JULY 4, 2004
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Q&A: Jim Spohrer
One-time venture capital man and currently Director, Services Research, IBM Almaden Research Lab, Jim Spohrer is betting big on the future of 'services sciences'. And while at it, he's also busy working with anthropologists and other social scientists who look quite out of place in a company of geeks. So what exactly is the man—and IBM's lab—up to?


NBIC Ambitions
NBIC? Well, Nanotech, Biotech, Infotech and Cognitive Sciences. They could pack quite some power, together.

More Net Specials
Business Today,  June 20, 2004
 
 
BT SPECIAL
Cool Companies
Businesses, big and small, with a twist that makes them oh-so happening. the first ever BT listing of India's coolest companies.

What's cool and what's not? All through May, a team of writers and editors from Business Today wrestled with this question, meeting with companies, consultants, analysts, venture capitalists, and the unusually well-informed busy bodies that hang around corporate circles in India. Armed with nothing but a few rules of thumb-the company has to be 'with it'; it needs to be either doing something cool or going about an existing task in a cool way; and the cool-factor needs to be scalable-the team tossed up (and out) names. It came back with a dozen companies that were as varied as they were cool. Here, in no particular order, are the cool 12.

Go Ahead, Just Call Me Sindbad
MOCHA
COFFEE-AND-MORE BAR
FOUNDED: 2001
TURNOVER: Rs 9.6 CRORE

Hungover on Casablanca? Well, founders Riyaaz Amlani (left) and Kiran Salaskar won't mind that

In 2001, Riyaaz Amlani and Kiran Salaskar had a vision straight out of Arabian nights: a medieval Quaveh Khanneh (coffee house) from Turkey, Morocco, or Arabia where people gathered to partake Quaveh (coffee), Sheeshah (Hookah to Indians), and gossip. And in a surreal twist they imagined such a place in downtown Mumbai. The result was Mocha, and it did start out in downtown Mumbai (on 500 square feet of space), although it has since expanded to two more outlets in Mumbai and one more in Delhi with talk of Bangalore and Pune. With its assorted menu of authentic coffees, wines, smokes, desserts, and world cuisine, Mocha isn't a coffee bar of the kind that has mushroomed across the country. "We did not want a cut-and-paste Starbucks model," says Amlani. "We went into the genesis of the coffee shop and found that people are looking for what we have come to call 'the twenty-minute vacation', "explains Salaskar. Film, travel, and dog clubs are just some of the things that are meant to give patrons that 20-min fix. As is an experimental menu that even plans to feature combos such as chai and bhajjiyas (tea and spiced fritters) during the Monsoon.

Behind the obvious passion of two foodies-that's what the Amlani-Salaskar duo is-is a 'bootstrap' model that should find favour with hard-nosed finance pros. Mocha has always been cash-flow positive, and all its expansions are funded through internal accruals-one loan of Rs 25 lakh from a nationalised bank has been all the external financial assistance this start-up has availed. And even as they plan a research and warehousing unit, a central kitchen, and a roasting unit, Amlani and Salaskar have not lost sight of the numbers. Desserts contribute the most revenues (coffee does only 8 per cent) and each outlet enjoys gross margins of around 22 per cent. "It is not really about coffee," confesses Amlani. Then, who said coffee was what people wanted on a 20-minute vacation?

Marketing 101, Operations 101, Finance 101,
And The Art Of Making A Summer Blockbuster

