by Mihir Dalal
Apart from the shiftin its business model, Sachin had decided that Flipkart would have to bring upon itself another upheaval. By now, it was clear that unlike in the US, most people in India would browse the internet on their smartphones rather than on desktop computers. Apart from a few million people who primarily lived in cities, most Indians wouldn’t have the finances, or the need, to purchase computers or laptops. Sachin had spotted this trend early, but despite his constant grumbling, he believed that the company hadn’t done nearly enough to improve its mobile app. By November 2014, Sachin had expanded the Flipkart 3.0 council to include about a dozen members – the people charged with implementing his grand vision. At their meetings, he started promoting the idea that the company should become an app-only platform.
Sachin argued that the way to make Flipkart into a household name was to beautify its main product – the app. The app would have to be made so technologically advanced, so aesthetically pleasing, that new users would be drawn to Flipkart by word of mouth, just like they were to Xiaomi and Apple in their respective countries. This would save Flipkart hundreds of crores in advertising expenses. The app would offer another advantage: customization. As it gathered data on users’ shopping habits, Flipkart would use its technology to analyze the information and display products, matching them with each user’s taste. This is how Flipkart would stay ahead of Amazon and its ilk. Sachin was convinced that this could only be possible if the Flipkart engineers, who had been used to building features for the desktop website, devoted all their energies to the app. And they could only be brought around to his worldview if the desktop website was closed down. He told his colleagues, ‘The world is moving towards the mobile. Customer experience on the app can be made significantly better than the desktop. So, not only do we have to be the leaders, we need to proactively move traffic to mobile. The only way to do that is to remove the crutch of the desktop.’
Another idea that Sachin had devised was the creation of a large advertising platform. By the end of 2014, Flipkart had quietly been earning sizeable advertising revenues. The Indian digital ads market was growing fast, touching nearly $1 billion annually.3 Most of this revenue went to one place: Google. The rest was scattered among thousands of websites. In the space of one year, Flipkart had become one of the largest advertising platforms after Google. In October 2014, when it had held the Big Billion Day sale, the company had generated more than ₹25 crore in ad revenues. Companies such as Hindustan Unilever, Coke, Nike and Adidas, which spent heavily on advertising, were all hunting for internet platforms that could bring them large numbers of shoppers, especially from a younger age bracket, with the money and desire to buy consumer goods. Flipkart presented them with a custom-made hoard of such users.
Until recently, Sachin hadn’t paid much attention to the fledgling ads business. But after the first Big Billion Day sale, he latched on to it. He recalled how during Flipkart’s early days, the ads revenue he had earned from Google and Amazon had been critical in propping up the company. Now he believed that it could be the transformational money-making scheme for Flipkart. Even Alibaba earned a majority of its profits through ads. Sachin had also been inspired by Facebook’s success in the US. When the social networking platform had started out in the mid-noughties, the desktop was the primary medium of most internet users. But over the past few years, people had increasingly switched to smartphones, a change that had upended many internet platforms. Not Facebook – it thrived more than ever in the smartphone era.4 It bought startups, introduced exciting new features on its app, copied rivals when it couldn’t buy or better them. Facebook now generated a majority of its revenues from ads served up on its mobile app.5 Sachin believed Flipkart could – had to – do the same here in India where most internet users would soon surf the net primarily on their phones.
In late 2014, Sachin was ready with the outline for the new Flipkart. A vision document was prepared. It was decided that Flipkart would be broken up into three parts. At the centre of the company would be the marketplace business that would be run by Mukesh Bansal. It would mark a stunning rise for Mukesh, who had joined Flipkart only a few months ago. In essence, Mukesh was replacing Kalyan Krishnamurthy.
