by Mihir Dalal
Until early June, Binny kept vetoing Kalyan’s return. Whenever Nitin or Lee or anyone else raised the topic, he would insist that they didn’t need Kalyan. Binny had many misgivings about him. Kalyan might be able to improve sales but the company’s culture would suffer, he said. ‘It’s always my way or the highway for Kalyan.’2 Binny also did not approve of Kalyan’s reliance on discounts to raise sales in many categories. ‘It’s too short-term,’ he pointed out. What would they do when money ran out?
Eventually, Binny’s resistance proved futile. One of the reasons was that Binny’s relationship with the Flipkart investors had altered. Until the end of 2015, Lee had had tremendous faith in Sachin and Binny. But the failure of Sachin’s attempted transformation of Flipkart had shaken him up. He mainly held Sachin responsible for the disaster. But it was true that Binny, too, had been an integral part of that project. Though not as weakened as Sachin’s, Binny’s standing with Lee had diminished as well.
Finally, in early June, Lee prevailed over him. Flipkart’s sales were still stagnant. There was a strong likelihood that Amazon could overtake the company at any moment. Binny reluctantly agreed to bring back Kalyan on one condition: Kalyan would be kept on a leash, his role limited and temporary. Around mid-June, Flipkart reappointed Kalyan in a strangely titled role, Head – Category Design Management.
In truth, Kalyan’s title was a subterfuge. It was inevitable that he would have complete control of Flipkart’s sales and marketing functions. His immediate mandate was unambiguous: revive sales growth and prevent Amazon from dislodging Flipkart.
It was a tough ask. Amazon had built up serious momentum and was within touching distance of Flipkart. The gap between the two companies was less than $100 million in monthly gross sales. With each passing month, Amazon was closing in. This was a staggering achievement given that it had started out in India just three years ago. Of course, unlike Flipkart, Amazon wasn’t constrained by the task of having to raise capital. Still, its ascent had been remarkably swift. In April 2016, Jeff Bezos had promoted Amit Agarwal, the Amazon India head, to his ‘S-Team’. This team comprised the seniormost leaders at Amazon globally under Bezos. Amit, who had a love of mountaineering, savoured the moment – at the age of forty-one, he had risen to Amazon’s summit. In an email to employees, Bezos said, ‘Amit and our India team are doing remarkable things. Amit and his experience in India will be a key resource for all of us on S-team as we work to figure out what it is to be a true global company.’3 By promoting Amit, Bezos had displayed his great satisfaction with the performance of the India business.
A few weeks later, he went for the kill.
In early June, around the same time that Kalyan was preparing to return to Flipkart, Bezos announced that Amazon would invest an additional $3 billion in India, having nearly exhausted its earlier investment pledge of $2 billion. He made the announcement in Washington, D.C. at the US India Business Council’s global leadership awards ceremony, where he was feted by Indian Prime Minister Narendra Modi. He spent nearly half an hour in conversation with Modi. Bezos gushed about the ‘huge potential’ of the Indian economy and mentioned that the Amazon India team was ‘surpassing even our most ambitious milestones’.4
One year later, Bezos again met Modi at an industry event in the US state capital. At this conference, he found another well-known CEO courting the Indian PM: Doug McMillon, head of Walmart, the world’s largest retailer.
IN HIS FIRST stint at Flipkart, Kalyan, as Lee Fixel’s man on the ground, had initially been feared. Very soon, however, his straight talk and deep knowledge of e-commerce had won over colleagues. Unusually for a Tamil Brahmin, Kalyan preferred to speak in Hindi, in which he was fluent. He was blunt, unrelenting, like a robot, with little time for anything apart from work.
This time round, Kalyan was in no mood for niceties.
As he was walking into the office on his first day back at Flipkart, Kalyan was greeted by a division manager who was sipping chai outside. Warmly, this executive asked, ‘How are you, Kalyan? It’s been a long time.’
‘Good. And you?’ said Kalyan.
‘Very good.’
‘Very good? Look at what you guys have done to the company. You find it good? I find it irresponsible!’5
Leaving the employee speechless, Kalyan strode into work.
