MartechBrain | E16 – Rajesh’s Entrepreneurial Learnings – Part 2

In this episode, Ajay Row speaks to Rajesh Jain about his entrepreneurial journey and learnings.

Transcript:

Ajay(Host): ladies gentlemen, continuing a conversation with Rajesh Jain who is probably the most extraordinary entrepreneur in many ways you know. For that matter in our times I think he’s got a lot to teach, we’ve got a lot to learn from it what’s more interesting that he’s also willing to learn from us. So on that note Rajesh, welcome to the second edition of our conversation.

Rajesh(Guest): Thank you very much Ajay.

Ajay:  Okay, the first conversation we spent a lot of time in understanding Rajesh Jain and who you are . Today I want to spend a little time on your thinking about business. The first topic for conversation and I turned to a personal experience you know I left ITC to start my first company. I’d been with ITC for five years and I set up my first company and a year later as broken debt unimaginable amounts of debt because I didn’t understand the importance of cash. I thought companies run on P&L and my P&L was very healthy. I did not realize that companies actually ran on cash and I was reading an article which you wrote about cash and I’d really like you to talk about because I think a lot of entrepreneurs out there think that we raise easy funding then we’re done, we’re good to go,  the next stop is we sell for a billion dollars and all wind up in the Bahamas  but I think let’s spend a little time on cash in business.

Rajesh: Yeah, so I think the biggest killer of any business is really cash flow and not everyone sort of understands it. It’s not the revenues that you make not new business that you get it’s the money which comes into the bank this money that you save after you’ve paid all costs, I think which is very important. So cash flows  and it’s not something which actually is not something which entrepreneurs intuitively understand.  See entrepreneurs most of them are all about new ideas, they are all about creating great new products and till the gravy train of  investments is there you know everyone loves to spend it. I think there are two things which are very critical the first one is that a business needs a sustainable model by which it is making money. I think it’s very  critical. We see money is not revenue, revenue comes when businesses pay you for services that you’re rendering which brings me to the second part. The second part is that you actually have to collect that money, that money has to come into the bank and that really creates the cash flow that you have as a business because if you don’t have the money in the bank how are you going to meet payroll, how are we going to pay your vendors? Everything comes to a grinding halt very quickly. So there are two ways to bridge deficits  or to meet cash flow. One is of course you can raise capital from friends and family, from venture capital etc., the second model which I have followed in my life is you’ve got to become profitable. Profits really become the way by which you’ll never run out of cash ,. They give you the foundation for investing in new ideas going forward and in 25 years as an entrepreneur I’ve never raised external capital and it’s not been a decision that I will never raise capital. I have talked with many investors through these years, it’s just that for various reasons deals never happened but in every one of the deals Ajay, I had the luxury of defining my terms whether it’s valuation or any other terms because I was profitable. I had money in the bank. I could afford at any point of time to walk away. If I had cash flow challenges then I would become desperate and take whatever deal was on the table. I think that’s how important cash flow is I think for entrepreneurs another way to think about cash flow is the faster you get to being cash flow positive, the greater is the control that you will have on your own company and on your own destiny. I think that’s very important.

Ajay: So one part of cash flow I think is an attitude and you know one part of it is  ensuring that we stay applied about any one thing it’s got to be cash flow but the other part I think is to create a flywheel and you want to just spend a minute explaining flywheels and maybe use one of your companies as an example.

