8 thought provokers – Part (2/3): Arena & Operations

As we continue our surge to identify the right mix of success factors, there is always a common thread that stitches them all. It is not to do with just the ability to dream but also the willingness to do and determination to complete what has been started.

This all started with the blog I wrote in response to a question – What is the a Brilliantly New Idea that no one has thought?

A deeper research into this question led to identifying the 8 thought provokers that eventually lead to first blog in this three part series. To learn about the first blog (and for continuity sake), please go to my earlier blog named – Study and Plan forward: 8 Thought provokers.

With this 2nd blog, I am going to explore the next three Thought Provokers:

1. Whats my arena?
2. What kind of operations are required? What can I NOT do?

Whats my arena?

The arena defines what kind of market competition you are entering. This is one of the most important and complex activity but is most overlooked. Reason being impatience and urgency to jump. This impatience is very much visible in mushrooming online businesses – as its easy to start a website. Any business that is easy to start by you, CAN BE EASILY STARTED BY SOMEBODY ELSE.

And this should be a significant red flag for you.

Arena definition can be done very easily –

• What does it take to start this business? In our MBA employment skills example, one would require first to be an MBA or a significantly accomplished professional who can guide the MBAs. An MBA for all the investment s/he has done in their career will not pay attention to what somebody who they think is inferior in education tells them. This is harsh but real.
• What are other players in the market already? In the world of internet, this should be fairly easier to find out. With good keyword searches, you should be able to nail down this. For our example of services to MBAs for employment skills, we see that there are numerous examples but hardly any proper services that come in the results.

So Research on competition is very important. I find the various Landscape diagrams published by leading VCs and consulting firms as very useful for any research.

What kind of operations are required? What can I NOT do?

It is always fascinating to look at success of others and mimic it. This is typical human behaviour and there is no surprise. After all, the iconic iPod was a ultra improved version of all the music players out there in the market.

Years 2013 to 2016 saw a significant spike in number of e-commerce and internet based startups in India.

Check out the list of E-commerce sites in March 2012 compiled by Amrita Kriplani.

From this list more grew and many or most are closed now. One of the key reasons why many/most of these startups failed is because they underestimated the operations involved in shipping goods from one place to another and then return in case it was not accepted by the customer. Here is a quote from A. T. Kearney report on E-Commerce in India:

“India currently doesn’t make it into  the top ten of A.T. Kearney’s eCommerce Index because its infrastructure  is underdeveloped, and there are still cultural reservations that keep  it from leaping ahead.  India is a big market (1.2 Bn people) but  infrastructure—technology, finance, logistics—still needs a lot of work,  and only 8% of the population uses the Internet.

The proliferation of Indian IT industry was primarily attributed to simplicity of the local operations. On the other side manufacturing and e-commerce are complex in operations.

I use a simple formula to understand the complexity of a particular operation. Based on number of touch points, the complexity of processes can be determined.

COMPLEXITY OF OPERATION = 2^n

where n is the number of touch points

Any operation with Complexity > 64 is a highly complex one and one must think on how to simplify it or outsource it to the right people.

In case of IT industry, any project has following touch points:

1.  Getting requirements
2. Development of software
3. Testing of Software
4. Deployment

Complexity of this is 2^4 = 16. So this is simple and is easy to start business.

The complexity for E-Commerce operation is below:

1. Getting customer to the website
2. Give them the right product that they need
3. Make them to do the payment
4. Identify the right logistics partner to dispatch the product
5. Dispatch the product
6. Get the product delivered to the right customer and confirm delivery
7. Reconcile payments with the payment partner and with the logistics partner

Complexity of this is 2 ^ 7 = 128. So this is highly complex operation.

I have found this as a good rule of thumb to help and identify the nature of operations. Complexity when combined with arena helps to be a good combination to determine competitive advantage.

I shall conclude this blog here. In next blog we shall explore all the open questions remaining for this series.

Thanks for reading!