and he always has a creative spirit,” says Michael Harney, who for two decades has bought and blended tea for his family’s company, Harney & Sons. “Tea can support many different kinds of businesses. We’re just hoping Steve stops at five or six of them. He has to be coming to the end soon, wouldn’t you think?”

Not necessarily. Smith’s latest venture, Steven Smith Teamaker, sold its first box in late 2009. Today its products are in hundreds of U.S. outlets, including 150 Williams-Sonoma stores, Whole Foods Markets in the Pacific Northwest and California and Zabar’s in New York. The company’s classically styled labels, among the cleanest and most elegant in the marketplace, can be spotted throughout Oregon and Washington and in restaurants and hotels from Blue Ribbon Sushi in Las Vegas to Trump in Toronto.

Ideas percolating

All of that is exactly what Smith was hoping for when he returned from his early retirement in France to start another business. “When you’re building a company, there’s inevitably that struggle, that scramble,” he says. “Are we going to get over the hump? Is this going to make it? Then you get to a certain point and you realize, ‘I think I have a business here. If I go away for a week on vacation, I’ll actually get a paycheck.’”

It’s usually at that point—right about where Steven Smith Teamaker is now—that Smith begins to decouple. He dabbles in side projects. He begins to consider the negatives of his current situation: recalcitrant partners, perhaps, or a lack of resources, or a brand with bandwidth that’s too narrow to encompass his ruminations. Before long, the negatives seem to outweigh the positives. And, in the back of his head, there are always ideas that, if he could just find the time to get them going…

Smith admits he’d rather be starting a company than running one, and he prefers doing just about anything to doing nothing at all. “There are ideas percolating all the time,” says Dave Leger, one of Smith’s two partners in Stash and now director of production for Steven Smith Teamaker—a man who clearly can’t even talk about his work without employing a beverage metaphor. “All Steve needs is the time to implement them.”

A good blend

Some of the ideas are pretty far out there, but they all circle back to tea. While many creators of companies wander across the consumer landscape, confident their creativity transcends category boundaries, Smith is that rare serial entrepreneur who has concentrated on a single industry. “In tea, Steve has found his medium,” Leger says.

In fact, Smith has pretty much been selling the same product for 40 years; only the quality and the packaging have changed. Each time, he explains, “I saw an opportunity to be a little more fearless in the way we merchandised, the way we talked about tea, even the blends and formulas we could create.”

While Smith says he plans to always keep control of his current company (this was part of the point of putting his name on it), he doesn’t rule out the idea of starting over yet again. Each time he has built a company, it has altered the landscape of the tea industry. By raising the consciousness of the tea-buying public, he has created opportunities where none previously existed. Someone will surely step in and take advantage of them. Why, he wonders, shouldn’t it be him?

Marketing maverick

If Smith is a natural innovator, he wasn’t always aware of it. Returning from a stint in the U.S. Navy in 1971, he landed a job in his soon-to-be brother-in-law’s natural-foods store. He ran off to Europe with the girl who ran the juice bar. Then he came back home and got a job selling herbs for a tiny Portland startup.

For his first assignment, he drove his VW bus up to Vancouver, British Columbia, and down to San Francisco, offering up chamomile and rose hips, spearmint and lemongrass. He racked up $15,000 in sales and $1,500 in commission. Strapped for cash, owner Steve Lee offered Smith a piece of the company, which he’d called Stash. “It was clear that Steve was a natural marketing guy,” Lee says. “He has always had a great sense for where a brand is going and should go.”

Until Mo Siegel created Celestial Seasonings in the late 1960s, tea and herbal infusions in America existed largely as commodities. Celestial gave them personalities and stories, with memorable, evocative names. Smith had the idea to do the same with Stash’s infusions, but to make the product upscale, at a price point at which Celestial feared to tread. As a side project, he opened a store in Portland’s Old Town and stocked it with loose tea purchased from a broker—typical stuff, such as Russian Caravan, English Breakfast, Earl Grey. When that didn’t move quickly enough, he talked Lee and Leger, who’d come on as a third partner, into letting him sell bags of tea under the Stash name, but with tweaks that rendered them proprietary. He combined the usual jasmine and orange spice into Jasmine Spice, that sort of thing. “I hadn’t been to China or India,” Smith recalls. “I knew nothing about tea. But it worked.”

Tea talk

Smith had many ideas for products but no budget to implement them. He became innovative in how he brought his existing products to market. Rather than hitting up groceries or coffee shops, he called on college bookstores; he developed office beverage programs. The company boomed. But Smith grew tired of operating on a shoestring. He had ideas jockeying for space in his mind, sure successes ready to happen, such as premixed tea-and-juice beverages and black teas with unusual flavorings—like those that would come to define Tazo.

Telling the story now, Smith walks around to the front of his desk and lifts up a framed photo that’s leaning against the baseboard. It’s from when Tazo was up and running, before he sold it to Starbucks. In the photo are Tazo’s frozen tea pops, a product that existed only briefly but during that time was one of the fastest-selling frozen novelty items in America. “You know what I liked best about this?” Smith asks. “Planning to market, the whole thing took 90 days.”

At Stash, there was no pipeline for new product, let alone one with a 90-day turnaround. So one day Smith announced to his partners that he’d sold his shares to Yamamotoyama of America, a Japanese beverage company. He went off to import tea accessories, mill and sell lemongrass from Guatemala and work in a joint venture with a coffee company.

Changing tastes

One day in 1986, he went for a run with Lee and agreed to help Stash on a contract basis, shifting it from regional to national distribution. “We just wanted him back,” Lee says. “I knew he’d be a big part of what we were trying to accomplish. Besides, he’s fun to be around.”

Really, how could he not be? For Smith, creativity is a faucet with a steady drip. “He has idea after idea,” Leger says, “and not all of them are bad.” Some of those ideas are actionable in current circumstances. Others have to wait until the world catches up.

“I don’t think his taste buds could have influenced the market when we first started, because they’re too sophisticated,” notes Celestial Seasonings’ Siegel, who compares Smith’s palate to that of a winemaker or gourmet chef. “His tastes are the equivalent of high-end cuisine. And he has always been willing to stretch the market to places that I’d never go.”