Rajesh: Yes, so I think what you have to do is for any business it’s basically this idea of growth which is very critical. How do you constantly ensure that you’re growing faster than or revenues are growing faster, costs are under control and so on, that’s sort of the flywheel effect that you need to do linked with one product after another product. I’ll give you an example going back to our  India world days  and at that time when I started India world I had very limited capital and what we did was we started doing websites for other companies. It took about almost a few months before we got our first significant order but while we had our own portals we also started developing websites for Indian corporates and that was very helpful in ensuring that the cash kept coming in because the model at that time on the internet some sites had subscription, we also had subscription in the early days a small subscription fee but we realized that will not work. Also the model was advertising as everyone realized in the first couple of years but for advertising you needed time, you needed traffic on the site and so the websites helped us get the money in and then the flywheel that we created was when we would go and pitch for websites to come corporates. We’d say that look we also have the ability to get traffic for you so if you can spend some money advertising on our site so you spend about 80% on your site development and 20% on  advertising on our website and  the website actually was almost 100% margin  for me and the more the advertising happened, the more sites that we could create on our own for niche areas and we created a total of 13 such niche sites from cricket news to finance to entertainment and so on. So that sort of helped again drive the flywheel. So we could do more as we did more corporate websites we could generate more traffic for them and so on. So I think this ability to drive growth from one business to another business, one product to another product, I think becomes very  important for  businesses. I mean the classic example that is talked about is how amazon uses its subscribers or the customers on its website, gets them into prime which gets more merchants and which gets them the whole flywheel going. I think every business has to think about what can become their profits flywheel because then the dependency on external investors becomes limited. Entrepreneurs themselves have greater control on their destiny and this really becomes the foundation for building a proficon.

Ajay: Absolutely. I’m going to come back to proficon in a moment but  now I want to go back to a question which you wriggled out of the last time around which is grit. I think a lot of entrepreneurial grit is about ensuring you move that shoulder against the flywheel until it starts spinning, isn’t it? You just spend a minute on grit and what you’ve learned because you’ve seen failure, you’ve seen success, you know success is not guaranteed in fact failure is guaranteed and success is what you wriggle away from. So can you just spend a minute on great because that I think will be one of your defining characteristics in individual.

Rajesh: Very good point  Ajay. So  recently for one of my blog posts I said , let me list down all the failures in my life and I listed all of them now and the  number came to 30. I said so I have succeeded three times and I failed 30 times in an entrepreneurial career which is about 28 years so that’s one failure a year and failure of course is never easy. Every time you have to shut something down, it’s hard it hurts, it hurts inside and on the last time I had to do it  was a venture which I started on the political front Naidisha. We had about almost 35-40 people we were trying to create a movement for prosperity and that didn’t work so early 2019  I had to let everyone go. I said we are shutting it down  and  it’s not worked and we had great dreams but that’s not working. Grit I think for me is the ability to persevere, the ability to never give up. It takes time to recover after every failure but that is not the end of the world. A lot of people sometimes I mean many people have asked me how would you know if you were to look back at your life what would you do differently, what are regrets you have and I say that look you’ve got to look ahead you’ve got to in a way live life forward  and you can only do that if you’re basically mental model is that I’m not you have to recognize failure because until you shut the door on a failure you are not going to open new doors. I think if I look back at my life it was that the a lot of the failures, I took much longer than I should have to shut the door on those failures.  Well it’s never easy when you’re working on it you’ve given your passion, your everything into building that thing out and then you realize it’s not it’s not working.  I was just listing out some of the things I’ve started in the last six to seven months. I’ve started almost 10 different new ideas.  Now I know a lot of them are going to fail and it’s going to hurt because each one of them there is some effort you know which goes into building these out but that’s part of the process. I think if you think about this as a continuum that only through experimentation only through trying out different ideas are you going to hit upon those few ones which are going to work and internally you have to say that look if I fail it’s the idea which has failed yes I made mistakes and I have to accept those mistakes but it’s not I am not a failure. Don’t worry about what other people will  call you, what other people will say. There’s a lot of luck of course involved in success and failure. I mean when I look back at India world in those four and a half five years that we ran India world there are 100 times when we should have failed. Every time there was some element here there some luck, some order that we got I mean which saved us or which helped us grow. Success is not sort of was not predestined  for us so it’s on both sides. I mean as an entrepreneur you can’t think of yourself as just because I’ve succeeded a couple of times that I can never fail  and also at the same time even if you keep failing, never give up. I think have that internal sense of perseverance,  hard work obviously is important, some element of luck is important, some element of smarts is important. All of these factors come together and in the same time when success comes never let success go to your head also. I think that’s very  important and this is a statement which again my wife said the day after the India went deal. So we had sold the company and we woke up the next morning, there was on the front pages of almost all of the newspapers and  I thought I was gloating, looking at my face and looking at the big headlines on the front pages I’ve never been there of course and then she said to me he said if you keep thinking about this you will never do anything significant again in your life. This is over this is the past. You cannot let this change, you be the way we are, you have to get back to work and now you have to think ahead what you’re going to do next and that like I said you know it’s the people around you again help define you, help sort of ground you  as long as you’re willing to listen to them. I could have reacted by saying that look you know  such a big deal you don’t understand what I’ve done but I said you know she’s absolutely  right and that is where again ego, humility all of it sort of come together in your nature, in the nature of an individual to help  define who you are and then you start looking forward. So a longest answer I think but a lot of these are elements which really go into I think the mindset that people or entrepreneurs can have. I think which will increase their chances  of success going forward.

