How strategic mismanagement can derail a business
The complexity of Business doesn’t define the Idea of Business instead Implementation of the Idea with precise execution.
Execution is the key ingredient for any business, Despite of huge investment hand and a great idea, the Business may end up failing due to the absence of execution.
In this What Went Wrong series, In episode 1 let’s unpack the story Askme/Askme bazaar what went wrong in that startup, and what could’ve been done better to survive.
Let’s go back to 1980 and early 2000. India has been growing from agriculture-central focused to manufacturing and industry-focused. Indian government provided multiple facilities to small businesses and enterprises to grow exponentially.
During early 2000, to connect multiple business owners and small enterprises, classified and yellow pages came into the marketplace for accessibility. GetIt Info services is one of the major classified platforms for SMEs.
In 2006 gradually Internet and digital transformation were introduced into businesses and India adopted digitalization at a small level, Businesses started introduced to digital portals instead of telephone directories and Yellow Pagesmethods.
Network 18 launched an online classified portal as ASKME, which is the digital version of Yellow Pages, customers, and business partners can connect to sellers directly. Sanjiv Gupta (Then founder of GetItInfo Service) identified the transformation and acquired AskMe and reimagined it as Askmebazaar an investment backed by the malasiyan investment group Astro Overseas Limited.
Having a decade of experience in classifying and expert in small and medium business owner networks along with high investment support, Askme started scaling up their business to provide business owners a platform to buy and sell their goods in Askmebazaar.
The Executive team of Askme has been more ambitious to expand Askme in multiple domains to compete with the existing/growing startups in that space. Manav Sethi CMO of Askme Group and Kiran Murthi, CEO of Askme Group were experts in marketing background. This leverages introducing sensation marketing promotions and strategies to attract customers and sellers in the marketplace.
Acquisitions
Having Financial muscle strengthened Sanjiv’s want to play full in the marketplace by acquiring a fast-growing startup and rebranding it as Askme group companies, In 2014 they acquired MebelKart, a furniture company with a deal of $20 Million and launched a furniture marketplace for buyers and sellers.
In 2015 within less amount of time, they acquired BestAtLowest another fast-growing startup in Grocery delivery with the deal of $10 Million and relaunched as AskMeGrocery.
Revenue Stats
As scaling up is happening at a fast pace but the revenue is shrinking drastically,
2011/2012 = revenue = 23.4 Cr
2013 = revenue = 25 Cr with Loss = 99 Cr
2014= revenue = 42 Cr with Loss = 180 Cr
2015= revenue = 50 Cr with Loss = 300 Cr
In 2015 standalone Askme Group spent 68 Cr on Advertising by collaborating with top Bollywood stars such as Ranbir Kapoor, Farah Akthar, and Kanagana Ranaut.
Downfall
Sanjiv started looking at revenue in business gradually with multiple folds in loss, Initially they concentrated on expanding business in multiple domains as In the Grocery space competing with Flipkart, and Amazon. In classified and B2B competing Just Dail and India Mart.
After encountering severe losses AOL started investigating on business strategies and models for revenue verticals. This made a financial freeze for AskMe groups to spend further and AOL made clear that they don’t want to invest further until break even/recovery gets started. AOL claimed that they made an elephant investment of $300 Million in AskMe Groups.
Due to Financial slick Sanjiv started looking out for new investors to run operations at AskMe. During those investment pitches itwas identified that technology complaints and supply chain management in AskMe groups has been running terribly, This made a red flag for investors to step back.
In 2016 AOL sent notice that it’s been more than a year since Askme failed to raise money, so they need to shut down the company and AOL was not responsible for losses further.AOL Chairman Malaysian Businessman Ravindran passed orders to the AOL Indian team to close the procedure of shutting down the company. Sanjiv flew to Malaysia to meet Ravindran but Ralph Marshall, Deputy chairman of AOL refused to proceed further and decided to shut down the company.
On August 9 2016 Askme employees started strikes for not providing salaries and sellers joined with them because they hadn’t received credit for their goods. Askme management passed emails to their partners and employees with information about AOL and stating that they haven’t provided funds so they are helpless. They can contact AOL directly for their funds. This created a huge disaster for sellers, partners, and employees left hopeless.
On August 19, 2016, Askme Groups was officially shut down with bankruptcy and affected as following
98.5% of stake holds with AOL
0.06% of stake with founder Sanjiv Gupta
0% return to the company
3,600 sellers affected with approx. 10Lakhs each
4000 employees remain jobless.
What Went Wrong
· Lack of a defined vision for the company before securing a substantial investment deal.
CEO of Askmebazaar, Kiran Murthi said that ‘ Company didn’t have a business model six to eight months ago’.
· Unnecessary diversification of the business model and acquisitions, leading to a fragmented and inefficient organizational structure.
Askmebazaar has an initial plan to establish an online marketplace solution for sellers and buyers, but diversifying its business in groceries, and furniture remains volatile.
· Neglect of technological advancements, highlighted by the absence of a dedicated CTO to steer innovation.
Many sellers and employees stated that the website responsiveness and process are so slow, regarding refunds and transactions employees have been operating through Excel sheets.
· Execution Failure in execution processes and a lack of management expertise in key areas.
Having huge investment management hasn’t allocated funds to technology and process, because Askme executives are experts in marketing fields so they burn cash in ads more heavily than in CRM or process tools.
