Thursday, September 10, 2009

Spectacular failures

We often hear about big successes. They get talked and discussed. They are highlighted in the media, and case-studies are made out of them.

But there are spectacular failures, that escape our attention, after the initial media frenzy is over. In my honest opinion, more learnings can be gleaned from "spectacular failures" than from successes.

Let me share one such example with you today.

Remember eBay? One of the finest companies in the online Buy-sell-auction type of business, it grew rapidly and under the leadership of a dynamic lady CEO, became quite popular and profitable.

And at the top of its success, it took a big bet. And failed in that.

When eBay was at the top of its game, it thought of a killer idea. Buyers and sellers, and the ease of communication between them, is the key to success of this site (business). The more convenient that will be, the more convinced everyone will be, to return for more action. And with each action (transaction actually), eBay gets its fair cut. That's the whole revenue model.

So the killer idea was to connect them using Skype, the famous and free web-service that allows you to make free calls over the internet to other people on Skype for as long as you like, to wherever you like. eBay spent billions of dollars (read full post) to buy Skype and integrate it into its entire user experience. Imagine - it all looks so neat. It had to work out. It had to create great value for everyone. It had to work!

It did not.

Here is a web news report that documented this. Read carefully!
"eBay has finally acknowledged what has been obvious to the rest of the world for at least three quarters: the Skype acquisition gamble has failed. Among the news today:  Skype CEO Niklas Zennstrom officially gone (he's been virtually gone for months). eBay will take $1.4 billion asset-impairment charge. Skype has missed the targets Zennstrom and his team set at the time of the sale. Thus, eBay will only pay $530 million of the potential $1.7 billion earnout (some small consolation).eBay shareholders can only hope that Skype housecleaning doesn't stop here. The Skype acquisition never made sense strategically, and one reason Skype has struggled, we think, is that it is just a distraction to eBay (which needs desperately to focus on its core commerce business). eBay should immediately sell what's left of Skype to Yahoo, Microsoft, or Google, all companies that offer portfolios of communications services that Skype might actually benefit from being a part of."
eBay was lucky to have sold off whatever was left of Skype at a hefty price to someone else (who saw a future in it!).

If you are wondering why such a big deal failed to deliver, I can offer several possible reasons
  1. Failure of CEO's vision - it was a bad decision from the start. Was taken under pressure to deliver big numbers really fast
  2. Problems in integration - the usual M&A nightmare is back!
  3. Misjudging the consumer's taste and needs - more of enthusiasm, less of a rigorous research
  4. Plain bad luck - the combination of factors that must make a big deal work, was not present. Too many moving parts, too little time, too much pressure.
So you see, those willing to make big bets, should be ready to face spectacular upsets. This is what big coporate bets are all about. And so it is with life!

In India also, a similar story seems to be unfolding. The IIMs have recently decided to outsource their entire CAT testing process to a foreign firm. Apparently, this foreign firm is supposed to be king of its trade. I was hugely surprised at this decision of the IIMs, a publicly funded brand, to pay $40 m* to a foreign firm. I am certain an Indian company could have done an equally good job. Maybe better.**

Anyway, so this deal was done. And we all expected a FIVE STAR product to roll out from the pristine stables of this giant foreign testing firm.

In the last few days, from the first exposure that we have had to the working style of this company, confidence has been the casualty. Two reasons -
  1. The demo of the online testing process posted on the official site of the IIM-CAT, is so pathetic in quality that it left me wondering about a lot of things. The online registration process also threw up several limitations.
  2. The training video put up by the IIMs and this company on YouTube is not well-researched - it even lacks a proper Indian accent! So you are going to conduct a test for 2 lac+ Indian students, and process-train them with videos that do not even have Indian accents? Funny. (Check this -http://www.youtube.com/watch?v=TQzvSq15RLQ)
So what next IIMs?  GDs and interviews with American accents?***

And here comes the absolute stunner - this foreign firm (in a tacit acceptance of its capability levels?) has already sub-contracted the humongous task of tying up with Engineering and Management institutes across India (for hiring their computer labs for conducting the IIMCAT) to a local Indian IT company. You know something? Sources tell me that this Indian IT company has little experience in such large scale logistical, testing exercises. And they are expected to manage the entire online IIM-CAT experience. You almost feel that a huge beta-version is being tested across hapless Indian students :)
 
What does all this prove? It probably shows the recklessness with which this deal was done. If I were an IIM Director, I would be really tough on the firm I am paying millions of dollars of taxpayers' money.