Ajay: I’m going to switch tracks a little now  and move more into  you know stuff which will help people in the entrepreneurial journey I’m hoping and let’s talk a little bit about how Rajesh Jain makes decisions.  So there’s your dollar deficit  rule, there’s lots of these rules which you’ve got there so let’s just talk a bit about them and how do you know what’s good versus what’s great what comes in the way how do you think about decisions how do you make decisions maybe if you give us a couple of examples, there could be distant examples or if there could be trivial examples like which should I room you stay in but let’s just spend some time understanding how you think about things.

Rajesh: Yeah, so  I think the way we have to look at decisions, that’s a great question today is which decisions are very  important and which decisions cannot be undone. You know there’s a nice framework which I came across recently from Shane parish where he called the called these as irreversible and consequential decisions. I didn’t have this these two words as defining but I always used to think of this. So in revert these are the decisions where you should be spending the maxim amount of time and even there can you break that up into smaller sub decisions.

Ajay: Sorry Rajesh to interrupt you but can you just spend a minute talking about Shane Parish because I think he’s an incredibly important figure for people to know.

Rajesh: Shane Parish runs this I think it’s called the knowledge project Farnam street blog and it’s a treasure house of wisdom that is there on how to learn, how to make decisions. He had a course recently a decision by design and his basic point is that decision good decision making is a skill that anyone can learn. So there are some  core ideas in the discipline which is aggregated from the best and he’s put that together and I think it’s that that like we discussed earlier there’s a lot of good wisdom in the world if we are willing to say that we don’t know everything and even as we grow older  there’s a lot to learn from other people.

Ajay: That’s our plug pushing, now moving back to Rajesh which is how did Rajesh Jain make decisions. So let’s talk a little bit about  you know  I’m using the example for a blog but maybe you can give us another example about your kid and the hotel room in the US, why don’t we spend a minute on that so irreversible consequential.

Rajesh: One first principle by the way is which I always use is, is there someone else who needs to make that decision? I think it’s very important. So you need to also decide  whether you are the  person to make that you know someone else needs to make the decision especially in a corporate environment. It’s what I call the monkey problem that you know you are you’re in a cabin every person who walks into your cabin has a monkey on their back, monkey is a problem and their goal is to leave the monkey in your cabin and walk away and if you don’t send the monkey back with them, you’re going to be in a room full of monkeys cabin full of monkeys.

Ajay: That’s lovely, so basically you’re saying allow the right person to make the decision first.