At the office, he immediately called for a meeting of key Flipkart executives. He asked them pointed questions about their roles and the performance of their functions. ‘I’m happy to have come back and am looking forward to working with everyone – there’s obviously a lot of work to be done,’ Kalyan told them.6 When a colleague asked about his role, the title being vague, Kalyan made sure there was no room for doubt about his authority. ‘I’ll run the show now,’ he said. ‘I will decide how things are to be done here.’7
In his very first week back at Flipkart, Kalyan showed just how serious he was about that statement. Based on the intelligence that his acolytes had supplied to him beforehand, Kalyan had singled out executives in the sales function who would have to go. As soon as his return was finalized, he demanded their removal. It had the legitimacy of an edict. These executives weren’t even allowed a chance to defend themselves. What made it all the more shocking was that two of them had been Kalyan’s protégés during his first tenure; they were people he had eagerly promoted. Now, Kalyan betrayed no qualms about discarding them. Nitin Seth, who had pledged to work closely with Kalyan, facilitated these exits. Kalyan had convinced Nitin that he needed freedom to operate and couldn’t be hindered by bureaucracy. He would need to form his own team; senior leaders would have to be sidelined. Kalyan made it clear who he would work with and for whom he had no time. Given the trouble that Flipkart had found itself in, there was no time to play nice, Kalyan told Nitin. And just as Kalyan wanted, changes were instantly executed. The people Kalyan had chosen were immediately given new roles to support him; those who didn’t have his blessings were made irrelevant, regardless of their title.
The message to the rest of the organization was clear: Flipkart was now going to be merciless. If you didn’t deliver, you would be cast away without a second thought. There was too much money involved, too many important careers that hinged on Flipkart’s turnaround. No one could be allowed to come in Kalyan’s way, collateral damage be damned. A group of Binny’s closest associates found this out at close quarters within a few days of Kalyan’s entry. In a meeting, these executives were debating whether Flipkart should hold the Big Billion Days sale that year. While it would boost Flipkart’s sales, the company would also end up losing large amounts of cash. Did it really bring any lasting benefits to Flipkart, they asked one another. Kalyan was infuriated by the discussion – that such a debate was being held in this most critical of periods told him that these people were amateurs. ‘You guys can discuss whatever you feel like but I’ve already started placing orders for BBD,’ Kalyan said to them, before storming out.
Kalyan’s acerbic manner and his decision to summarily remove important sales executives had the desired effect. It shocked the sales division – which had become moribund – into action, as they kick-started a frantic turnaround effort. Kalyan’s most urgent priority was to prepare Flipkart for the festival season sales face-off with Amazon that had now turned into a knockout contest for his company. Kalyan had no doubt that the Big Billion Days sale was the most important event of the year in the Indian retail business. A good performance would set the tone for the coming year. Brands, suppliers, employees would all be reassured; surely, investors would follow. A poor showing would be unacceptable in any year; this time, it could spell the end for Flipkart as an independent company.
To avoid such an outcome, Kalyan went back to the formula that had worked in his first stint: procure smartphones on an exclusive basis, cut prices in other categories and carry out speedy order deliveries. Over the past few months, Flipkart had struggled to rekindle sales partly because it no longer had exclusivity with the key smartphone brands
. The loss of Motorola and Xiaomi had been particularly damaging. For Kalyan, repairing relationships with these brands was paramount. Motorola and Xiaomi phones, by themselves, could contribute more than fifteen per cent of Flipkart’s sales in some months. If Flipkart could win back exclusivity with these brands, sales growth would be assured.
