A wake-up call

The Flipkart fiasco seems to have set off reaction that the company’s founders may not have imagined. It has pulled even the Government into wanting to cast a watchful gaze over online retail. The Big Billion Day (BBD) chaos of October 6 offers many important lessons.

Flipkart’s early years were examples of great strategising and effective execution. Its growth story and many achievements are all the more remarkable considering that its founders, the Bansals, did not possess any serious business management experience prior to Flipkart.

Not surprisingly investors loved Flipkart and showered it with the only language of admiration they knew: Loads of money. But somewhere along the way the management of Flipkart seems to have lost the plot. The company seems to commit what in tennis parlance might be referred to as “unforced errors”. The BBD is just the third in this list of unforced errors as far as one can recall.

The BBD story raises questions about the management’s preparedness for the difficulties it ran into, its ability to carry out disaster recovery, some of the pricing practices it has adopted and so on. These are core facets of running an enterprise and just some of the many issues that will be analysed by pundits in the days to come.

However, some inferences appear plausible even with the limited information about Flipkart and its recent fiasco.

First, the Flipkart management does not seem to have learned from its experience with similar deals that it announced in the past. Although not on the same grand scale as BBD, they were sufficient to inform the management of the Indian consumer’s craze for online bargain hunting and hence the potential response to BBD.

Second, the public relations fallout of BBD seems all too obvious. The scale of dissatisfaction with BBD appears to be unmatched by anything else comparable in recent corporate history in India. In another country with meaningful consumer protection laws the legal action that followed would have been sufficient to threaten the existence of the enterprise.

Third, and more importantly, BBD and its preceding incidents point out to perhaps a more basic issue at Flipkart: While the Bansals have done a terrific job of taking Flipkart to where it is, the enterprise now perhaps needs to complement its top management team with a senior business leader with relevant industrial experience. A more mature team at Flipkart with the farsightedness to see through the sheer recklessness of this misadventure could perhaps have averted it.

The Americans have long recognised the need for appointing industry leaders as CEOs or COOs of such hyper-growth enterprises, even while the founders stepped aside or occupied other top management positions.

Tim Koogle at Yahoo, Eric Schmidt in Google and more recently Sheryl Sandberg in Facebook are visible examples of such appointments. Investors in those companies played an active part in bringing about such changes.

At Flipkart it is time perhaps that that the Bansals shared top management space with a seasoned industry manager brought in with suitable empowerment.

The investors in Flipkart have as much at stake in its success, if not more, than the Bansals. It is just as important that they see the need for strengthening the top management team with a seasoned industry professional.

The writer is chairperson of the NS Raghavan Centre for Entrepreneurial Learning at IIM Bangalore. The views are personal

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