VARMA CORP—THE FACTORY
FILM STUDIO
FOUNDED: 2003
TURNOVER: Rs 27 CRORE

Would Toyota Approve? It should; the Varma Production System rocks

Here are some of the words you would never associate with Bollywood (Mumbai's motion pic industry), right? Cost control. Assembly-line production. Inventory. Brand building. The 4 Ps of marketing. Wrong. Meet Varma Corp, a company that has actually chosen to go back to business basics in a procedure-challenged industry. The company derives its name from its founder, Bollywood ace Ram Gopal Varma, a director who cranks out films faster than people can watch them at a facility he calls 'The Factory'. "A film is about selling," he says. "You have hoardings that are basically commercials; promos that are TV ads; and the product is the film itself; why should it be any different from selling Coke?" Maybe it's the content, this writer offers tentatively. "Yes, once in a while the content matters," responds Varma in all seriousness. "That's what I am here for; at any given point in time I see potential in several ideas that I do not have time to execute; so, I simply look for suitable talent and hand it over." In its eight months of existence, The Factory has produced three films with eight more on the floor. It is an assembly line, and a financially viable one at that. "Every film of mine recovers its cost, so we always break even," says Varma. "Some show moderate net profits and then, of course, there are the straightforward hits." The model has its share of critics. The audience will soon OD on the Varma brand, they chorus. "That is a bit like saying the Coke brand is diluted every time it is advertised," laughs Varma.

In the motion pic business, as in any other business, access to finance is critical. A few years ago, a clutch of NRI (non resident Indian) investors approached Varma with an offer to fund a corporatised, studio-model of filmmaking. Today, the investors run K Sera Sera, a company that finances The Factory's projects, and Varma is stretching the corporate model for all it is worth. One of his tenets: films can do without stars. "I positioned Vivek Oberoi (a then relatively unknown quantity who is today one of Bollywood's biggest stars) as big as any star in the commercials (hoardings in Varmaspeak) for Company (a film about the Mumbai underworld) and when it was released, he actually was as big as any star," gloats Varma. Another tenet: the producer needs to control distribution so that "the communication goes down to the last leg just as it does in a multinational company". "I have to have control over the publicity," he insists. All this is so simple that Varma is surprised no one has thought of it before. "I am shocked it hasn't been implemented before." Well, its time has come.

There's No Success Like Mechanical Success
QUEST
ENGINEERING CONSULTANCY
FOUNDED: 1997
TURNOVER: Rs 95 CRORE

Seen him before? Like Quest, CEO Ajit Prabhu keeps a low profile

Very few people outside the rarefied realm of the engineering cognoscenti are likely to have heard of Bangalore-based Quest. Still, you'd encounter Quest-if you were to look for it, that is-in the most improbable places: inside gas turbines made by GE and under the hoods of gm or Ford cars. Chances are, one component or another in the gut of the machine has been designed by Quest. The company is also one of the few remaining in the country that recognise the merits of a degree in mechanical engineering. Quest may design decidedly uncool things such as inlet and exhaust systems for turbines, the innards of industrial oxidisers, compressor-castings, aerospace gear-boxes, and printer components, but there can be no arguing the fact that it has brought engineering talent to the fore. "We are a successful product design firm," says CEO and co-founder Ajit Prabhu simply. "Our clients rely on us for developing world class products in a cost-effective fashion, which we do with India's engineering talent."

That's something some of India's software biggies-think Satyam, Infosys, TCS, Wipro-can stake claim to but Prabhu points out that "for them it is a peripheral activity". He has more to say about quest's product-orientation as opposed to its Indian rivals' services one and the company's standing as one of the few six-sigma engineering solution providers in the world. Much of Quest's mechanical engineering expertise can be attributed to its recruiting policy-forget the large cities, the company mops up whatever relevant talent can be found in towns such as Hubli, Shimoga (both in Karnataka), and Pollachi (in Tamil Nadu). That could explain why, apart from GE, GM, and Ford, United Technologies, Danaher, NAL, and HAL source component designs from Quest. The result? Over the eight years of its existence, Quest's revenues have grown to Rs 95 crore, and workforce to 550. And eight months ago Venture Capital firm Carlyle Group invested $6 million (Rs 27 crore) in it. That's telling.