Sachin and Binny, who had admired Mukesh for years, were even more impressed by him as they began to work closely after the Myntra deal. They appreciated not only his entrepreneurial abilities but his overall personality as well. Mukesh had cultivated a taste for couture after Myntra turned into a fashion-selling site a few years ago. He dressed down consciously. His taste was varied – he admired the fashion sense of Hrithik Roshan, George Clooney and Lisa Haydon.6 Mukesh was serious about health and fitness – he worked out nearly every day, and had a physique to show for it. He played golf, had friends in Bollywood, and at the same time, was well liked by many of his colleagues at Myntra as well as the company’s investors. He was well-read, soft-spoken, articulate. He was all this, a father to two kids, and also a hugely successful internet entrepreneur. For Sachin and Binny, Mukesh was the personification of ‘cool’. His life hadn’t been dissimilar to theirs. He had grown up in Haridwar, studied computer engineering at IIT Kanpur and written code before becoming an entrepreneur. Like the Bansals, Mukesh, too, was an advocate of using technology in retail. He was as introverted as they were, and yet he had evolved into a rounded, mature person, a man of the world, something the Bansals had always wanted for themselves. Mukesh, in turn, was highly ambitious. He harboured a desire to become CEO of Flipkart in the near future. He charmed the Flipkart co-founders with purpose and, unlike Kalyan, got along well with Sachin, who even encouraged Mukesh’s ambitions initially. Convinced that they had found their ideal partner, Sachin and Binny charged Mukesh with the daily running of Flipkart.
The logistics service would be headed by Binny. Not only would it deliver orders for Flipkart, it would also be expanded to become a large logistics firm on the lines of Blue Dart and DHL. Sachin would develop the advertising platform that would, over time, become Flipkart’s most important lever in moving towards profitability.
On the whole, the vision document of Flipkart 3.0 was a work of impressive conceptual ingenuity, the corporate equivalent of high-level graphic design or architectural planning.
In November 2014, at a meeting in Singapore, Sachin and Mukesh presented the vision document to Lee Fixel and Flipkart’s other board members. More than a dozen Flipkart executives had come to the meeting to make presentations. With Sachin’s aid, Mukesh articulated Flipkart’s new strategy. Although the plan was radical, there were few probing questions from the board members. And even fewer criticisms. The lone dissenting voice was that of Kalyan Krishnamurthy. Looking at Sachin, Kalyan said that there was one major problem with the strategy: Sachin wanted to turn Flipkart into Snapdeal, which had always been a far inferior company.
Sachin’s reply was terse. ‘Yes.’ Without offering an explanation, he moved on to other matters.
The other board members watched the exchange in silence. In more informal forums, Lee, along with other board members, had expressed some of their doubts to Sachin. Lee had pointed out that if Flipkart tried to become a marketplace overnight, its service might suffer and its carefully cultivated brand could get damaged. He was also a bit alarmed by the app-only plan. Many products were still being bought on the desktop website and millions of customers used both the desktop site and the app to shop on Flipkart. Why would the company want to lose all this business and hand it to Amazon? Lee had asked Sachin.
But Sachin, who had anticipated these questions, was prepared. He predicted that people were moving to the mobile in such large numbers that within a few years, all online shopping would take place exclusively through that medium. ‘If we have a world-class app, we can create a huge advantage. This is not what Amazon is good at. They’re not built for the mobile age,’ Sachin would say in defence of his vision.
‘So why can’t we build a world-class app and keep the desktop site?’
‘Becau
se the desktop site will only be a crutch that won’t let us focus on the mobile app.’
These conversations would continue over the next few months. But it was an intoxicating time, with Flipkart’s growth consistently high, its valuation rising all the time, so that all reluctance eventually fell away. Lee signed off on Flipkart 3.0.
In December 2014, Flipkart raised another round of funding. Less than six months after the billion-dollar round, it received another $700 million in fresh capital. Along with Flipkart’s present investors, five new firms, including Qatar’s national fund, contributed to the round. Flipkart was in such great demand that the company was able to handpick investors from a queue. Its valuation quadrupled to $11 billion in a little over a year.7 This capital infusion was as strong an endorsement of Flipkart’s new vision as there could be. To the Flipkart investors, it didn’t matter that the company was unprofitable. The fact that its sales were expanding prodigiously eclipsed any concerns. It was a global trend – investors were backing fast-growing startups in the belief that once these firms acquired a large market share, they would figure out how to make profits eventually.