By the early 1990s, Smith developed an interest in selling higher-margin teas. Stash was already spending more on its raw materials than the other mass-market brands, but, he thought, What would happen if a company spent double that? Smith understood that the expense of sourcing and buying tea is actually quite small compared to the labor, packaging and distribution costs. “If you had the best raw materials, you could create a super-premium product and charge even more,” he says. “Nobody was doing that.”

This wasn’t possible under the Stash umbrella, for reasons having to do with both branding and finances. But that didn’t mean it wasn’t possible.

In his workshop, Smith opens a bottle of iced tea blended with fruit steeped in filtered water and pours out samples. He has three flavors under the Steven Smith Teamaker line, with more to come.

The concept is familiar enough to consumers. But before Snapple bottled its first blend, before Honest Tea pushed the envelope with a lightly sweetened juice product, a first iteration of that beverage launched Tazo.

After leaving Stash for the second time, Smith set up in his kitchen with a batch of teas, fruit juices and a refractometer. Earlier, he’d created a product called Simply Red that combined apple juice with tea. That was the template. But if he was going to start a new business, he needed a line of products. Soon he had three flavors. But he needed a name. “I was aiming for Merlin meets Marco Polo,” he says, “with some Raiders of the Lost Ark thrown in.”

He sat in a room with Lee, who had invested in the new venture, and they emerged hours later with Elixir, later altered to Tazo. Soon after, a tea-leaf reader informed him that Tazo means “river of life” in the Romany language she’d grown up speaking. Never one to turn down an auspicious omen, Smith made that phrase the guiding principle of the business.

Finding a niche

Tazo, which launched in May 1994, took the new-age earnestness of Celestial Seasonings and presented it with a dash of mysticism and a large dollop of humor. “Nobody was having fun with tea at that time, and that’s what we were determined to do,” Smith says. (The shelf life of the ready-to-drink beverages was listed as “longer than milk, shorter than a Twinkie.”) Once a line of eight bagged teas was launched, the packaging seemed to promise entry into some mystical otherworld. The names of the teas—Awake, Zen, Calm—didn’t tell you what was in them, but rather how they were supposed to make you feel.

“The teas were fairly straightforward,” Harney says, “but then he’d have shamans and all that. I mean, he wasn’t a shaman. It was all marketing shtick. Effective marketing shtick, obviously, but it didn’t appeal to everyone.”

Smith knew that. Though Tazo’s Awake would end up as the bestselling black tea in natural and specialty foods in the U.S., he wasn’t trying for mass appeal. Recalling how he was always low on funds at Stash, he decided to price his teas at $4.49—a huge leap from the $1.99 and $2.09 that Celestial Seasonings, Bigelow and others were asking. He didn’t do research, and he didn’t write a business plan; he just saw a niche and went after it as he’d always done.

“When Tazo first came out, I really thought it was bullshit,” Siegel admits. “It was like a screenplay somebody had written. It was cute and well done, but it seemed totally invented. But he moved it around to where it became more mainstream.”

Smith had created an equity with a life of its own. From the beginning, Tazo was a success. Though industry leaders doubted he could sell any volume of tea at $4.49, the boxes jumped off the shelves. The company grew so fast that Smith went looking for new investors to keep the momentum going. What he needed, he calculated, was for someone to buy 20 percent of the company—to put in the money, keep their mouth shut and let Tazo ride its wave. Howard Schultz at Starbucks didn’t seem a likely fit. But he did have the money.

Sealing a critical deal

Smith already had a history with Schultz. When he left Stash the second time, he’d been offered the job of Starbucks director of beverage. Instead he told Schultz he’d start a company and create a tea brand for Starbucks on the side.

“We were one sentence away, just haggling over who would pay for a $10,000 piece of equipment,” Smith says. “But it didn’t happen. Someone else swooped in and got the job. It ended badly.” At the time, he says, he never wanted to set foot in the Starbucks building again. This time, Starbucks told him they weren’t interested in Tazo. The coffee giant had a tea of its own in the works, produced by the same company that had failed with the original assignment. And the story gets worse before it gets better. Through other sources, Smith learned that Starbucks was planning to launch its own line of ready-to-drink beverages called Tiazzi, a name perilously close to Tazo. Smith wrote a letter asking them to cease and desist. Shortly after, he took a call from a Starbucks executive who reiterated that the company had scant interest in buying 20 percent of Tazo and operating as a silent partner. Yet everyone who’d attended the meeting hadn’t been able to stop talking about Smith and the Tazo brand, and how well it dovetailed with what Starbucks was trying to accomplish. So how about if Starbucks bought the entire company and kept Smith on to run it?

Leaving Starbucks

Smith was crammed down by venture capital to a point at which he owned just 10 percent of his company. He loved the Tazo vision, but it wasn’t his to implement anymore. In January 1999, he and his investors sold.

The multiple was a paltry 1.2 times earnings, $9 million total. “Had we held on for another two years, we would have gotten substantially more,” Smith says. But because they sold when they did, he and his investors were able to hitch a ride on one of the great growth spurts in American corporate history: Tazo started out in 1,000 stores and soon found itself in 10,000. For five years, tea’s comparables throughout the Starbucks empire were better than those of coffee. From arriving at less than 1 percent of the chain’s sales, Tazo hit 8 percent. But eventually—and probably inevitably—corporate control started to chafe. Smith’s ideas never stopped coming, but a billion-dollar company is hardly as nimble as a startup.

“Everything I’d suggest,” Smith says, “they’d say, ‘Good idea, but we don’t know how to scale it.’”

The offer to join Starbucks had been open-ended; he could have stayed forever. But flying back from a tea-sourcing trip to India in March 2006, Smith realized his run at the company needed to end. He worked out a plan that day that let him gradually disentangle, with a one-year noncompete agreement. By the end of 2006, he was gone.

The market in Villeneuve-les-Avignon, France, is held on Thursday and Sunday mornings. Smith wandered through with his basket at least once a week during the summer of 2007, buying cheese from his favorite fromagiere, chocolate from the chocolatier, biscuits from the bakery stand. These were craftsmen selling their wares directly to customers who understood and appreciated what they did. One word came to Smith’s mind, and it isn’t hard to guess what it was: tea.