Rajesh: So I’ve always tried to delegate to people and let them make the decisions because only then has accountability come. Another thing which I learned is what I call that delta dollar decision rule so again this is something which I’ve evolved. Many times we sweat about small decisions , so oh should I buy this thing or not should I buy this book or not  should I switch hotel room should I stay in and so on and I you know one day I sort of just decided I said look decisions which are goanna cost less than a hundred dollars , the answer should be yes. Everyone can decide their threshold ,  because if you hundred dollars isn’t going to make a difference for  most of us you know  so it’s whenever buying a book, a book is 500 rupees  and this hit me i’ll tell you where the small story where it hit me. Recently I was recently as of course a long time ago  I was taking a flight in the US and  my previous connection had come early so I walked up to a check-in counter and I said that you know there’s a flight departing in one hour can I get on that flight rather than wait another four hours for the next flight and   the person at the counter she said  yes and it’s goanna cost you seventy nine dollars for making the change and  I started thinking for myself I said oh you know what 80 dollars well maybe I should I  should just spend three hours a here rather than you know we are all that mindset you know I’ve already paid for the ticket why should I pay 80 more for the day and then I said and I thought about my own hundred dollar delta. I said there’s a hundred dollars I’m goanna be in new york three hours earlier I can do so much more there I’m goanna be sitting at an airport on a on a seat for the next three hours, I’m goanna say yes so I had to make a decision very quickly because the time was running out we have to go through security and get to the gate and so on and the baggage also had to be moved  and that’s how these things come up. So 100 dollars a night for example will get you a much better room in a hotel and  that’s how memories are  developed. You know you’re not sitting in a crammed place you get a little more space  in your room where you can work and so on you want to spend 10-12 hours even you may be sleeping for a lot of that time and books that you buy   you know decisions that you make on which flight to take and so on. I was not always like this I used to always I was a cheapskate for a long time in my life the cheapest deal etc. and then I realized it’s just not worth it you know because for people like us, I think what’s very important is we need the contiguous time and space to think and that’s how good decisions come. So if you create some of these principles in your life I think this helps. Another way what I do in decision is that I think the biggest asset for making better decisions is we need time to think, you know we need contiguous time where we are not interrupted by WhatsApp and emails, I am not on in general not on social media. I have a very basic LinkedIn and twitter presence which I’ve just started recently. I have a cheap phone you know 15 000 rupee phone so  my phone doesn’t do too many things  because for me the treasure that is there is one two hours to think without getting distracted with other things. Even in my company I get very few phone calls many times even if I get phone calls unless it’s from a person whom I absolutely want to talk to I will let the phone ring. I’ll call that person back when I want to call them up rather than let them interrupt my flow of thought because a lot of our, what are we very good at I think in any company, the founder or the entrepreneur or the CEO needs that that time and space to think through the future, to think through the challenges which are there. The immediate things are other people who can take care of those things. Our nature is that we want to get involved in everything and I’m not a very micro person and I did that in my company 13 years ago I brought in professional management because otherwise I don’t like day-to-day management and I’m not very good at that  that and but that meant giving up power. Well I had someone else who had to make the decisions. I was not, I may have ownership but I don’t have I’m not CEO anymore. So delegation I think some of these tricks of making decisions I think also doing a post-mortem on when things go wrong I think it’s very important. So did I let my emotion come in the way, did I not have adequate information and did I deliberately choose to ignore certain types of information that I got, advice that I got when making a decision, I think all of these things become very important. So I think the key point is for all of us the good news is as Shane parish puts it, decision making is something we can keep getting better at and that I think is a skill which if the earlier people learn I think the better it will serve them in life because we’ll just make fewer bad decisions.

Ajay: Rajesh, a very part advice was not to have a room full of monkeys  and in that process you’re basically asking someone has to take the decision  and very often you may disagree and commit as it were, can you just talk a bit about that.