THE NEW FLIPKART 3.0 council of more than a dozen members would now convene at the large conference room in the Myntra office, about half an hour from the Flipkart headquarters in Koramangala. They also continued to meet at Sachin’s house. The discussions there would last until late into the night. At one such meeting, towards the end of 2014, Sachin gave his colleagues a surprise.
They had been discussing how fast the company could implement the new plan. What Sachin had envisioned was a wholesale makeover of Flipkart, a company that employed more than 30,000 people and had thousands of vendors and suppliers. It was a complex, chaos-inducing undertaking that was inherently dangerous. Some Flipkart officials suggested that the company spread out the implementation over three years. They were already unsure about Sachin’s decision to break up the company. To them, it made little sense to separate the marketplace business from Ekart, which was the most important component in delivering reliable service to customers. They suggested that Flipkart should at least not make these changes in haste. Staggering the plan over three years would give the company sufficient time to practise and learn without disrupting its present business. But Sachin shot down his critics. ‘No, we’ll have to do this by the end of 2015, within one year,’ he said. His colleagues were in shock. At the start of these discussions, they had been told that the plan would be implemented over the next three to five years. Now, suddenly, Sachin wanted to taste immediate success.
Managing people had never been one of Sachin’s strengths. He had always been a demanding, volatile boss. Over the years, his colleagues had found ways to deal with him. But by now, Sachin had become an altogether different man. His abrasive tendencies, his zeal, ran unchecked. His respect for others had diminished. He tended to be dismissive of those who dared to differ. When a colleague complained that he was being too critical of others, Sachin said in response, ‘People are ultimately resources. Don’t get too invested in them.’ All of Sachin’s ideas now were radical; his conviction in his vision was so strong, his belief in his ingenuity so unshakeable, that he felt no need for conflicting opinions or the benefits of trial and error. Citing Xiaomi’s example, he demanded that the company immediately stop spending on marketing – the app would be so attractive that it would naturally pull users. Citing Apple’s example, he called for the shutdown of the desktop website. When some colleagues opposed him, pointing out that a large number of users still shopped on the website rather than on the app, Sachin told them, ‘When Apple gets rid of old products, their customers also complain. But the replacements they come out with are so much better that users migrate to the new product. Our app, too, will be much, much better than the website.’
At an early 2015 meeting of the Flipkart 3.0 council in the Myntra office, things came to a head. Many of the dozen members gathered there were again arguing for a more gradual shift to the marketplace. Amod Malviya was one of the dissenters. He reminded Sachin that Flipkart didn’t have a good history of implementing big changes. ‘We should start small, keep learning and move incrementally,’ he advised. If they suddenly became a marketplace, they would have to take a revenue hit. It would compromise customer experience.
‘It’s OK,’ Sachin said. ‘We’ll take the hit.’
Bemused, Amod laughed out loud.
‘Why the fuck are you laughing?’ Sachin shot back.
‘Matlab kya hai – what do you mean?’
‘You can’t smile at my meetings!’
‘You can’t speak to me that way!’
The exchange was short but it grew so heated so quickly that, within seconds, both Sachin and Amod had jumped to their feet, furious. Alarmed, their colleagues had to intervene.
Over the next few weeks, the members of the Flipkart 3.0 council kept dwindling. Anyone who opposed the new plan would not be invited to the next meeting, their approach dismissed as small, limited, limiting.
At the end of January 2015, Sachin was ready to carry out his grand new vision. He wanted to announce it to a larger group of employees in order to bring them around – not simply to persuade them to make the requisite changes, but to encourage them to think of their jobs in a new way. What Sachin ultimately wanted was a sweeping change in the company’s culture: the employees of an internet company couldn’t think in the same way as the members of a retail company would.