A Teamaker is born

While at Tazo, Smith concocted the idea of a faux workshop that would be open to the public. It would be staged almost like a Disney construct, with onlookers catching glimpses of “workers” packing “product” that in truth had come in through a back door preprocessed from a warehouse. “I was going to have a really slow machine, spitting out one tea bag every three or four seconds,” he recalls. “Workers would be wrapping packages like they’d be shipping them out somewhere.”

The flaw in the idea, Smith understands now, was the faux part. The artisans in the French market had authenticity in a way none of his tea companies ever had. He moved back to Portland, inspired to rectify that.

This time, Smith’s idea was small-batch tea, produced by a company nimble enough to turn on a dime. He wasn’t looking to steal Tazo’s customers, just as Tazo hadn’t been about competing with Stash. This was a new category, something between the mass-market landscape and rarefied products bought by tea fanatics from internet specialty sites.

“It’s always interesting when you start a new business,” Harney & Sons’ Harney says. “It’s hard to cancel out all the legacy things from an existing brand, but this way, he’s back at zero. And he has the benefit of having sold the last business, so he has a little cash. And it isn’t like he went into books or something entirely new. It’s still tea, so he has the same contacts.”

As part of his effort at authenticity, Smith decided to name his new company Steven Smith Teamaker. He created teas with names such as Mao Feng Shui, an amalgam of the connoisseur-level tea Mao Feng and the widely known Chinese phrase feng shui, the art of site orientation. Then he set out to raise money, a process that lasted about half a day before Smith realized he didn’t have the stomach for it. Raising capital is an onerous process. Even worse, it usually leads to a loss of control.

After some hand-wringing, Smith decided he had enough money of his own to finance the business for 18 months. Then he’d see where he stood.

Smith’s tea bags are gorgeous, miniature works of art. “He’s got an incredible design aesthetic,” says Richard Harvey, president of Williams-Sonoma Brand. “You walk into our stores, and they just look like they belong there.” Still, it’s Smith’s Portland atelier—part retail shop, part performance-art space, part laboratory—that was the creative breakthrough for Steven Smith Teamaker. One weekday morning, groups of two or three people wandered in—some who knew exactly what they were looking for, others who were passing the building and became intrigued by the sign.

“I’ve had people come through that door I’d never seen before who ended up not just buying tea but investing in the company,” Smith says.

Drink to that!

Running a brand out of a workshop gives him license to experiment with products unlike any that have ever hit the market, such as teas that incorporate Douglas fir needles or have been steeped in used Pinot Noir barrels.

His more familiar teas also have qualities that render them unique: Fez holds the space of a traditional Moroccan mint, for example, but consists of Mao Feng blended with Oregon spearmint and lemon myrtle. “Until now, the consumer wasn’t ready for something like this, and Steve wasn’t ready,” Harvey says. “Now both of them are.”

In 2009, Smith took a three-year lease on the building. He’s about to sign on again, but needs even more space for an additional production facility. He has Celestial Seasonings’ Siegel as an investor, as well as Jean-Michel Valette, the chairman of Peet’s Coffee & Tea who formerly ran the Robert Mondavi winery. Smith, Siegel says, “has found himself a niche picking off the edges of Bigelow, Lipton and Celestial. He has done it twice and clearly seems to be doing it again.”

Lee, who founded and now runs Kombucha Wonder Drink in Portland (with Smith as a minority partner), says, “It’ll take five years to get Teamaker fully up to speed. I think he’ll have a good ride with it.”

Yet, as he looks ahead to his future, Smith isn’t certain he can see Steven Smith Teamaker around the bend. “They’ll want a liquidity event at some point,” he says of his investors. “Recently I had to go away for a week and realized this business can run without me. I wouldn’t have to leave, necessarily, but I can pass the baton to someone else.”

Smith has been doing product optimization and freelance development work for the Bright Tea Company line from Mars Drinks, a division of worldwide manufacturer Mars. For years, he says, he has taken insights gained from other categories and applied them to tea. When he talks about a session with that company or one of his other nascent projects, you can almost hear the machinery whirring in his mind, that perpetual-motion idea machine gearing up. “Another company for Steve after this one?” Lee asks. “I don’t see why not.”

Who’d bet against it? The only thing the man has ever failed at is standing still. And he’s not eager to try it again.

©Entrepreneur Inc. All rights reserved.

Stepping stones
Set up in 1967, the company, with a net worth of above Rs.1,639.7 crore and a turnover of over Rs.1,290.6 crore, has land reserves of 9,343 acres at present. This includes land for residential, commercial, retail, hospitality and integrated township projects. The group expects to acquire 6-8 million sq feet in FY’12. Ansal API’s profit after tax stands at Rs.101.7 crore now.
Ansal API’s initiatives in the sector refuse to bottom out, the years spent notwithstanding. There is a lot more the group is planning to come up with. “We are building a township in Lucknow of over 4,000 acres. There are 35 villages in that area. We are adopting and upgrading those, from providing vocational training to developing infrastructure,” says Ansal. “If I can train a carpenter at the site itself, there won’t be any need to bring in costlier manpower from bigger cities. Such thinking would help the villagers. Rather than making them a party in a transaction by buying land from them, we are trying to make them stakeholders in our business. It is often seen that after selling their land and getting fat cash, a farmer does not know how to utilize the sum earned. It gets squandered. We provide guidance on this through small workshops and try to get them sustainable employment. This is the system realty businesses should focus on,” he adds.

Spreading roots
Established in 1967 as a family-run business, Ansal API today is among the top realty and infrastructure companies in India. It currently operates in business verticals ranging from integrated townships, condos, group housing, malls, shopping complexes, hotels, SEZs, IT parks and infrastructure & utility services.
Housing being a safe area, this sector accounts for 80 percent of the group’s total revenue. According to the Planning Commission, there still is a shortage of 25 million homes in India and it will take 15 to 20 years for this demand-supply gap to be filled. “Housing will remain our main focus. Also, along with the government, we are trying to decongest the metros and develop tier II and tier III cities. Our dream projects are based in Lucknow (4,000-acre project) and Noida (2,500-acre project). Our aim is to spruce up the lifestyle in these cities—from schools to medical facilities to multiplexes and playgrounds—basically create a composite life,” informs the veteran realtor.