My PC Or Yours?
XENITIS GROUP—AMAR COMPUTERS
MAKER OF RS 15,000 PCs
FOUNDED: 2001
TURNOVER: Rs 23 CRORE

Box, office success? Well, you can put it that way, at least in West Bengal

Even in a category where prices head south in the blink of an eye, a pc that sells for Rs 15,000 (including a 15" colour monitor, speakers, and a CD-ROM drive) is that rare thing, a mix of adequate benefits offered at a price attractive enough to make a difference. Popular estimates, including one put forth by this magazine a few months ago, suggest that PCs will really become popular when their price breaks the Rs 10,000-barrier. Amar PC- Bengali for 'my PC'-is getting there. "We knew that demand would go through the roof if computers could be made available at the price of TVs," says Tathagata Dutta, one of the founders of the Xenitis Group. Dutta and Shantanu Ghosh, the other founder, were both channel managers, the first at Godrej Pacific, and the second at IBM, in an earlier life. Realising that there was money in computer components sourced from Taiwan and other South East Asian countries, the duo founded Xenitis Group in 2001. Business was good, but the Linux revolution set them thinking about the economic viability of bundling the free operating system, and the hardware components they sourced into one compellingly priced bundle. The result? Amar PC, launched on January 21, 2004.

Since then, Xenitis has sold some 5,000 PCs, on the strength of which it closed 2003-04 with revenues of Rs 23.17 crore. Projections for 2004-05 are even more rosy: 25,000 PCs and a turnover of Rs 50-75 crore. To cope with demand, Xenitis is expanding the size of its assembling facility at Chinsurah near Kolkata from 2,000 square feet to 12,000 square feet. The expansion will fuel the company's march into West Bengal, Jharkhand, and Orissa. Then, after arriving at a name resonant enough for the national market-Amar, feels Dutta, is much too provincial-and riding a Rs 25-crore advertising budget, Xenitis plans to go national with its offering. Will Dutta and Ghosh break the Rs 10,000-barrier? Watch this space.

The Great Indian Animated Story
TOONZ ANIMATION
ANIMATION
FOUNDED: 1999
TURNOVER: Rs 18 CRORE

India's Shrek? Not quite, but Tenali's getting there

The story of Indian animation is replete with companies serving as offshore production sweatshops for Western studios. That is, if you leave out the tale of Thiruvananthapuram-based Toonz Animation, which has gone ahead and produced local content with a series on Tenali Raman, a part-historical, part-mythological court jester and wise man rolled into one. What's more, the series premiered on Cartoon Network Asia. "We believe that we have set the right example for the industry to follow. Along with taking on outsourced projects, Indian studios should also tap their inherent strengths to become original animation film producers," says P. Jayakumar, CEO, Toonz Animation. In effect, the company, convinced that it could not become a globally known animation studio without creating its own properties, allocated precious resources to developing original projects, often at the cost of having to say no to high-revenue yielding outsourced work.

The 'content' strategy has had an adventitious benefit: it has attracted expat talent in droves. Among them is Atul Rao, a Los Angeles-based writer and director and a second-generation Indian American who was drawn to Toonz because of his own interest in exploring the story of Hanuman, the monkey god who features in the Ramayana. Convinced that crossover themes can work, Rao, now the Creative Director of Toonz, is blending Indian characters with Western production values. Well, if Crouching Tiger... worked its magic on Western audiences there is no reason why an animated rendering of the story of Hanuman cannot.

God Is Just A Print Away
BARTRONICS
IDENTIFICATION TECHNOLOGIES
FOUNDED: 1989
TURNOVER: Rs 12.5 CRORE

Divine ID? God may know you, but this biometric device could help you access him better

One company saw an opportunity in the serpentine queues, repeated security failures, and not infrequent stampedes at India's plethora of holy spots. And it found a way to apply biometrics to manage crowds and address issues related to security. The technology itself may not be all that cool, but Hyderabad-based Bartronics India's use of it definitely is. India's #1 automatic identification and data collection (AIDC) company has implemented biometric solutions at Tirupati, Vaishno Devi, and Amarnath. Pilgrims pass through at least 12 fingerprint identification stations before they reach the main shrine; at each the print is tallied with the one taken at the base station (ergo, no pilgrim can join a queue unless his identity has been established at the base station). Emboldened by its success, Bartronics now wants to implement a biometric solution in Mecca.