Kalyan’s chosen team went to work. It was a group filled with relatively junior managers, many of whom had worked with Kalyan in his previous stint. They were all overachievers, aggressive, earnest and completely willing to work themselves to exhaustion in order to carry out Kalyan’s will. Among the familiar faces who returned from other functions into sales roles were three of Kalyan’s favourites – Amitesh Jha, Sandeep Karwa and Smrithi Ravichandran. He put another person, Ayyappan R., in charge of the day-to-day running of the smartphone business. One man stood out in this crowd: Ajay Veer Yadav. Ajay had joined Flipkart as head of smartphones in May after a spell as COO of The Mobile Store, a chain of smartphone stores. In his mid-forties, Ajay was a decade older than most of his colleagues. He had cut his teeth at United Spirits, Vijay Mallya’s liquor company. Working for the liquor baron and his associates in the heyday of United Spirits, Ajay had picked up colonial mannerisms. Tall, broad-shouldered, he would turn up at work in a suit and tie, shoes spotlessly polished. He spoke correct English and addressed people formally. His appearance and manner amused his colleagues who, like other startup professionals, dressed in casual attire as a principle and spoke in colloquial Hindi or a pidgin of Hindi, Telugu, Kannada and English.
Along with Ajay and Ayyappan, Kalyan spent much of June and July on the road, trying to rebuild relationships with smartphone-makers. Working eighteen hours every day of each week, Kalyan met executives at all the important smartphone companies. Initially, they were sceptical. Flipkart had been hit by a barrage of negative headlines for nearly six months. The company had changed its CEO at the start of the year, only to appoint Kalyan in a vaguely titled position a few months later, on the orders of his boss, Flipkart’s largest investor. It seemed to these companies that a power struggle was ongoing between Tiger Global and the Flipkart founders. This was hardly reassuring. Senior leaders also kept leaving the company. Flipkart’s valuation had been marked down by its own investors. There were even rumours about how long its cash reserves would last. From the outside, Flipkart looked like a mess, its image at an all-time low. Against this, Amazon projected an aura of stability, power and competence.
At the offices of Xiaomi and other smartphone companies, Kalyan, Ajay and Ayyappan were pounded by questions and doubts.
‘Are you in for the long term?’
‘Can you guarantee Flipkart won’t lose focus again?’
‘Amazon is going to outspend you. How do you plan to take them on?’ ‘There’s a lot of churn. You guys keep changing leaders.’ And on it went.8
Kalyan was honest. He admitted that Flipkart had lost its way but pleaded with the smartphone chiefs to trust him. ‘Give me a chance. We will do whatever it takes to make you successful.’
Flipkart had also devised a new smartphone strategy that Ajay and Ayyappan presented in detail at these meetings. It was fuelled by a novel insight, which caught the attention of the phone-makers. Customer shopping patterns on Flipkart seemed to indicate that people who already had smartphones were hunting for better phones. Worryingly, Flipkart didn’t register searches from new users. For some reason, people who owned feature phones didn’t seem to want to upgrade to smartphones for the time being. Essentially, the demand would come from people replacing their old smartphones, not from people buying smartphones for the first time. This was surprising – smartphone sales had been fuelled by the multitudes who were swapping their simple handsets. With the entry of cheap Chinese smartphones, it had been assumed that this shift would continue for many years to come.
Looking at its customer shopping data and the general slowdown in online retail, Flipkart had come to the conclusion that industry sales volumes would hardly grow this year, contrary to the general consensus. This new market reality necessitated a change in strategy by both Flipkart and smartphone-makers. Flipkart divided the market into layers based on prices. In every niche, the company set out to accumulate a small but deep assortment of powerful Android phones. It had also decided to buy sizeable quantities of iPhones, the most premium brand, to attract the small number of customers who would want to indulge themselves during Diwali. But it would avoid buying too many phone models: depth over width. This strategy was risky – Amazon, with its goal of offering the widest range of products in any category including phones, would have everything for everyone. If Flipkart had misread the smartphone market, it would spell disaster.
The company also prepared what it called the ‘affordability construct’ for customers. It was to nudge people into making purchases by offering to buy their old phones at decent prices. Customers were given the option to purchase phones on interest-free credit. The company had primed its supply chain for fast deliveries of phones at the expense of other products.
On the whole, the comprehensive package and the depth of Flipkart’s research impressed phone brands. Finally, the company outbid Amazon and promised sales volumes that far exceeded what the brands had expected. This sealed it.
