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Chandu Nair is today well known in Tamil Nadu’s entrepreneurship ecosystem. Popularly referred to as ‘Scope Chandu’, he’s often seen having coffee with budding, early-stage entrepreneurs, mentoring them and sharing experiences from his journey as an entrepreneur since 1987.

Of course, Nair didn’t always have the time for such pleasures. He was neck deep in work, having led Scope E-knowledge Center, as its co-founder, through various transitions before settling down to build a Knowledge Process Outsourcing business around content, information and data. Late last year, he exited Scope by selling out to the Raman Roy-owned Quatrro BPO Solutions (Quatrro has owned stock in Scope since 2007).

In Startup School this edition, we chat with Nair about making market-driven changes to a business model and selling out a business.

Over the years, Scope E-knowledge Center has adopted three different business models. Please take me through the journey of how you finally arrived at a model that worked. What lessons did you learn from this journey?

We started with the idea of building a market research company. We did custom work for several clients but couldn’t scale up with our approach. We thought about it for a while and realised that the reason we couldn’t scale was because we never really built client relationships with our approach of being a market research service provider. Moreover, companies never saw the value of information as we expected them to.

 

If I were to draw a lesson out of this experience, I’d say we did a wonderful job of identifying our expertise and bridging that with what the market needed.

 

In late 1998, the Internet was beginning to boom. There were several portals that were being launched and our expertise was in the area of providing content. We launched content4portals.com, a business-to-business offering that’d serve our clients with content services. We did well. In the launch phase, we advertised in the Economic Times and got about 60 to 70 enquiries. We had over 100 people in our team and touched revenues of Rs. 2 crore, which was not bad then. However, as we all know, the dotcom bust happened. Business slowed down so much that we were facing closure. My co-founders and I had to make several personal and professional choices. Finally, we decided to bite the bullet and stick with running the business but with a new business model. We decided to offer content processing and information services to overseas clients. The decision wasn’t easy. None of us had ever sold in the Western markets. Most of our prospective clients had never outsourced.  Yet, we decided to go ahead with version 3 of Scope.

Of course, we now know that version 3 worked out very well.  Now that we have the benefit of hindsight, what did you get right?

Several things. For starters, within version 3, we made many small tweaks to our business model. Our initial target market was the Western market research companies. We thought we could reduce their cost structure by doing some work for them in India. However, the market was very fragmented. Market research companies themselves were struggling abroad. We quickly knew it wasn’t the right market for us. We analysed the market and figured there was a huge market for financial information, business research information, pharmaceutical and healthcare information, science and research information and legal information. Each of these segments was huge. We decided to ask ourselves, in which of these areas do we have the skills sets to succeed? We also figured that information, which resulted in saving time for middle and senior management professionals, was highly valued abroad. We decided to ignore some markets – like the financial information market – for lack of relevant skill sets. We focused on science information, patent and legal information and healthcare information. The company had the capability to offer all kinds of content, data and information related services – from content abstraction and editorial services to database creation and keyword indexing. We did very well here.

If I were to draw a lesson out of this experience, I’d say we did a wonderful job of identifying our expertise and bridging that with what the market needed.

Additionally, after the initial customer development we’d done and proof of concept was established, we went out and raised money from e-India (now part of Infinity Ventures). We raised more money that we wanted, but it helped us setup a top class delivery center in Chennai. This certainly played a key role as well.

There is one other aspect we got right – it was our sales pitch. Along with Evalueserve, we were among the first few companies to call ourselves a Knowledge Process Outsourcing (KPO) company. It is extremely important to get that pitch to a client bang on and the label we gave ourselves worked very well.

In the knowledge process outsourcing business, dealing with ambiguity – be in client relationships, work flow and process or giving instructions to team members – becomes crucial. How did you deal with this at Scope?

In our business, you’re actually selling confidence to a client. A research is asking himself, should I pursue this experiment or not? A marketing manager wants to know how to tweak his launch strategy based on some information. If we can help them answer these questions, with confidence, we’d have done our job. I’d say we dealt with ambiguity by embracing it. To give you an example, we created metrics to rate quality of data and information. Now, for a person making a call with your data, the metric of how reliable the input data is becomes all the more important. By adding the quality metric to your process, you reduce the ambiguity in the engagement.

Workflow, process and metrics are crucial to reduce ambiguity in operations. It is also critical to understand all the risks from the perspective of key stakeholders – employees, clients and partners. We need to then add these risk mitigation strategies into the operational process.

Why did you sell Scope to Quatrro? Why let go of a business you’ve built and one that is doing fairly well?

It is very easy to start a business. It is very difficult to get out. I call this the Abhimanyu trap. There are all kinds of reasons why you let go of a business. If it’s a business that is not doing well, you should get out of it – close it down or make a fire sale. If you think your business can grow at a faster pace by selling out to another company – do it. Maybe, you want to make the money and move on to something else.

At a broader level, there are three kinds of decision-makers in this world – proactive, reactive and inactive. I can safely say that I have been in all three categories at various stages in my entrepreneurial life. However, while I was about to begin the journey of Scope, the KPO (version 3), my co-founders and I decided to have an exit plan even before we started the business. We were convinced that it was a good idea to handover a steady business and move out. Our investors made an 8-times return on their investment.

Here I’d like to add that once you decide to exit, it is crucial to withdraw slowly from the business. Once venture capitalist told me that running a business could be explained through 4Ms – measure, manage, monitor and monetise. One needs to carefully let go in each of these areas. On a lighter note, I tell people that when I exited Scope, it reached a stage where the business did better if I didn’t go to office!