The government factor
Ansal feels that the government should have a little more open approach towards the realty sector for it to see better growth in the future. “When it comes to rules and regulations, we have a set of age-old ones in place. If that doesn’t change, we will be left behind as the world progresses,” he says. Ansal also feels that new blood should be made part of the decision-making process. “The government has to take the initiative and private entrepreneurs should be inducted into thinktanks to give it a more practical outlook. It’s not a given that only public servants or IAS officers can come up with ideas. Also, monetary help should be offered to new innovations,” he opines.

Challenges faced
Providing homes to all citizens of a country like India is a daunting task. Many more initiatives are required from the government too, feels Ansal. At present, the government’s focus areas are agriculture, export and industry, while housing comes at the bottom of its list. “Realty today is the second-largest employment generator after agriculture. However, the growth of the sector has been hit due to archaic laws. There are not many funding options in the sector. Unless the government relaxes its norms, it will be very difficult to fill the demand-supply gap in the housing sector,” says Ansal.

The digital revolution
With the digital revolution, India has witnessed growth in many fields, including realty. Because of the digital revolution, there has been tremendous change in the way housing is looked at today, says Ansal. It has led to a phenomenal change in overall thinking. “Earlier, everybody wanted to find a job and migrate to a metropolis. Today, there are good opportunities in tier II and tier III cities too. People are outsourcing work to smaller centers. For example, as a company, we don’t want people to work in offices alone. We want them to work from home to save office space. These smaller cities now have more planned and organized townships. People don’t have to move to bigger cities for want of necessary amenities and infrastructure anymore. There, we provide them clean water, better electricity and good housing network. We have brought about better connectivity. With the country getting digitized, there has been a change in the way people function. Today, customers can book flats online. The changed overall climate is conducive for growth and should be made use of,” says Ansal.

Low-cost housing
Affordable housing, according to Ansal, is the need of the hour. Working on this, the group plans to construct 4,000 such houses in Rajasthan. These houses would cost between Rs.3 lakh and Rs.8 lakh. “It has been possible for us to come up with the low-cost housing plan in Rajasthan because the land there is cheap. The government should partner with private players to construct low-cost houses where land prices are high. Private players may not be able to make bumper profits but they will certainly reach breakeven point. It can be part of our CSR,” adds Ansal.

The realty mogul
“I have not achieved anything great in life,” says the man responsible for changing the skyline of Delhi and converting Connaught Place into a contemporary business hub in the 1970s.
“When we built the first high-rise building, Aakashdeep, there were a lot of apprehensions about it. When we built our first residential apartment, Ashadeep, initially it would take 15 days for us to sell a flat. Things have changes now because of the goodwill that we have created over the years,” says the realtor. “We had to convince the government a great deal when we built our first shopping mall. Same goes for multiplexes too,” he adds.
The only thing Ansal is proud of is his long-term perspective and the fair business he does. That’s what his advice is to future entrepreneurs too: have a long-term perspective, be honest with your staff, vendors and the customer.
The Stephenian, who shared his college bench with the likes of NK Singh and Mani Shankar Aiyar, is an early riser. He gets up at 6:30 every morning. A fitness freak, he works out for 45 minutes daily at the gym. By 10 am, he is in his office. And, after a day’s hard work, he starts for home at around 6:30 pm. He loves spending time with his family and doesn’t entertain work-related calls at home. His love for his family is more evident when you look at a painting hanging in his office—made by his granddaughter Anushka. Apart from his work, Ansal has three other passions in life—reading, travelling and golf. He loves reading non-fiction and self-help books and plays golf on weekends. He is a lover of bhajans, too. The Gayatri mantra is very close to his heart.
When you talk about what kept his four-decade career rolling, Ansal mentions his commitments and delivery. “Once I commit to something, I stick to it. Also, I’m very frank about my problems,” he says. He has his weaknesses too. Impatience is one of them. “I depend on my hunches more than practical things.”
Ansal, who has many feathers to his cap, counts changing the skyline of Delhi and the face of Connaught Place as his greatest achievements. The Uphaar tragedy, on the other hand, has been the greatest setback of his life and career. “The capital crunch and the Uphaar tragedy, followed by the demerger of the company, have hindered our growth,” he rues.
The realtor has fought all odds and promises to continue to do so in the coming years too. After all, there is a lot that needs to be done in ‘building lifestyles’—the tagline Ansal API goes to town with.

This is not some corporate branding but a new strategic move that will cost the Mahindra Group around Rs.120 crore over the next three years. It will render strength to Anand Mahindra’s federation of companies.

But, why “Rise” is the new Mahindra mantra? Anand Mahindra, Vice Chairman and Managing Director, Mahindra and Mahindra explains, “About 13 years ago we felt the need to define a core purpose for the group. A core purpose is important for every company but it becomes even more important for a group of companies to create alignment. The idea of having a core purpose intrigued me. It stems from a kind of hypothesis.”

Exemplifying how one can arrive at the core purpose of one’s company, Mahindra said, “What if you were working in a company and a competitor takes over it for the sole purpose of liquidation and competition? The competitor continues to pay everybody well. No one in the company has any monetary reason to regret the liquidation of the company. But what is it that you will still miss about the company before liquidation and about going to work every day? If you are able to figure this out, you are close to defining the core purpose of your company. In other words, what makes people go for work every day and transcends the aim of earning roti, kapda aur makan is your core purpose.”

It was 13 years back when the company’s objective was redefined and so started the drive of defining the core purpose of the company. “At the time of independence, the idea was to demonstrate that Indians were second to none. The idea worked well. It energized everybody and the results were for everybody to see. As time passed by, two things happened—we grew, India grew in stature and Indian companies grew and we became increasingly global as a corporation,” Mahindra reminisced.

But how was this relevant? Yes, Mahindra did have a purpose when he asked his office of strategy management to work on the core purpose of the company, which had a number of foreign expats feeling that lack of connect. “If I am Mr. Chi running the company’s Chinese operations, why would I get up every day and work to prove that the Indians were second to none? If we can be a company that engenders consumers and whose employees can shape up their destiny, we can have value,
position, trust and a viable business model,” Mahindra signs off.

©Entrepreneur October 2011

MD: When you talk to investors and consumers, do you sense a lurking suspicion about big business in the country right now?
AM: Definitely yes.

