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Valuation

Business Valuation Simplified

by on 18 March 2016in Karthik Srinivasan

In today’s ‘hungaama’ around value of a business, it is quite normal to get carried away between creating a long term sustainable value for a business as against ‘milking’ a quick opportunity of generating a high share price for promoters to make a windfall gain.  Needless to say the media attention on the latter plus the common man’s constant fascination for rags to riches stories, significantly contribute to the hype. (e.g. Flipkart, Snapdeal etc.).

Every start up organisation or entrepreneur must have its thinking clear around the long term objectives as well as the core purpose of the venture.  Profitability and growth are certainly the key foundations – without cash there is no show.  But that alone does not drive the true value of the business.

The eco system is larger than just profitability and growth.  True valuation of a business is driven by multiple factors

  • What is the differentiation provided to the customer, be it a product or a service
  • Quality of the offering
  • Price at which it is offered
  • Longevity viz., if I buy this product how long will this last  (most of the Indian homes will have Godrej steel cupboards which have seen a few generations and still in tip top condition)
  • Innovation

A sustained focus on the above will ensure generating a long term value for a business.

Business Plan

Design Thinking: An Introduction to the Uninitiated

by on 14 March 2016in Praveen Udupa

Suppose you have a severe stomach ache (God forbid), and you go see your doctor. You imagine you might have appendicitis and tell your doctor as such. If your doctor responds, “Oh dear! You might be right. Let’s not waste any time. The operation theatre is free right now. How about we put you down for an appendectomy immediately?” What would you think of this doctor? Obviously you wouldn’t think too highly of his skills as a doctor. You would expect the doctor to have the common sense to first diagnose the issue before venturing into a solution.

But when we come to solving everyday problems, I wonder why we check our common sense at the door. Look around you. There are plenty of examples of Band-Aid solutions. There is severe traffic congestion in a city intersection. Let’s build an over-pass flyover, only to decongest that intersection and promptly move the congestion over to the next intersection. My restaurant has severe over-crowding during peak hours. Implement a fancy Tablet based order management solution. Delhi reels under severe pollution. Let’s implement Odd-Even formula. In this age of technology, almost everyone instantly jumps to an IT based solution.

Design Thinking is an approach to problem solving and innovation. Design Thinking is a set of structured thinking steps that promises to lead us towards a workable, long lasting solution to the real problem that is faced by the organization. There are five key steps in Design Thinking:

Step 1: Empathize. It means get into your client’s shoes and feel the problem. Experience the inconvenience that the issue causes to the client. Only when you truly empathize with your client, you will gain the perspective required to solve the problem.Step 2: Define. Real problems are never apparent at the surface. What is visible at the surface is always the symptom. The actual problems are the root causes buried underneath a pile of effects. Uncover the root causes to the symptom and define the problem clearly and accurately.

Step 3: Ideate. The thing about solutions is that it needs to work for this specific client, for these specific stakeholders. There are normally never one-size-fits-all solutions. It is therefore essential to brainstorm many possible solutions and pick a few that seems reasonable on paper.

Step 4: Prototype. Build a prototype of the solution. This is an actually working solution that may not be complete in all respects. The intention is to study the impact of the solution in a study environment.

Step 5: Test. Implement the prototype in the study environment and verify if it successfully eliminates the symptom, and that it does not create any other problems of its own. If the prototype is successful, great. Otherwise, go back to Step 3 and iterate until the right solution is determined.

Design Thinking puts the customer in the center; products / services are conceived as a means to solve the customers’ problems. Every individual must become a Design Thinker. Every start-up must adopt Design Thinking with gusto.