DEC. 22, 2002
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Two Slab
Income Tax

The Kelkar panel, constituted to reform India's direct taxes, has reopened the tax debate-and at the individual level as well. Should we simplify the thicket of codifications that pass as tax laws? And why should tax calculations be so complicated as to necessitate tax lawyers? Should we move to a two-slab system? A report.


Dying Differentiation
This festive season has seen discount upon discount. Prices that seemed too low to go any lower have fallen further. Brands that prided themselves in price consistency (among the consistent values that constitute a brand) have abandoned their resistance. Whatever happened to good old brand differentiation?

More Net Specials
Business Today,  November 24, 2002
 
 
NOTES FROM THE THROUGH
The Perils Of Moving First
Being there first may not be the hot thing it seems to be. Try being a second mover.

I push the companies I work with to innovate, and be among the first few in the field of their choosing. I'm certainly not as old as people who tend to simplify life into rhyming proverbs -- nevertheless, I find myself saying "The trend is the end".

My reasoning is that the top three or four companies in any sector tend to take 80-90 per cent of the value in that field and those that come after will have to fight for scraps. So it's economically worthwhile to be among that first handful of companies in a new field. Look at any business, from toothpaste to television -- it's the top four or five companies that make most of the profits.

Left Angle
Going By The Book
Wide Angle
Notes From The Trough
Leadership Secrets

Now when journalists see a few companies in a field starting up, they call it a "trend". Nothing wrong so far. But if we were to take heed from this "trend" and start a business in that space, it may not be the sensible thing to do. Because, if something is declared a trend, it means the future leaders in the space are likely to be at work already -- and the sector's probably dead for anyone else. Hence, "the trend is the end".

Counter-intuitive it might seem -- but an interesting premise nonetheless. And food for thought for all of us who want to start yet another call centre or bioinformatics business. To me, those sectors went 'dead' for newcomers years ago.

Lately, though, I've been thinking of a caveat to this belief. I call it the first mover disadvantage. I'm often asked about the success of an Amazon or a Yahoo or Google or eBay. Or even a Microsoft or Starbucks. The truth is that none of these companies were the first in their field.

Amazon wasn't the first online bookstore, nor was Yahoo! the first portal. They learnt from others and out-did them. Microsoft actually has a clear strategy on this: it is never the pioneer in any field. But it is among the handful that takes off from the starting line soon after the pioneer, following relentlessly, and building on the learnings from others' shortcomings. There is a common insider's view that any version 1 or 2 of a Microsoft product is a piece of junk -- and the first version worth buying is 3.0. They get it right the third time.

It's like a long-distance runner starting off with the gun, being part of the initial pack, but pacing himself till he can see the front-runner's strategy. You can then decide when to put in that extra 'kick' and overtake others to the rope. It's hard to do that if you're last off the blocks though.

What can we learn from this? I know of no way to ensure that one is second in a field, but there is a deep lesson here to keep an eye on every single company, anywhere in the world, who is doing something in your sector.

One way to do it is through googling -- but be warned that company websites are not always up to date, or even accurate. Read the press releases in the niche news sites relating to your business. But don't trust press releases too much either.

Talk to your potential customers as soon as possible. Get from them a sense of who else is out there selling to them. Gather all the on-the-field intelligence you can.

Microsoft used to do something very smart earlier -- I'm not sure they continue to do so now when they're on the legal backfoot: they would call up a marketing, or technical person from a software company with a competing product. Tell him they planned to offer him a great job, interview him thoroughly, suck him dry of any information that could make a difference, and then say they'd get back to him. At which point, for some reason, the job wouldn't happen.

But, soon, the Microsoft press release machine would announce a next rev of their product with those very features. When the product would actually be released was another question -- I've seen five years go by between their 'vapourware' announcement and actual product release in one case -- but that market was won in the meanwhile.

The ethics of this tactic are debatable, and you have to make your own choices. But there is little debate that it is often better to be a well-informed second than a brave but clueless first in any field.


Mahesh Murthy heads Passionfund. He earlier ran Channel [V] and helped launch Yahoo! and Amazon.com at a Silicon Valley-based firm. You can reach him at Mahesh@passionfund.com.

 

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