Let's accept it. No one can manager and deliver education testing services in India better than Indians can. Three cheers!


* $40 million is what the local newspapers reported, the IIMs will pay this foreign firm for this adventure
** yes, yes, I understand. All reasons will be proffered. You know, we want to make the IIM-CAT international, and offer it as a competitor to the hallowed GMAT. And all that! So why not let an Indian IT company use this grand opportunity? Are you trying to tell us that Indian IT firms (coupled with expertise from testing firms) are NOT capable of this? So what are the IIMs and IITs doing in the first place?
*** this is not a small matter. You get paid tens of millions of dollars, and this is the video you produce? Imagine a student from a small town wathcing the video. He/she will be scared stiff hearing the accent itself.

~

23 comments:

munish said...

Dear Sir,
You have made our task simpler.
You underline the learnings in your blog and we directly grab them.
Very rightly said, it is a spectacular failure that brings more learnings than a splendid success.
It takes a "Great Depression" to settle for a Keynes to propound one of the most revered theories in economics.
We need to understand that we must learn from our mistakes and should not repeat them. Mistakes disappoint but they do pave the path to success.

Sir, i could not find the meaning of the word ' proferred' used in asterisked lines at the end of your blog. Kindly acquaint me with the same.

Yours sincerely
Munish Sharma
Fall'09, Indore.

Proton Meenketan Patel said...

Dear Sir,
Thank you, for sharing such a great practical learning of corporate spectacular failure.
Sir, can we say? without good CASED approach - (Criteria, Alternatives, Sources, Evaluation, Decision and Documentation), more focus on technology(not customer centric) are harmful for good project plannings.
Regards,
Proton Meenketan Patel
Spring-09

Nu said...

Hmm ! Failures teach you more than Successes. True..Because failures guide you about the possibly wrong steps. A mix of Success and Failures would be a great lesson for the start-ups,already settled orgs and students as well !

I think yes, it could have been someone from our very country to roll out the CAT exam...

joshi said...

Hello Sir,

Thank you for your valuable information. I knew that eBay had acquired "skype" in Septtember, 2005. But, I didn't knew that at last they will be going to sell it off due to the several reasons.

furthermore, we get to know one of the "failure of a corporate company".
Well, sir, these are the information that i know about eBay:
1] Founder:- Pierre Omidyar
2] Started in 3 September, San Jose, California
3] The first item sold on eBay was "Broken Laser Pointer" worth $14.83
4] eBay is available in more than 30 country.
5] In India the call centers which provides huge services to the 'eBay.com' and 'eBay.co.uk' and may be other countries as well, are "IBM-DAKSH" and "MOTIF INFOTECH PVT. LTD(Ahmedabad)."
6] During the time of recession, means before 7 to b months, on eBay one of the house was sold worth approx. '$2 to $3(Don't remember the exact figure)".
7] Though eBay have many trcking tools to catch the fake customers and fake sellers, they have not achieved the 100% success, yet, to catch all of them.
8] eBay belives in one of the most influence stratergy: "Basically People are good."

Regards,
Keyur Joshi

Keyur said...

Hello Sir,

One of the valuable information that i forgot about eBay is:

1] eBay when came to India, tookover the website "baazi.com" and started its operations.

Manas said...

As someone involved in the testing company 100percentile.com, I agree that Indian companies would have been a better bet for running the exam. ;-)

I can only HOPE they chose a foreign company for reasons of security - so that the nature of the question paper would remain confidential.

Sandeep Manudhane said...

Thanks Munish, Meenketan, Keyur for reading and commenting.

Manas - let's wait and watch!

Nu - thanks for reading. Nice profile you have.

Chetan said...

Respected Sir,

Nice to read this!

Yes Sir,if the leader goes wrong,than the organisation must be ready with failure and a very big price for that failure. "Get ready for unexpected",everything not always go your way this is my learning from this article.


Thank You
Proton Chetan Choparia
Fall 09
Indore

ankit sharma said...

Respected Sir,

You gave a great insight to this loop hole of CAT going online.
Sir my personal opinion about CAT going online is that as nowadays anything on internet is not safe "you have hackers in every street" so,this format might not work for IIM's.

Thank You
Proton Ankit Sharma
Fall 09
Indore

vidit said...