MD: Do you think that an evolution in corporate philosophy manifesting itself through a tagline and a brand campaign will go well? Are people willing to receive positive communication from big businesses? Would they still not be suspicious and say that they do not trust you as you are trying to look better than what you actually are?
AM: I have been in touch with the zeitgeist through Twitter or Facebook. It is a valid medium to get a flavor of what people think. There is an absolute cry for a change among people as they want to believe in somebody. That is raising the stakes. We are taking a risk of disappointing people and not walking the talk.

MD: My question focuses more on the timing of bringing about this change. What if you had brought this before people some six months before the 2G saga which is going on at present? Or six months after it getting over, assuming that public memory is short and people must have forgotten the worst. Do you think that the acceptance or rejection of the campaign would have been different based on the timing of Mahindra Rise?
AM: (That’s) Intriguing. I do not know if it would have been different. We were determined to do this program anyway. This program, internal work and campaign preparation have been in progress for more than
a year now.

MD: How do you measure the success of what you are trying to communicate? What will you, as an individual, choose to measure this with over the course of the next three to five years?
AM: About four-five years ago, I articulated a metric to check our customer centricity, which was equally a fuzzy concept. We used the well known Mathematical Programming System to convert it to a customer as promoter score (CAPS). I announced that if I was on a desert island and had the choice of getting only one metric, it would be the CAP score. If you have a high percentage of customers recommending you, your business will flourish sooner or later. Rajeev, our human resources Head, announced an employee as promoter score (EPS), which is a very specific metric.

We’ve been doing this for four years in the group measuring customer as promoter score. It is easily measurable and follows a very simple survey. The anonymous survey that asks employees whether they will recommend somebody else to join Mahindra. The question is the trend line. So, that is a hard metric. As our human resources head Rajeev said, we are going to get in these brand pillars of accepting lower limits and translating on ways to stretch your budget. That’s how we measure whether people are accepting our limits or playing safe. We’ve been measuring the index of innovation and driving positive change as qualitative. We’ve got a very hard-nosed set of metrics to be used.

MD: What does 10 X mean? Investors may be keen to know if this is some sort of minimum guaranteed bump up in the way the company has performed over the course of the years.
AM: Ten X is a state of mind. It could be 10 times revenues, 10 times profit, 10 times market share or even 10 times proven in quality. It is has to be taken according to what you want to set as your goal.

MD: Tomorrow if I buy a Scorpio or I join Mahindra & Mahindra as an employee, what will be the change in my life because of ‘Rise’ in your brand?
AM: A very strong brand manifesto has been created on this, which will be translated down to everybody. If you are a salesman for Scorpio or any other Mahindra vehicle, you and your team will be measured on this brand pillar. In Mahindra Rise, no limits would be accepted. One has to apply alternative thinking and innovative ways in getting the consumer understand the benefits of our vehicle. Passion has to be involved, essentially. Rise would also mean to judge whether the employees are driving a positive change. The motto would be to improve the quality of life for an individual buyer as well as commercial buyer. The entire number of people throughout M&M should keep repeating the motto of the company in every single thing they do. Once this happens, there will be an impact.

©Entrepreneur October 2011

The company, with its flagship programs of SIP Abacus and Brain Gym, is a subsidiary of a Malaysia-based company founded in 1993 by Kelvin Tham, who designed the courses to increase the mental ability of children with better attention, recall and so on. Other SIP Academy India programs— Global Art, MIKids phonics, AMAL and Orator English fluency program— were a far cry from what Victor was doing before he started SIP.

An IIM-A management graduate, he joined Godrej Soaps in the marketing division in 1994. After three years, he joined the retail arm of Standard Chartered Bank in Chennai. “Although it was a great learning experience, I didn’t necessarily agree with the working culture of such organizations that value numbers over people,” says Victor. He thus started a company similar to SIP with common friends in January 2002. But differences soon cropped up as Victor didn’t necessarily agree with the vision and values of his friends and decided to part ways. Not surprisingly, Victor’s family expected him to take up a job again. But that was not to be. For, his ears perked up when he heard one of his friend’s mother talk about SIP, Malaysia. “It seemed interesting and I took the plunge. It also looked reasonably easy to do,” smiles Victor. “If it didn’t work out, I could also go back to the corporate world.”

But, was it anything but easy? “It wasn’t. For one, we didn’t have the first-mover advantage,” he says. There were hardly any such classes for children other than a few, imparting computer courses or summer courses for theater, arts and dance. Victor had the tough task of creating demand for SIP’s course offerings, SIP Abacus and Brain Gym at that time. “It was concept selling at its best. I was sure that once I spoke to parents and stakeholders, they would warm up to the idea,” he reveals. With an investment of Rs.10 lakh, of which Rs.5 lakh was from his own savings and Rs.5 lakh was borrowed from a friend, Victor started the company. Marketing assistance was provided by the parent company in Malaysia. In August 2003, SIP Academy got its office in the
T Nagar area of Chennai on a rent of Rs.17,000 a month. Since the centers were franchisees, there was little investment needed for infrastructure. It was also the reason why the company broke even fairly quickly—in the first seven months.

The first three centers in Chennai opened in 2003, of which two continue to operate. The first outstation franchisee center was in Bengaluru, in September. It was slow in the beginning, until Victor was invited to Bengaluru for a center inauguration in 2003. After ads, the franchisee had to wait for just three hours. “Then came one parent who, it turned out, was related to the franchisee and was already sold on the idea,” laughs Victor.

There were other challenges, too. Capital, for instance. “But we were wise in conserving capital and had a very good finance person who knew how to make each rupee last longer,” he says. Financial crunch eased a little bit with Rs.10 lakh Citibank loan. The IIM-A degree held him in good stead, Victor feels. Then came overdrafts and banking channels offering loans without collateral.

“The biggest challenge was finding good area partners in the form of franchisees,” reminisces Victor. Then the added work of convincing a prospective franchisee on how it was a profitable venture. But as the existing franchisees started to make money, word of mouth became the most significant way of getting committed franchisees. In fact, it started with some parents turning teachers at the centers and then franchisees. The turnover for the first year of operations was Rs.1 crore and the company had 72 franchisees by March 2004.