Bartronics has been around since 1989, but it is only with the growing popularity of biometrics- essentially identifying a person by getting a machine to match body parts such as the retina or iris, or thumb prints-and RFID (Radio Frequency Identification and this involves getting devices called 'readers' to, er, read radio signals emitted by tags), that it is finding its place in the sun. The company has provided solutions to Tata Steel, hp, ABB, Dr Reddy's Laboratories, A.V. Birla Group, ITC, and ibm but it is temple thing that propels it into the realm of the cool. Sudhir Rao, the company's Managing Director, is already looking at the next big thing after biometrics and RFID, revenues of Rs 75-100 crore, and a global presence. Will things work out for Bartronics? Well, the company has the closest thing to a hotline to God.

Let Your Fingers Do The Gaming
INDIA GAMES
GAMES
FOUNDED: 2000
TURNOVER: Rs 10-15 CRORE

Thumb happy? Well, Vishal Gondal would sure like more of the world to be so

It seems somewhat apt that a boy who won the National Computer Programme Solving Contest when he was 13 has grown into a young man whose company has bagged the mobile gaming rights to the newest disaster blockbuster The Day After Tomorrow. Now 27, Vishal Gondal-he says he has "gone through all eras of computing from dos 2.0 onwards"-runs Indiagames, a company that boasts some 60 international telcos, including familiar names such as AT&T, SingTel, and Vodafone, as its customers. Gondal's first company, an interactive games creator that spawned Indiagames, dates back to 1998. Among the first people to visit its office was a team from a multinational i-bank that offered to find him some funding. "I told them I did not need a loan," remembers Gondal. "Then, they told me how I needed to structure my business and promised not to charge an engagement fee." Bankers from a multinat arriving on the doorstep of a 22-year-old's company with the promise of funding-it doesn't get any cooler than this!

Today, Indiagames has pretty much emerged the first port of call for anyone seeking to source games from India and is one of the world's best-known mobile games creators (it is yet to get there in terms of games for consoles or PCs). And it got there by displaying some characteristic initiative and chutzpah. "When Nokia was planning to launch its first camera phone, we got a prototype and developed 11 games for it," says Gondal. "When the phone was launched, we were the only company with ready games for operators. We signed up 20 global operators straightaway." Last year, Indiagames bagged the worldwide mobile content rights (for games, ringtones, wallpapers, and images) for Spiderman from Marvel Comics and Activision and has reportedly sold over 500,000 copies of the game. It has since acquired rights to The Predator and Buffy The Vampire Slayer. Big deal? In the world of mobile gaming, yes.

The ABC of Healthcare
CARE HOSPITAL
HEALTHCARE
FOUNDED: 1997
TURNOVER: Rs 85 CRORE

Looks hi-tech, doesn't it? That Care Hospital is, but it is, but it is also fairly low cost

Corporate hospitals, the perception in India goes, are expensive. To date, this has largely proved an accurate assessment. However, much like organised retail that presents a low-cost alternative (and one that comes with better service) to that of the unorganised variety, corporate hospitals hold the promise of high quality and low cost healthcare. Hyderabad-based Care Hospital, founded by Dr B. Soma Raju and a few other doctors, is delivering just that. It isn't charity but indigenisation and cost control that are helping it do so.

