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.

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