Victor feels his biggest brand endorsements were children, who showed their skills and acumen in various competitions and got a lot of press coverage. “The media helped immensely with great responses to our press conferences in Hyderabad and Bengaluru, the two cities we were struggling to get traction,” he feels. With that, the demand for SIP classes grew, something that can be seen in the company’s turnover for 2004-05— Rs.1.74 crore.

Then Sri Lanka came calling. The Indian arm had been supporting the Sri Lankan operations in terms of training and resources, when the concerned person was moving out. Victor acquired 60 per cent of the organization in April, 2007. By the year end, it was a wholly-owned subsidiary. Currently running 22 centers in the southernmost country, Victor is also considering acquisitions in other countries but would rather talk about it when it does happen.

At SIP Academy India, he is also happy that the company’s work culture is exactly what he wanted it to be. “Words such as innovation don’t figure in our mission statement. It is more about building relationships, recognition, responsibility and continuous learning.” Nearly what most entrepreneurs live by.

©Entrepreneur October 2011

Family business background
“Coming from a business family, I have been exposed to it all my life,” says the 33 years old Founder and CEO, William Penn. Ranjan opted to be part of the family business—manufacturing stationery items—and did so for six months. In 2002, he launched his company William Penn.

The idea & opportunity
Learning from his family’s B2B business, Ranjan knew he wanted to explore the B2C market. “We realized there was no store for stationery as a specialty in India, so we decided to make an attempt at it,” he says. William Penn started its first outlet in Koramangala, Bengaluru, stocking everything from artists’ material, office supplies, specialty desktop products, etc. Barring five to 10 percent products that were manufactured, rest were sourced from vendors. “We noticed people had interest in writing instruments and sensed a possibility of having a specialty store,” he recalls. Not too long in the game, the firm’s focus went niche in 2004. The economic environment, too, was quite conducive to his plans. It was the beginning of economic prosperity in India which meant people had higher spending powers, were more aware and buying products that were ‘nice to have’, as he describes. “We also had a bit of luck,” he quips.

Early blots
Contrary to his perceptions, opening William Penn’s second outlet gave him a reality check. “We had no clue about the supply chain, never knew what customers wanted,” he mentions. Everything, from merchandising to software system, was a case of hit and miss. Going on, he made efforts to talk to people who knew these things.

A major challenge he faced as an entrepreneur was figuring out the right software required for inventory and billing systems. The firm initially used a Fox Pro-based system and went wrong. “It handled one store well, but couldn’t handle stock transfers across two stores,” explains Ranjan, who recalls spending six months to clean up the mess. Plus, organized retail was a nascent phenomenon which meant there was no authentic source of information. He had to speak to traditional retail shop owners or standalone modern format stores to understand how they tackled similar issues. “Every challenge is a learning for the future.”

Write choices
One of his best business decisions was spending time on the shop floor, taking constant feedback from customers and offering brands they desired. In 2004, the firm started with 10 brands, making it the only store stocking genuine, reliable writing instruments and accessories. Getting the first set of brands on shelves was a mammoth task. Import duties were 50-60 percent and manufacturers weren’t enthusiastic about India.

Order values weren’t large and that didn’t excite suppliers. Convincing suppliers meant a lot of cajoling, frequent visits abroad and presentations galore. Many times, this meant being rejected by manufacturers who were immediately put off by the thought of dealing with India, because it wasn’t a big enough market. Ranjan couldn’t risk bare shelves either. “Even if a single brand wasn’t there it was magnified. It meant our potential for sale was limited,” he explains. Determined, he approached stationery stores in Singapore and Malaysia which were ready for small orders. This meant paying import duties on retail prices but he took on the cost.

Concurrently, he didn’t have depth in each brand, and importing each took months. “We didn’t know what to order, we had to wait for all SKUs to sell before we could re-order,” he says. Lead times were long, and with no prior sales experience he didn’t know how to forecast demand. “20 percent products were sold, but we had to wait for the rest to be sold before we had a sizeable order to place.”

Life started to pick up. Import duties reduced to 30 percent of in-voice value, lessening barriers to import. End-customer costs were reduced. “This helped us stabilize. We also had a first mover advantage,” he says. With an influx of global business, the firm gained credibility. In FY6, William Penn began clocking in order values of about Rs.20,000-Rs.25,000 per day.

Filling a talent pool
“It was difficult to attract talent. We didn’t have a specific job description to pitch and were a team of seven only,” he says. The most logical approach was to poach staff. In due course he realized it wasn’t the best strategy as these employees weren’t trained and had little know-how on William Penn’s portfolio of brands. “Here we were selling brands, customers expected us to speak their language and know more,” he notes. Language was a problem; store-attendants weren’t well-versed with English.

Good insights for Ranjan again, because when he hired the next set of employees, English and basic customer care skills were a pre-requisite. This time he opted for staff with experience in organized retail stores. Unfortunately, they too needed thorough training. Who could do it better than an entrepreneur on the shop floor? One-hour training sessions every morning followed suit, which included discussing product categories, nuances of dealing with customers, standards of service and brand know-how. “I knew what we needed to do; so made this an interactive process with quizzes and gifts and lots of fun,” he says. However, in the enthusiasm to sell, attendants went a bit far. At one time, he had to make it clear that customers were told the truth. “You can’t say a pen is unbreakable, or won’t get scratched,” he explains.

Growth years
By the time William Penn had reached its third store, Ranjan had a better sense of running the business. “In India we were the only one buying writing instruments, so push and pull factors worked in our favor,” he says. Now that survival wasn’t a primary objective, Ranjan could devote his time to other factors that make a store successful. “Every entrepreneur needs to ensure that his bread and butter is secure, only then he has the freedom to look at more.” . With that in mind Ranjan and team approached professionals with experience in retail stores to include architects. “Initially we went wrong with our furniture so we shifted to a modular format made in factories and fitted at stores,” he recalls. With a blueprint in place, stores could easily be replicated now.

The market today
William Penn operates in a large, aspirational market with an eclectic canvas of customers ranging from politicians, lawyers, businessmen, celebrities, with an average age of 30 years, not leaving out the occasional teenager who wants to buy a Lamy for an exam. But, his customer base is still confined to evolved societies in A-class cities and metros.