For instance, the hospital uses the locally developed and manufactured Kalam-Raju stent (the Kalam in the name is the country's First Citizen, who encouraged Raju, then an employee of a state-run hospital to develop the stent, putting the resources of a lab of the Defence Research Development Organisation that he then headed at the good doctor's disposal) instead of imported ones. Care is also working on indigenising everything from oxygenators to catheters to components that go into dialysis equipment and has founded a company Relisys Medical Devices that will soon start manufacturing these. In most hospitals, the level of indigenisation is 5-10 per cent; Care hopes to take it to 35-40 per cent with its Relisys initiative. "Indigenisation is crucial not just to reduce costs but also make products that meet local needs instead of just being a replication of a western model," says Dr Raju.

It isn't every hospital that adopts cutting-edge management techniques such as activity-based costing and bar-coding of inventory. Care does, which could explain how it has been able to keep its inventory at the same level despite growing revenues by an average annual rate of 30 per cent over the past three years. It may never achieve the volume-play of a Wal-Mart, but this five-facility (three in Hyderabad and one each in Vizag and Vijayawada) is a game trier.

The Oil-Method Company
AYUSH THERAPY CENTRE
AYURVEDIC PRODUCTS & SERVICES
FOUNDED: 2002
TURNOVER: Undisclosed

Spot the MNC? Well, nor can we, but it is HLL

Can big business ever be cool? Just ask India's premier fast moving consumer goods company, Hindustan Lever. In 2002, the company forged an alliance with Coimbatore's hoary Arya Vaidya Pharmacy to provide Ayurvedic 'wellness' treatments through a chain of salons it proposed to start. The first Ayush Therapy Centre-there are now 10 across four cities-opened for business in Chennai in June 2002. To date, some 80,000 customers have paid anything between Rs 750 (for a basic oil bath) and Rs 12,000 (for a correction of imbalance, in ayur-speak) for a brush with the pharmacy's time-tested remedies. Then there are the products, some five of them currently, again based on the pharmacy's recipes but reinforced with hll's emphasis on efficacy and safety. By 2005, HLL hopes to have 50 clinics catering to 150,000 customers a year, in place.

The clinics themselves are run by franchisees and monitored by a Lever manager. And professionals poached from AstraZeneca and Dabur are helping the company build new capabilities in research and supply chain management. "The response has been amazing," says Vipin Chawla, Business Manager (Consumer Healthcare), HLL, "If we continue like this, there is no reason why the chain cannot be taken abroad." He's right: there's no reason why.

Its Heart Is In The Right Place
VASCULAR CONCEPTS
DRUG-COATED STENTS
FOUNDED: 1998
TURNOVER: Rs 35 CRORE

Angels in bunny suits? For users of Vascular Concepts' stents, its workforce is no less

It was an idea that burned within biomedical engineer Swaminathan Jayaraman when he was working for Intravascular Inc in the US. "I realised that if the talent available in India could be tapped effectively, it could lead us to bigger inventions within a shorter time and with lesser amount of money," he recollects. And so, the engineer returned home and founded Vascular Concepts. Today, in a field dominated by transnational giants such as Johnson & Johnson, Boston Scientific, and Medtronic, the small Bangalore-based company has a 25 per cent share of the Rs 90-crore stents-think small self-expanding stainless steel tubes that keep blood vessels open after surgery-market. Attribute that to the R&D factor. Jayaraman himself holds 35 patents; Vascular, 30; and the company's state-of-art Sirolimus Eluting stent (it reduces restenosis or the recurrence of blockage in the blood vessel) is currently undergoing pre-clinical trials in The Netherlands.

Much of Vascular's ability to undercut multinationals stems from its lower costs of R&D. The manufacturing itself, reasons Jayaraman, is secondary and can be outsourced. This is just what the company has done: its manufacturing is done by a company based in Germany. Still, Vascular has been unable to translate its success in the domestic market into a launch pad for its obvious global ambitions. "Indian clinical trials are not accepted in Europe," says Jayaraman. "And it is very expensive to do them there; we are looking to raise $10 million (Rs 45 crore) for the next big leap." The pragmatic engineer realises that technology alone cannot help Vascular go global and admits that the company's success in the US can largely be attributed to the fact that it gets its manufacturing done in Germany. Its showing, however, has given him reason for cheer. "Given the right kind of backing, we can become a leading player globally," he gushes.