Rajesh: Very good point. So this I learned from a colleague at netcore who joined SEO and became our CEO Girish and he had this phrase which he had got when he was working at Intel, disagree and commit. Especially it applies to people at the top. Many times you’re in a position where you can disagree but you can’t do anything about it but as a founder as an entrepreneur if let’s say I disagree with my CEO,  I can always force it force things in my way I can say hey you know what I’m the boss, I own this company you’re going to do it my way but you do that once and you are going to undermine the authority of the person running the company. Others in the company will realize there are two power centers and very soon there’ll be conflict all over the place. My approach and I’ve followed this for the last 13 years in net core since we’ve had a series of CEOS then even if I don’t agree with say some of the decisions which are there I will hold them to myself, I will not say it publicly. I will voice my disagreement privately and then if the CEO still believes it’s the  decision I will disagree but I will commit to that decision. So even in a meeting if there are five people seven people in a meeting if there are one or two who don’t agree it is not that you disagree and then you say that look I don’t agree with the decision and I’m going to oppose it oppose the execution of it. Disagree but if the group makes a call then everyone needs to commit to making that decision a success. So you it’s not that you don’t voice your disagreement, you voice your disagreement if you cannot persuade the others, you disagree and commit.

Ajay: Rajesh, that’s been tremendous reason we just have a few minutes left and I’d like to spend those few minutes on the future how do you see, you’ve been in Martech and related  fields now for over 20-25 years,  ever since you got and got back from the us and you’ve been in various forms of this. How do you see the future over the next five ten years playing out. If you’re a young entrepreneur or you’re to advise a young entrepreneur what would you say you do like remember the movie the graduate the chapter takes Dustin Hoffman inside and is plastics, so what’s the equivalent of plastics today?