Future fills
The company has 15 stores across India and three shop-in-shops in Hyderabad, Delhi and Bengaluru. It is slated to open two stores later this year in Cochin and Kolkata. “We aren’t running after a number, but will carefully choose the markets we address,” states Ranjan.

The company’s online store that launched two years ago, and was revamped six months back, is due for some serious attention by the CEO. Currently it handles about 100-150 transactions a month and goods are delivered free of cost on purchases of above Rs.1,000.

Learning with the flow
“Dealing with people has been a big learning, it’s easy to do a job but not as easy to get it done,” quips Ranjan. From a team of seven to over 200 people, at every level, Ranjan felt the need to ask his employees why they were excited about working at William Penn and their impact on business. The best ideas come from people on the floor is this entrepreneur’s belief. “The moment we stop listening to people there lays a danger of being irrelevant,” he says.

©Entrepreneur October 2011

Foundation years
“My first recollection of school was in Ranchi when I went to St. Xavier’s,” recalls the soft-spoken Murthy. The memories are vivid, for the first time Murthy, the 11-year old boy, was uprooted in the middle of a school year. His father had moved jobs to Kolkata. Not being entirely clear on how long he was going to be there, he suggested Murthy and his sister live with their grandparents in Bengaluru. The then sixth-grader joined Bishop Cottons where he spent the rest of his school days. He went on to do a year of Pre-University at MES College, but his mind was quite set on studying medicine. Murthy’s father however suggested he write the IIT JEE examination, which he did, after a year’s preparation. In 1980, he got into IIT Madras, his first achievement which Murthy owes completely to his mother’s support and encouragement. “The whole concept of a mother’s love is completely different, that’s when you appreciate it,” he comments. Personally, he had to choose between taking the seat or applying for medicine. Peer pressure took over, and he opted for mechanical engineering. “Many of my friends hadn’t got into IIT and thought I was nuts, evaluating whether to take it or not,” he quips.

Graduating years
The five years at IIT was Murthy’s first taste of freedom, away from the shelter of home, no compulsory attendance, afternoon siestas in the hostel and football. In fact he went on to represent his hostel in seven-eight games. “IIT Madras was a fascinating first semester because of the 250 students in our batch, probably 240 of them would have been class-toppers in school,” he says. “Suddenly after the first couple of tests, you realize that you’re not likely to be number one here.” At that time, he gave himself a tough choice—whether he wanted to struggle to the top or live life differently. Murthy chose the latter. He still hadn’t given up his dream for medicine and he applied for the top five medicine schools in the U.S., post IIT. While he sought admission to a few like South Western Medical School in Dallas, University of Virginia, they weren’t able to offer financial assistance, so he applied for related programs like biomedical engineering “I got admission at Harvard MIT for a MD PhD degree; but it was committing me to five-seven more years of studies post IIT,” he says.

Murthy dropped the seat because it didn’t have fellowship, instead wrote the CAT examination on his father’s advice and got admission at IIM-Ahmedabad in 1985. “But they don’t call it an MBA, that’s the worst part, it’s called PGDM,” he disapproves, largely because it cost him visa hassles during his visit to the U.S. many years later.

IIM-A was a different experience, it’s where he met Jaya (now his wife) and also because he appreciated subjects unlike in engineering. “I was able to work for a few months before IIM-A, at a British company based in Kolkata, McNeil and Mager,” he mentions. Murthy was put in charge of sales of special purpose valves at their Bengaluru office. He vividly remembers an incident where he spotted a mistake in specifications for an order placed by Hindustan Aeronautics Limited. “I pointed this to the Chief Engineer, a big guy who saw credibility in my argument once he knew I was from IIT,” he says. In the end, Murthy’s initiative had the firm cancel the order from their end.

“I really understood the value of customer service,” he states. Thanks to solid work experience in hand, Murthy won a scholarship as one of the toppers of his batch despite taking up tough courses like statistical methods and data analysis.

Sonata days
Murthy joined Sonata Software after IIM-A, because he wanted to work in a startup, since it wouldn’t straightjacket him into a role. He had a ‘grand time’ there for five years, despite a meagre monthly salary of Rs.1,500. “It was fantastic, I loved my experience and was doing whatever I wanted,” he says. This included everything from product management, to building and selling of software and he accredits this to his boss, a certain Mr. Ramaswamy, who is still the MD of Sonata Software. By the fourth year, Murthy realized that if he wanted to make it big in the IT industry, he’d have to play a role in a bigger IT industry than India. “In Sonata we competed with software products’ marketing division at Infosys, we used to pretty much beat them every time,” says Murthy. “Through this, I think, Nandan heard of me.”

Life and learning at Infosys
Infosys, in 1992, had advertised a requirement for a marketing manager overseas. “I told myself that this company really requires marketing help, I must talk to them,” he quips. When he met the co-founders Nandan Nilekani and Narayana Murthy, the chemistry was great, but at the end of the day, the latter wasn’t 100 percent sure if Phaneesh would be successful since he didn’t drink or eat meat! He finally joined Infosys nine months after he received an offer because Sonata didn’t want to relieve him, and instead promoted him soon after he resigned in April ’92. When he joined Infosys as marketing manager, revenues were less than Rs.9 crore. “It was a fantastic learning period, truly like an entrepreneurial opportunity,” he says. As the first guy to sell in U.S., the period was also critical because a year before, the IT giant had almost decided to close down. “Mr. Murthy had prevailed on everybody to make one last big ditch attempt and that was the gamble,” he says. The plan was to use one or two years of cash left and see what happened.

Needless to say, the learning for Murthy during this phase were plenty. In true pioneering spirit, he started hiring MBAs from Hindustan Lever, P&G and Lipton, because selling software was no different, he felt. “To me, it was just selling a relationship, the value proposition, dreams and aspirations to CIOs,” he says. “And that’s one of the reasons we did so well.” The hiring of MBAs in the IT industry started many trends in the sector. Thanks to a startup environment, Murthy was able to contribute differently and launched new services, including consulting as a division.