A Kitchen Garden In My Pocket
PROALGEN BIOTECH
NUTRACEUTICALS MAKER
FOUNDED: 2003
TURNOVER: RS 1 CRORE

See the vegetables? Proalgen's N.S. Balamukundan insists they are there in the pic

A decade ago, any talk of substituting the active nutrients that can be derived from a field full of carrots with that extracted from a pond of algae would have been dismissed as fanciful science fiction.

Today, this is near-mundane biotech. Chennai-based Proalgen uses microbial sources to produce natural active ingredients, thereby increasing volumes exponentially. For instance, the company extracts carotenoids from an algae instead of carrots, lycopene from a fungi rather than tomatoes, and lutein from another algae, not marigolds. In all three cases, the benefit is scale and a shorter growth-to-harvest period. Mathematically, a kilogram of algae can produce 10 per cent beta carotene as opposed to a kg of carrots that does .0002 per cent; and 50 acres of algae can produce as much lutein as 40,000 acres of marigolds.

That makes the business a lucrative one to be in. "There is so much pent up demand for our products globally that a quick ramp up is the need of the hour," says N.S. Balamukundan, Managing Director, Proalgen.

Proalgen develops (and patents) its own strains of microbes and extraction technologies and is in the process of acquiring 150-200 acres of land near Chennai for its new-age farm.

This year, the brothers NS who founded the venture, Balamukundan and Venkatesh, expect revenues to nudge the Rs 7 crore-mark, largely on account of carotenoids. Little wonder, then, the Tamilnadu Industrial Development Corporation (TIDCO) is eyeing Proalgen for a strategic stake.

The Medium Is The Message
TANTRA
T-SHIRT MAKER
FOUNDED: 1997
TURNOVER: Rs 5-6 CRORE

What's on my T-shirt? Tantra's Ramchandani (left) and Vimal Mariwala will be upset to know we couldn't read that

Marshal Mcluhan would have approved of Tantra. Tantra who? well, a t-shirt is a t-shirt unless it is a Tantra, that's who. Buy a Tantra T-shirt if you are fed up with Nike Reebok and Tommy Hilfiger screams a presumptuous tag on one Tantra T. Another tag proclaims that Sting, Paul McCartney (Editor's note: we'd edit that name out if it is the pursuit of cool we're after) and Bill Clinton have sported Tantra Ts. Not bad for a seven-year old company that sells T-shirts with, what else, cool messages. "Cult." "Semi-underground brand." "Capturing the brown race." These are just some of the terms Ranjiv Ramchandani, a 30-something former advertising pro and one of Tantra's co-founders describes the brand. "The medium (Ts) was completely unexplored when we came on the scene," he says smugly. "Now, we have the kind of mindshare and impact that a big corporate would die for."

Only, a big company may not be able to replicate Tantra's model. All its designs come from a network of copywriters and designers gainfully employed everywhere. And just one in every 500 gets approved. "Our mindshare is bigger than our business share and that is just the point," grins Ramchandani. "We are here to build long-term equity." It seems to be working: Tantra Ts adorn shelves in some 500 retail stores across the country. Shoppers' Stop? Yes. Lifestyle? Yup. Globus? That too. The company owns a cutting, making, and tailoring (CMT in garment-speak) unit in textile hub Tirupur that churns out 5,000 Ts a month. And Ramchandani claims the products meet "all international quality specs" for knits. Still, the brand's turn of phrase runs the risk of offending a starched shirt or two. Its Mental Inside T, a play on the Intel Inside logo attracted a notice of sorts from the chipmaker. "Get some perspective guys," was Tantra's response. "We are not in the microprocessor business."

 

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