The first to return to Flipkart was Xiaomi, in late July, less than two months after Kalyan’s comeback. Soon after Xiaomi, Motorola and Lenovo followed suit. Kalyan’s presence helped in a significant way to reassure these brands about Flipkart. His courtship of brand executives – CEOs don’t usually travel to attend meetings with brand partners – flattered them and reaffirmed Flipkart’s seriousness in competing in the category again.
As with the smartphone operation, Kalyan imposed similar rigour in other categories. He centralized power, but his ruthlessness which was jarring to those outside his team, also brought decisiveness and agility. In August 2016, his efforts started yielding improvement in the sales numbers, which finally inched up after many months of decline.
Simultaneously, Flipkart’s customer service scores were advancing. Binny’s imposition of structure and processes at the company had brought much-needed discipline, especially in the supply chain function. Under the leadership of Binny’s chosen lieutenant, Saikiran Krishnamurthy, the logistics service was recovering the speed and consistency in order deliveries that had once made Flipkart the favoured shopping destination of online shoppers.
Slowly, the company was regaining its mojo.
Flipkart made another big move to preserve its leadership position. In late July 2016, the company swooped in to buy Jabong, the struggling fashion e-commerce firm, for $70 million. For months, Snapdeal had been locked in talks to buy Jabong. The discussions had reached the final phase, with the two companies converging on an agreeable price. This is when the Jabong investors reached out to the Myntra CEO Ananth Narayanan, encouraging him to make an offer. Ananth took the deal to the Bansals and Lee Fixel. After moving from McKinsey, Ananth had brought about a rapid improvement at Myntra, increasing its margins and accelerating sales growth. He was held in high regard by Flipkart’s board. They gave him the nod to make an offer. While Jabong’s business had collapsed because of corporate governance problems, its brand still resonated with fashion shoppers. Besides, it was too risky to let Jabong be bought by a rival. Fashion was the one category in which Flipkart’s dominance was unchallenged; it would be foolish to enter into an expensive fight over this in case Jabong was snapped up by Amazon or Snapdeal. In four days, the deal was done.9
If Flipkart was going to lose to Amazon, it wouldn’t be for lack of agility.
AS SOON AS Kalyan returned to Flipkart, Sachin Bansal’s internal alarms went into overdrive. After he had relinquished the CEO position, Sachin, as Executive Chairman, had been kept on the margins of Flipkart, like a pariah. He had spent his time conducting management reviews, which had turned into rather meaningless obligations for Flipkart executives who knew that Sachin had no say in the running of Fl
ipkart. But the moment Kalyan came back, Sachin jumped into action, trying to reassert his authority. He tracked Kalyan’s moves obsessively, worried about the growing influence of his former subordinate.
A new power dynamic had developed at the company. It wasn’t just Binny and Kalyan wrangling for power, or even Sachin, who was the keenest to contain the Tiger cub. In a matter of months, Nitin Seth had become the most powerful leader at Flipkart, after Binny. In fact, all three top leaders – Binny, Kalyan, Sachin – leaned heavily on Nitin to make their way. Kalyan, because he needed Nitin to get around the bureaucracy and escape interference by the Bansals; Binny, who banked on Nitin to keep Kalyan in check; and Sachin, who not only wanted to contain Kalyan but also make himself relevant again. Initially, Nitin tried to make the best of his role as the go-between. He even attempted to bring the three of them together. He believed that all three had major strengths which, if harnessed, would yield miraculous results for Flipkart. Sachin possessed technological prowess and an instinctive ability to think big, Binny was skilled in implementing sound processes and was determined to build a self-sustaining firm, and Kalyan was a dynamic leader with an instinctive grasp of sales and finance – all powers combined, these leaders would make a formidable team.
But it was a forlorn initiative, destined to fail, as Kalyan and Sachin’s visceral dislike of each other was insurmountable. They rarely exchanged words and when they did, the cracks in their relationship instantly became clear. At one senior-level meeting, Sachin excitedly described a small-town store visit and listed some of the missing pieces in Flipkart’s offering to customers.
