Article: AAP and the startup's dilemma

Entrepreneurship

AAP and the startup's dilemma

The new party has shown how a startup can make rapid strides in a market. But long-term questions remain
AAP and the startup's dilemma
 

A startup is judged by how quickly its management is able to recover from initial reverses

 

Like every brand that has made its mark in the market in a short span of time than the industrial average, there are sky-high expectations from AAP

 

The Aam Aadmi Party (AAP) was the newsmaker of the month, in February, returning to power in Delhi, this time with a near-complete mandate. The two-year-old party makes an appropriate case study for startups, particularly in red ocean sectors — and you can’t get a redder ocean than politics. The questions AAP leaders will be confronting in future are also questions startups have to face during the different phases of their evolution. How these are addressed determines where the startup goes from a promising beginning.

The story so far

Given enough time and finances, a startup in an ideal world tests the waters for its offering. It gauges market sentiments before customizing what it has for the consumer. The AAP emerged from the churn that was the anti-corruption movement in 2011. It got two advantages in the period between 2011 and 2013 – convincing arguments that corruption was uppermost in the Indian public’s mind, and that Arvind Kejriwal, the technocrat-turned-taxman-turned RTI activist, could be an effective mass mobilizer. That, for a red ocean sector, is as good an alpha test as any.

By the time the party was formed, it had recall value among the voters, particularly in Delhi, where almost all the 2011 agitation had taken place and where Kejriwal’s NGO avatar had been based. That was the home ground advantage, not to mention media coverage.

Compromise. The 2013 elections returned the BJP as the single largest party. AAP, the second largest, took Congress support to form the government. For a new product or offering, diluting the brand is not advisable, till such a stage when it can stand on a solid foundation of consumer trust. By allying with the same party the 2011 agitation was against, the AAP was left open to criticism by opponents. It also left it unable to pursue the systemic reforms it had promised.

Premature expansion. A little more than a month-and-half after forming the government, Kejriwal resigned citing interference by the Congress. By then, in early 2014, the Lok Sabha elections were on the runway. AAP announced that it would contest more than 400 of the 543 seats. For a new product, a high-profile expansion into bitterly contested geographies might be premature and might cost both resources and long-term viability. The AAP managed to win just four seats, all in Punjab, and none in Delhi. Its stock had plummeted.

Recovery. A startup is also judged by how quickly its management is able to recover from initial reverses. Political commenters were critical of the AAP and Kejriwal’s gameplan. The party then decided to retreat and consolidate in Delhi, foregoing state elections in Haryana, Maharashtra and other tempting geographies. After the May 2014 Lok Sabha debacle, the party concentrated on the Delhi state elections and entered campaign mode much before the elections themselves were announced. This, for future analysts of the party, will be an important period to dissect, and much has been written already about their strategy.

Leveraging assets. Politics in India, particularly the Independence movement, began with mass mobilization, a bit of history that Congress, which had engineered it in the first place, has forgotten. To prevail against a strong cadre-based party like the BJP and its sister organizations, the AAP sought volunteers from Delhi and elsewhere. The nearly 40,000 AAP volunteers who fanned across the city much before campaigns actually began, who led the social media and ad campaigns included students and working professionals who took a break from their work to contribute to the cause. These were the people Delhi’s voters were to meet in person. These were also people the voters could identify with. A company which has as its face someone identical in appearance or socio-economic characteristics with its target population has a great chance of connecting with the people. Conventional parties, like the Congress, with their high-profile rallies, were behind on this curve.

Long-term commitment. Kejriwal took the first step right by apologizing for quitting as Chief Minister last year, and by assuring prospective voters that he would stay this time around. A consumer takes a long hard look before purchasing a new brand. This consumption decision is easier and more decisive if she is reassured that after-sales service will be present. Nobody wants to purchase a product with an expected lifespan of five years and be left holding it without after-sales support in the intervening period.

Fundamentals. During its evolution, a startup’s management often loses sight of what made the brand emerge and become popular in the first place. So far, the AAP has consistently stuck to the basics: Amenities for citizens; non-communal politics; probity in public life. Consistently remembering the fundamentals does not hurt a brand.

Long-term prospects

These and other specific political factors, not to mention errors committed by rival brands, helped the AAP to one of the most decisive mandates in Indian political history. But that is the short-term story. Like any other startup, the party needs to keep certain indicators in mind if it seeks to evolve in the country and, eventually, occupy the space that old brand, the Congress, is vacating rapidly.

Numbers aren’t always reliable. Sixty-seven out of 70 Assembly seats is a massive mandate. AAP volunteers and supporters are justifiably pleased about it. But that is the equivalent of a single glorious run in the stockmarket – good while it lasts, but the brand is only as good as its last valuation.

In 1989, the Sikkim Sangram Parishad won all 32 Assembly seats in that state. Check the number of seats it has today. The AAP will have to begin with a clean slate for the 2020 Assembly elections regardless of its performance this time. The latest performance is no guarantee of future results. Till the hypothetical consumer buys the product once again, she is just that: Hypothetical. Also, an over-reliance on numbers ignores the other less tangible factors within an organization or market. That is why number-crunchers might make decent CFOs, but never good market leaders.

Performance. Everything depends on how good an effort the AAP makes at delivering its promises. The BJP debacle indicates voters with extremely high expectations can turn away from a party very rapidly. The new government thus has less room to maneouvre and much at stake, just like a new brand which has made its mark in the market at a shorter time than the industrial average.

Redder oceans. As far as expansion is concerned, the AAP needs to factor prevailing conditions in other geographies apart from Delhi. Electorally more valuable states like Uttar Pradesh are redder oceans with far more complex electoral dynamics than the national capital — many more parties, splintered vote banks, divisive and sectarian politics. Each sub-geography needs a customized solution. One brand of toothpaste might be a hit in a certain geography and find no takers in another.

Overall, the AAP has made an impressive start, but to truly leave its mark on the industry called Indian politics, it will have to act like an ambitious startup. More established brands watch such a newcomer with an eagle eye. Such markets are seldom forgiving.

A startup is judged by how quickly its mana-gement is able to recover from initial reverses

Like every brand that has made its mark in the market in a short span of time than the industrial average, there are sky-high expectations from AAP

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Topics: Entrepreneurship, #Current

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