Business growth plan for small ventures in software product and service space

Abstract

The contributions of new and small firms to the economic well-being of regions and countries are undeniable. In low-income countries Small Ventures account for 60 % of the countries GDP and 70 % of the total employment. On the other hand, studies conducted suggest that close to 66% of new ventures fail in the first 5 yrs of inception. This project tries to explore the various strategies adopted by new ventures which have succeeded and the reasons for succeeding. Extensive Literature review of reports on New Venture Strategies helped us to zero in on a cluster of strategies usually adopted by new ventures, from the report Eight Archetypes of competitive strategies for Entry. We chose to apply this model on the GIS industry in India as this is considered to be a fast emerging domain where many start up ventures are finding it hard to survive. Analysing the industry attractiveness of GIS industry in India (using Porters five forces and Value chain analysis) suggested a Low level of attractiveness of the industry. A sample of around 10 GIS companies operating in India were shortlisted and their strategies identified using the Eight Archetype Strategy model. The study threw up a few interesting results. There were two strategies that seem to be succeeding in the industry.? Controlled Growth through Specialized Products and Narrow Focus Strategy? Aggressive Growth through Generic Products and Broad Focus Strategy. The Strategies of unsuccessful companies were usually a raw mixture of the above strategies. An usual case of the Stuck in the Middle approach. A linkage diagram of the core activities performed in each of the strategies seems to reinforce the original strategy, while a mixed strategy falls apart in the linkage diagram due to contradictions in the core activities. The companies adopting the Controlled Growth- Specialized Products- Narrow Focus Strategy seemed to be more successful than the latter. But then, the key parameters (Intellectual property, Investment, Entry barriers, Expertise, Quality of customer Service) were also higher for the former. The Value chain analysis resulted in identification of 3 broad phases in the evolution of a GIS firm.1. Map Data Collection and digitization2. Develop application for the GIS data.3. Forward integrate to develop devices for the map and applications. All the successful companies had at least a fair amount of presence across the 3 phases. Having identified the successful strategies and the dynamics within the industry, we chose a Not-so-Successful firm (Spatial Data Private Ltd) and studied what could be done to turn around the company. The Strategy of the firm was Controlled Growth through Generic Products and Broad Focus Strategy . Performing the SWOT analysis of the firm enabled us to make recommendations to the modification of the firm s Corporate Level Strategy and Business Level Strategy. The To be strategy recommend was Aggressive Growth through Generic Products and Broad Focus Strategy . The reason being the company did not have any specialty product or domain capability and it would be a very big change to move into the Controlled Growth, Specialized Product strategy. Also the firm was Cash strapped. One of the key changes in the To be strategy was to focus on different domains to improve its end-to-end capability. We then explored the different domain that were profitable and emerging and defined the Business Level strategy of the company. This was done using inputs from macro-economic situation in the domains and also competitor analysis. A Few of the domains that we have recommended to start with are:? Personal navigation devices- The value proposition in this domain were convenience of navigation within the city and other point of interest location details.(Example ATM near a location)? Mobile segment (both low end as well as high end) - The value proposition in this segment was similar to that of the personal navigation segment. But it also has an SMS and MMS based services where individuals can get maps of the place they are interested and find out points of interests. Many more VA Scan be build upon this model in the future.? Real estate- For this segment, an online web portal was recommended where the buyers and sellers can interact and help in quicken the process of either renting out an asset or selling/buying assets. The differentiation in this segment was that with accurate maps, the buyer and seller have better visual images of the locality and hence reduces the need of physical visits. This reduces both time and money to the users. Agriculture, Suburban and rural areas, Engineering and construction could become viable in the next 3-4years.The underlying philosophy was that, though the customer profiles in these segments look very different, there are synergies in the back end operations and they are fast growing markets waiting to be tapped. For the above segments, a deployment plan was made which includes the advertisement, sales and distribution. The demand and revenue projections showed a positive cash flow from the 2nd year of operation, even with very competitive pricing in the 1st year compared to competitors. Assuming a rate of return of 15%, the NPV for the business for a three year window is showing a positive NPV $ 7,219,351, which looks attractive.