Flipkart invited about a thousand of its highest-ranking employees to an auditorium at the Jyoti Niwas College in Koramangala. It was a fitting choice for the corporate theatre that was about to play out. There, the three Bansals – the company’s founders, and with them, Mukesh, now the third-most important man at Flipkart – announced the split of the company into three parts. They explained how Flipkart would become one of the world’s leading technology companies. Their speeches were generously peppered with words such as ‘big data’, ‘machine learning’, ‘artificial intelligence’, ‘product thinking.’
The response from the spectators wasn’t encouraging. On hearing about the drastic changes, the employees who ran Flipkart on a day-to-day basis, expressed doubt.
‘How will this work?’
‘Why are we doing this?’
‘Do we need to make all these changes?’
‘Do we need to make all these changes all at once?’
But the three Bansals were unfazed. Like a king presiding over his janta, Sachin told his employees that all the changes mentioned were necessary for Flipkart to leapfrog into a $100 billion firm.
Over the next two days, Sachin, Binny and Mukesh, along with other Flipkart executives, elaborated upon the upcoming changes to their respective departments. But employees showed little enthusiasm. ‘You’re talking gibberish,’ some said. ‘The more I tried to explain it, the more embarrassing it became,’ recalls one of the department heads.
Nevertheless, Flipkart pushed forward with the new plan. Within the next six months, the company would, to some degree, remake itself in exactly the way Sachin had envisioned.
THE NEW FLIPKART would have another essential feature: a new management team. This plan had been conceived by Sachin and Mukesh, and Binny had backed it. The three Bansals together believed that for Flipkart to ascend to the greatest heights, the company would need superior leaders. Sachin, in particular, had no doubt that while the old team had served Flipkart well so far, they had reached the limits of their abilities. Their resistance to Sachin’s plans was also inconveniencing. In order to elevate Flipkart to a world-class company and transform it into a true bastion of technology, new managers would have to be found.
Flipkart had already appointed a new finance chief: Sanjay Baweja. In his mid-fifties, Sanjay was a well-respected CFO, having worked at companies such as Airtel and the Tata Group. He had been hired with the long-term objective of taking Flipkart public. But the most important appointment was that of a chief product officer.
Puni
t Soni had been the lead product manager for Motorola since its buyout by Google. He had led software development for the new Motorola phones that turned out to be among the bestselling smartphones of 2013–14 across the world. Punit had grown up in Anushakti Nagar, an eastern suburb of Bombay, a few kilometres from the Bhabha Atomic Research Centre, where his father worked as a nuclear scientist. Anushakti Nagar, one of the very few well-planned areas of India’s financial capital, served as the housing colony for the scientists, engineers and doctors working at the research agency. After finishing school in this elite environment, Punit would spend six years studying engineering at two ultra-conservative places, first in Haryana at the National Institute of Technology, Kurukshetra, and then at the University of Wyoming, in the eponymous mid-sized American state, the population of which is lower than most Bombay suburbs. After obtaining his master’s degree, Punit moved to Silicon Valley just as the dotcom bust was beginning at the turn of the new century. Now in his mid-thirties, Punit was looking to move on to a new job after having spent eight years at Google.
Sachin had met Punit in early 2014 after Flipkart and Motorola became exclusive partners. Punit had betrayed a supercilious manner. Once during a routine meeting, when Sachin asked him about Motorola’s upcoming products, Punit pulled out a phone from his bag and showcased its features, some of which were futuristic. Sachin was awestruck, his eyes widening as the product was demonstrated to him. Sachin, always a firm believer in Flipkart’s technology prowess, had then drawn a parallel between the new Motorola phone and the Flipkart app, which he claimed was ahead of its time, too. Punit waved his hand dismissively, ‘Nah, I don’t think so, Sachin. The technology we’ve built is way ahead of anything Flipkart has created. It’s incomparable.’ This had made Sachin bristle. But it had also made Punit seem more impressive. Sachin would keep telling his colleagues, ‘This is the kind of person we need.’
