Offline Operations for an Online Startup

If I had to look back at our history over the last 2 years, the aspect that stands out as most challenging has been handling the offline operations to keep the online business going. However, it is also the most critical part of our offering, it is why customers come to us in the first place. And this is true of most, if not all, Consumer Internet plays in the e-commerce space, for they are all about making it simpler for consumers to perform some activity, namely Commerce, that was hitherto performed offline. If it is indeed the most important aspect and is also the most challenging, how does a startup prepare itself to handle this challenge?
 
For starters, it is important to truly understand how much energy will go into this activity. If I go back to our own story, we knew that would be the key area, but even so, I think we underestimated the extent to which it would be important for us. It is easy to get caught up in the coolness aspect of launching your venture/site, but don’t lose sight of the fact that the Operations form the true lifeline for your business.

There is the initial groundwork needed to launch the site and get things going so you have offerings for the customer that comes visiting. But that’s the easy part – the real thing starts when you have a paying customer place an order because at that point, everything else becomes secondary. Handling that customer’s request to his/her satisfaction should be your only goal from there on until that gets taken care of. And if you are doing well, you are hopefully getting that steady stream of orders, so that goal becomes perpetual.
Once you are convinced about the importance of your Operations, you will need to staff up accordingly, and preferably starting all the way at the top. In fact, I would go to the extent of having someone on the founding team with deep Operations experience in a similar setting elsewhere. Having that level of ownership for an area that’s as important will go along way in ensuring that it gets the right level of attention and effort, and that you are taking the necessary steps to evolve your team as you go along. Hiring this expert was certainly a challenge for us, and we asked one of our advisors for ideas. Given that on-time delivery was an important aspect of our service, he suggested that we look in a vertical with a similar mandate, such as the airline industry. The ground staff responsible for ensuring that flights take off on time for any airline understand the importance of keeping things running like clockwork and might be ideal candidates for consideration. We didn’t get the opportunity to act on that advice for various reasons, but I thought it was a great idea, completely out-of-the-box. Likewise, having folks that have managed an employee base similar to your operations force will obviously bring the value of that experience with them, and that value will get more and more critical as you grow. Just as the quality of the team is important, you also want to size it appropriately – as a startup you can’t afford to overstaff but at the same time, you dont want to understaff and compromise on the quality of your service. So, depending on the nature of your operations, estimate the volume of business you expect to generate (and review this against actuals on an on-going basis) and  ensure that you are sufficiently staffed to handle that volume.

As you staff up, it is equally important to put a process in place (and again, refine the process as you go) for your various operational tasks – shifts/attendance, petty cash inflow/outflow, auditing, order processing, customer support, customer follow-up are some areas that come to mind. And any such process better be centered around the customer and your Quality of Service (Qos), for if the quality gets compromised, then its only a question of time before the process becomes moot. You simply won’t need it because your customers aren’t coming back.

So lets say you have a team in place and you have a well-established set of processes that enable your team to chug along and that your early customers are happy with your service and keep coming back. Pat yourself on the back when you get to this stage because it does mean you have survived the early phases. Now comes the bigger problems, ones that you almost want to have. Scaling up, without compromising quality, is a huge challenge. It is important that a customer and quality focused culture are now a part of your organization’s DNA. Only then will you be able to onboard your newer employees (the ones you will need as you scale up) and train them to sustain the same levels of customer satisfaction. But more importantly, scaling up needs investment, usually from Venture Capitalists. And in order for them to be interested, the scale has to be much better than linear. You need to be able offer the kind of 10x returns that would interest them, and that is hard to do if you are not becoming increasingly efficient as you scale up. This is what makes a business model like shaadi.com or naukri.com a lot more compelling – to get 10x more volume, they don’t need 10x the staff. To take our own example, if we need to hire an Operations team of size 10x (and therefore 10x other associated costs such as rent, utilities, benefits etc) to handle 10x the volume, that is probably not such a great value proposition for the VC. We have to be able to prove that we are able to handle the growth in volume with lower and lower transactional cost per order handled. Needless to say, it is going to be hard to demonstrate this efficiency in the early stages because you are still growing very quickly, but after you get to a certain critical mass (and that better be within a reasonable time period), the efficiencies better start kicking in. In order for this happen, it is almost imperative that technology is put to good use in constantly refining your business workflows and processes. The more manual operations you are able to replace with automation (presumably at lower transactional cost), the better off you will be in driving this efficiency, thereby increasing your ROI.

Some examples I have seen lately are predominantly technology teams that start up a venture that has a significant Operations/Logistics play to it (including our own, of course) – while they will no doubt be able to use their technology expertise to solve some of the complex logistical challenges down the road, it is important that they take the necessary steps to ensure that they are able to handle their initial operations well, demonstrate early success and subsequently grow to the point where that technology expertise becomes critical. Unfortunately, the value of the technology is only going to be truly realized when the volume gets to be significant, and growing to that volume will take a lot more than just technology, so hope these teams plan accordingly and execute well. Good luck!