More importantly, going to NASDAQ was a unique experience. “The biggest takeaway from Infosys was that it was fun to be first in anything,” he states. Plus, Nilekani’s philosophy of strong delegation not only helped build a strong sales culture in the company, but also empowered Murthy to an extent where he was able to learn a lot. “He was the big picture man; Murthy was the complete opposite,” he mentions. “His ability to crib about a Rs.2,250 expense in your budget to what we can do to eliminate poverty in the world and span the entire spectrum in one sentence was phenomenal; his attention to detail is something anybody can learn from,” he tells us.

Unfortunately, in 2002, Murthy had to quit Infosys unceremoniously over a sexual harassment lawsuit. When the news broke, he was in Alaska but by the time he was back he had six job offers for CEO on his home mail box. “I thought I might as well start something on my own and launched Primentor to do consulting till I could raise some capital,” he says.

Entrepreneurial journey
Quintant was started in the end of 2002, with partners Tiger Ramesh, Kanth (Miryala) and Amit Sethi, as the iTOPS (Integrated Technology and Operations) company with Rs.140 crore in the first round of funding by GMR Group. The opportunity was clear because all IT firms were doing work on ‘Time & Material’ model. “I wanted to change the industry and to be a closer partner with the customer, and this meant I had to make their objectives my objectives,” he points. Of course, this was also Murthy’s chance to shape the values of his company, create a work force, practice customer intimacy and establish an innovative culture, in the way he wanted.

In eight months, Quintant was approached by iGate with an acquisition offer. “I did not want to sell, but realized I had to worry about my partner’s sentiments, who saw millions of dollars coming their way, and said I had to accept,” he says. The sweetener, of course, was that iGATE wanted Murthy as CEO. Murthy’s investors left the decision entirely to him.

iGate era
At iGATE, Murthy had 1,800 employees, none of whom he knew, unlike Sonata and Infosys where he had hired everybody. Plus, five CEOs had already quit in the last four years before him and they expected him to do the same. “Here I was a heading a company that was staffing-driven unlike Quintant, which was innovation driven; it took me some time to come to terms with iGate,” he recalls. Back then, revenue of the comparable company was about Rs.250crore-Rs.300 crore (without the sub-contracting work). GE had 45 percent of revenues and the day after Murthy joined the co-chairman indicated that they had put iGate on notice period. They were going to lose the business. “I sat with GE and got the contract renewed,” he says. Murthy stopped staffing, decided to do only offshore projects, which started the profitability curve. “We went from minus 20 percent to over 20 percent in over six years, revenues went up to Rs.1,287crore in 2010,” he notes. Plus he instituted a lot of best practices from his Infosys days at iGATE like software certifications, quality management, and the way to approach customers. “It took me two-three months to clean up iGATE,” he points out. This included developing a sound work culture. iGate, Murthy said, works on an adult-adult model unlike paternalistic tendencies at many other firms in the industry. It’s a no-brainer then why iGate has been rated as the best employer consistently over the last four years. “We make a lot of investment in employees’ leadership development and career planning,” he says. “The market was ripe for companies where employees would be more entrepreneurial, more empowered; we’ve done a lot of that,” he adds.

Murthy’s ideology on hiring has been thanks to Dr Sabu’s advice, (from his Sonata days) who told him once. “Ek cheez dekhna. Dum hai ki nahin? Dum hai tho kuch bhi kar saktha hai.” “I’ve always looked for people who are willing to take ownership, with drive and energy to take it forward,” he reiterates.

Phaneesh, Patni and posterity
In May 2011 iGate made news with its acquisition of Patni Computer Systems with an 83 percent majority stake which catapulted it into the billion dollar game, despite incurring a debt of around Rs.3,300 crore. “The industry structure was changing a little, we started to feel that innovation alone wasn’t enough, we needed a bit of scale,” he states. There had been speculation around iGate’s interest in Satyam too, but Murthy confirmed reasons for choosing Patni. “I figured our core strength and what would turn Satyam around weren’t matching,” he highlights. The newly-formed combined entity, iGate Patni, deems to bring scale with 26,000 employees, 360 clients, and diversification of verticals to insurance and healthcare, media and entertainment, retail and logistics, communication and utilities. “Strategically we’ve done some more interesting things, and have acquired Patni’s Product Engineering Solution also on the revenue side,” explains Murthy.

While iGate Patni has a go-to-market strategy of a combined entity, both are still listed as separate companies in the stock market. Reasons for the latter are a combination of financial resources and Indian regulatory norms. “Indian norms only allow companies to delist themselves on a reverse book building process which we have to do. It also requires another around Rs.1,000 crore which I don’t have,” he states.

And since the whole thesis of the acquisition is revenue synergy, gain a larger share of customer’s dollar, more verticals, and a bundle of services to client, it made sense to go to the market together. Murthy maintains that the acquisition will only hit full speed by 2013. This year, he says, is about stability and building a foundation to achieve superior growth in the future which includes retaining customers and employees. “By 2012, our joint go-to-market strategy will start yielding results,” he affirms.

Like most transactions, iGate’s buyout of Patni involved heavy axing of senior management, to include CFO Surjeet Singh and HR Head Steve Correra, because there was room only for one to run the combined entity, those from iGate. “The fundamental trait for any CFO is high degree of trust, so someone you’ve worked with is better,” he says.
The new executive committee has four people from Patni’s side who in Murthy’s opinion were doing a great job of holding things together. “They have a good set of complementary skills, experience, and have been high performers, so I hope they bring that here,” he says. More importantly they were willing to give Murthy the five-year commitment he needed.

“There was no great value with others as they had built empires of their own; it would’ve made it difficult for us to streamline processes and cost structures, he states.”

Axing also involved the CEO of Patni Jeya Kumar to be replaced by Murthy himself. So what does he see himself bringing to the table as the CEO? “I have been part of the industry for a long time now and know the nuances more,” he points out.

“Plus, I’ve been based in primary market for long. Since 80 percent of the business comes from North America, the clients know me.” The IT entrepreneur hopes to make the new entity a high margin, high hustle company, which is what iGate was, and the next two years will be a good indication if they have a viable model for growth and be able to make further acquisitions in future.

“You have to build a culture that accepts acquisitions.” Moving ahead with the same vigor when he started his entrepreneurial journey, Murthy says it’s important to have conviction in what you’re offering.
“Bet for success, don’t hedge for failure,” he signs off.

©Entrepreneur October 2011