Rajesh: So, I  think there are two parts to the answer. I think one is on the b2c side I think there is plenty of growth which is happening across all industries. I think the key point to notice in in countries like India, incomes are going to go up. So in the next decade if you look at a 10-year horizon, even if we grow at 7 in dollar terms incomes are going to double from 2000 per capita to 4 000 per capita. Now almost 1500 of those are probably going to get spent on  consumption related activities. So whether it’s education, whether it’s health, whether it’s better homes, all kinds of things, better leisure travel and that’s really the significant opportunity because you take $1500 a year multiplied by a billion, 1.3 billion people, it’s two trillion dollars of spending that is there. So I think from the b2c side India is a great opportunity long term but I think also there people have to see how to do the companies.  I think it’s there’s one model which is of course there is that you raise a lot of money and then you keep spending it, I am not a subscriber to that theory. I think there are ways by which one can build businesses  where you can get the unit economics  early on and it’s possible to work on those models even on the b2c side. So there’s a lot of opportunity on the b2c side because there are newer and newer areas which will come up, newer and newer interests that people are going to have, opportunities, the world is never short of opportunities it’s entrepreneurs basically identify those gaps and they’re always going to be gaps. The world which I am in is on the b2b side so from a business side and I think there the biggest opportunity I see is how marketing is going to get transformed. As Drucker had put it a business really has two primary functions innovation and marketing and marketing is never going to go away and but marketing is going to change and how is it going to change. First is that the number of channels available for interaction between a business and the customer are exploding , so it’s omni-channel so it’s not multi-channel what customers want this omni channel which means the seamlessness of experience across multiple channels. So I could buy something online I could go in and return into a store please recognize me and update the appropriate profiles that you have. If I’m a best customer when I walk into the store, I should have a fantastic experience. So with omni channel also comes personalization. I think very  important. We as customers are going to want better recommendations because we are giving brands so much of our data, every click that we make every action that we are doing on the app is resulting in data. It’s like ants leaving those pheromones the trails for other ants to follow. We are leaving these digital pheromones  for ants, for  the brands that are there but most brands don’t know what to do with that so brands who can do that well and there’s a huge opportunity out there personalization. Then comes this whole thing around machine learning that this is the golden age of AI in terms of the availability of data, availability of machine learning models that are there where machines can process huge quantum of data and see patterns which we humans cannot. Who are your best customers, how do you identify them, how do you create awesome experiences for them how do you get them to recommend you to their friends and family. A lot of these opportunities start opening up. I think also there’s still a lot of friction in the way business is done or we as customer, consumer have to interact with brands can there be more what we call single click actions. So chat bots for example or just voice, I want a ticket booked  Mumbai to Delhi ideally on indigo going tomorrow morning and returning take a flight after eight o’clock. It’s what you would tell your assistant, you can’t type that today into a search box and get the outcomes I mean you still have the same arcane methods of searching as you probably had 10 years ago, how can these things change? So there’s a lot of opportunity I think and I think the real big opportunity on the business side is really in the interaction between a brand and its customer, while a lot of energies and monies have been focused on the world of acquisition, on the world of ad tech I believe that over time there will be shifts to the world of martech which is about retention, it’s about engagement, it’s about loyalty, it’s about  how do I take my best customers give them great experiences, get my best customers to do more referrals, to make them influencers because a lot of this is now possible in ways which was earlier not possible. We can share good experiences that we have with 100 other people. I bought this great table from Ikea, if tomorrow a friend of mine asks me I’ll recommend it to him I don’t I ilea doesn’t even know that  I’ve helped sell probably five tables for Ikea. If only they knew if only they could have added a field in the sign up form on their website which says who told you about this table they’d know that hey there’s this Rajesh Jain who’s recommended maybe four five other people. So there’s a lot of unknowns which are there  are friction which is there and that’s I think where the  space for entrepreneurs to really look at over the next five to ten years and I think the final point there is that I think Indian entrepreneurs should think global when they begin. The mistake which we made I think when I look back  net core we should have probably thought about expanding outside of India much earlier than when we woke up a few years ago because today your competition is global through SAS you know software as a service. It does not matter where the company is it’s not just work from home it is also delivered from anywhere. It’s buy from anywhere. No one knows no one cares about whether your  office is next door or whether it’s in in eastern Europe or in the US. So the mindset that companies entrepreneurs will need to come up with saying that look my competition can be global so I also need to build with keeping the best in class mind globally and work on reaching customers globally. So I think it’s  fascinating because  opportunities I think are multiplying in the world  as digitization happens, I think the past seven months have compressed probably four five years of digitization into  maybe half a year  and I think entrepreneurs if they think long term and if they think about what is it that they can do to imagine the future? I think one thing is a lot of times we create for the next few months you know , six months, 12 months and he has entrepreneurs you got to look probably two or three years ahead. It’s you know when I started India world  the inspiration  came from   one of the books I read at that time in my old business plan I sort of outlined in that book which was Competing for the Future and there’s a beautiful paragraph in there where the authors say that the future is basically a it’s a competition , so it’s different entrepreneurs different CEOS having different visions for the future and the one who wins is who’s whose vision really becomes a reality. So we are competing for the future in that sense we are the future vision so it’s very important to have a vision, it’s very important to imagine how the world will be in two three years since it may not be easy but you’ve got to have some idea of what you’re doing. I do that whether it’s in the tech space or whether it’s in the political space where I think about I said what will India be like in 2022, 2023, what are the changes which will be there and I’m creating for that world and all the new things which I learn, how does it alter my vision for tomorrow’s world. So I think if we can do that I think there’s unlimited opportunities  which can really open up for entrepreneurs.

Ajay: Many thanks Rajesh. That’s we know I must say in the last one hour I’ve learned a hell of a lot and I do hope that the people and I hope lots of people watch this will learn as much as I have done. I think it’s been invaluable thank you so much it’s been a real privilege and an enormous pleasure. let’s hope we can do it again soon.

Rajesh: Ajay I thank you very much for turning the tables on me. You did a lot of homework in reading up all that I’ve written. Thank you very  much. I deeply appreciate, the idea came from you I wasn’t sure how it would work. I’ve never been interviewed like this by someone and great thank you for having put in the effort and wonderful questions thank you very much.