Good Evening Sir,
Three Points for this blog
1. It's wrong on the government part to outsource huge funds of common public to foreign company.

2. A lot of income will be earned buy that company and profits will be enjoyed by them.

3. Indian firms can also do it in a much better way as we are also advancing day by day.

Regards
Vidit Shah
Indore Campus

vaudevillian said...

The Ascent appeared to me quite artificial.

There is no need to show faces of people in video. No sync between what they are saying and whats there
in the form being filled.

Prometric is name in testing softwares. I guess Lots of there product might be made in india(OutSourced)
not sure though

vaudevillian said...

Sorry for getting of the track with
subject of post

I just saw this video with amazing Idea regarding motivation.

Wanted to share it with you
http://www.ted.com/talks/dan_pink_on_motivation.html

Bhupendra

Sandeep Manudhane said...

Dear Bhupendra, yes the "accent" is artificial and contrived.

Thanks for the video! We actually use TED.com material continuously at PROTON for classroom learning.

Dear Vidit and Ankit, thanks for commenting.

Surendra Mourya said...

What you have mentioned is exactly right in every era especially in era of globalization in which everything is changing so rapidly that even a single bad decision can collapse a behemoth. We have recently seen the global economic meltdown in which many big organizations fell like hell. In this time we have to take the decision, as you mentioned, after well research.
The example of the online CAT was really spectacular. How such a big brand like IIMs, which are the symbol of management in India, can spent so much money recklessly for only going global, which is not going to help the student. We Indians are better than anyone else in our country because we know better our consumers. And instead of encouraging an Indian IT company we are giving such a big project to a foreign company which has developed pathetic software for such a big exam.

proton said...

Thank you very much Sir for your post on eBay and CAT going online.

I completely agree with your point that there are more learnings from "spectacular failures" than success.

I somewhere heared that to become a good leader you must face a failure.

What are your views on this, Sir?

Sandeep Manudhane said...

Dear Surendra, thanks for reading and commenting.

Thanks "proton" for your feedback. I agree with your view on failures.

aditya said...

Dear sir,
Thanks a lot for sharing your valuable and unmatchable knowledge with us.You said it very rightly that failures teaches a lot than success.Even the failures of prac- cats teaches and motivates a lot to do well next time.
keep sharing your valuable thoughts sir.Thanks a lot:)

PROTON Meenakshi Soni said...

Dear Sir,

There are two kinds of failures: those who thought and never did, and those who did and never thought...

IIMs decision seems to be latter one.

To add to the same - The problem of BRAIN-DRAIN suits best in this case. In case of Brain Drain, few year back Indians tend to leave India for better opportunity in other countries but today they have decided to R-2-I i.e. return to India, because the economic opportunities are better back home.

A survey authored by Vivek Wadhwa with the Kauffman Foundation found that the returnees to India are in their 30s and highly educated, the majority have Master's and Ph D's.

Indians didn't trust India but at the end of the day an Indian came back to India...

What are your views on the same Sir?

Sandeep Manudhane said...

Hi Aditya - glad that it helped you!

Proton Meenakshi - you raised a sensitive point! Indians in droves have returned, largely and only because of hostile work environment back in US (and Europe). There is no particular affinity they have as far as physically working in India is concerned. This is partly due to the "online" nature of work nowadays, and partly because of inertia. Many Indians have full families (2 generations or more) abroad so the incentive to return is further reduced. But yes, the large scale R2I is a very interesting phenomenon happening.

bhavya said...

I really liked the facts mentioned by you regarding the IIMs decision to outsource their entire CAT testing process.

Gaurav Taranekar said...

Respected Sir,
The decision taken by the governing body of IIM is really pathetic, in the world IT Indians are leading everywhere(we can see the ad of Intel with Ajay Bhatt as a role model).
I think some of the Indians still believe that "angrez" and "gora" are better than us.
I am not a racist but this happens.

Pr. Gaurav Taranekar

Anurag Khandekar said...

Respected Sir,
The article is explaining the intricacies of the blunders created by top global firms and then too we are cynical about our own firms, Sir i agree with you that the online CAT module was to be handed over to an Indian firm rather than an American firm which is not aware of the demographies of India. I would like to thank you sir for highlighting the specific portion so that we can easily get the concise learnings.

Sandeep Manudhane said...

Gaurav, Bhavya, Anurag - thanks for commenting!