For ages, the local kirana stores have served main stream
for most families, rich or poor, across India. The success of these kirana
stores depended on their owners’ understanding of the customers and their
needs, in that locality. For most parts the owners did this understanding part
exceedingly well. Customers on their part were mostly loyal to the local kirana
store as they had grown to specific product brands which they would always find
in these stores. The strength for the stores came in the form of stable price
and predictable product quality coupled with the short term ‘faith’ loans they
provided to their loyal customers. These loans which were mostly interest free
and purely on faith played a major role in retaining the customers. The
drawbacks of these stores however were the extremely limited product range and
the sluggish response time to stock a newly launched product.
The Indian economic reforms which were brought out in the
early 90s set path a big change in terms of how the customer shopped. The free
flow of money meant customers were asking for newer and better products, fast.
Frequent product launch became a norm and the product variety grew exponentially.
Customers wanted to see and compare the products before they would buy.
This meant -
1)Customers were interested in newer and broader
range of products than a predictable small range.
2)Product innovation, product procurement and
product distribution (time to customer) had to be continuously and radically
3)Product availability increased and customer
retention became more important.
All these meant that the local Kirana stores no more had a
place in the locality or at least their share was reduced. To overcome these
new challenges, the Kirana stores had to set aside their standard operating
procedure and get into a more agile and innovative model to reach the customer.
1)They had to widen their supplier portfolio to
ensure every new product reached their shelves, quick.
2)Remodel their stores
3)And more importantly, use Innovative ways to attract
Stores which did not change mostly were either closed or saw
a revenue plateau. The interesting aspect is that some ‘legacy’ Kirana stores
continue/d to exist without any change,
1)Owing to the locality they were located
2)Or by serving those customers who were in a
hurry and did not have time to go around a bigger retail shop.
3)Or maybe the owner was satisfied with revenue
Having worked for more than a decade in IT outsourcing and
knowing the working of many IT services companies; each having varied degree of
adherence to standard IT processes, I tried to correlate the working of Kirana
stores with some IT services companies. I first separated the IT services companies
into the ones which have their own R&D and the ones which do not have their
own R&D. When I compared the IT services companies which do not have their
own R&D with a Kirana store, I found many similarities.
Note – I have only
listed a few similarities. They do not essentially mean one is same as the
other. Also these are generic observations and should not be taken in context
to any particular IT organization or a Kirana store.
1)IT services companies have a limited range of
services (mostly based on the technology).
2)They follow a standard process (software
development process) which helps them achieve a predictable model leading to a
3)They know their customers and most often suit
their processes to their customers. (For ex - change their finance calendar
based on customer recoverable dates).
4)If a customer demands a non-standard way to
execute a project or a technology that the IT servicing company does not deal
with, the IT companies most often have to make changes to their internal
process before they can serve the customer.
One point that stands high, in my opinion, which is not
necessarily derived in correlation to the Kirana store, is the innovation that
can happen, rather the lack of it, in companies which adhere to processes.
Having processes is good as they help give a predictable
output but they also hinder innovation, in my opinion. Generating new ideas or
finding newer ways to achieve objectives become extremely limited in a well-developed
process environment. The reason for this obstruction to creativity is most
often the process itself, because any well-established process will be tuned to
identify and highlight risks. The process senses any new idea as a deviation
and treats it as a risk i.e. essentially no new ideas or drastic changes can
occur. If there is an idea, most often it is limited in scope or is mostly
developed as an output for a specific requirement.
This, in my opinion, to a great extent explains why we
rarely see an innovative product from a pure IT services company. (Indian IT
servicing companies are forefront in following the quality processes often maintaining
the highest ratings).
If you ask me is it bad not to be innovative, then my
answer will be ‘No, it is not’. If you can make money servicing products, it’s still
a perfectly good business model. Haven’t many automobile repair centers thrived
only on oil changes and tire rotations? So will these pure IT services
If the question is how long can an IT services company look
at only services, then it is until the company hits the bell curve plateau. It
is important for companies to sense the plateau early and change gears to get
back on the growth line. The companies need to arrive at newer ways to increase
revenue. It might be by broadening service lines, tapping new markets or by
Do we need processes
The simple answer to this question is ‘Yes, processes are
required’. Remember innovation is not the end game. Putting the product to
production and bringing it to the market in time determines the success of the
product, and this requires stringent processes. Not having a set process in the
production stage leads to disastrous results. So it is extremely important to
have a set and predictable process in place.
It’s important to understand when are processes important
and when can they be detrimental. It is also important for companies to
understand that innovation is not a process and it’s not predictable. A company
without innovation plateaus soon, much like those Kirana stores which avoided