Flipkart’s other Bansal comes to the fore
Will Binny’s data-driven decision-making skills and calming influence help his firm maintain its momentum?
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At an open house meeting in December, a Flipkart employee asked Binny Bansal, the company’s billionaire co-founder and chief operating officer, whether he was leaving. At the time, e-commerce circles were rife with rumours that Bansal was on his way out of Flipkart, along with one other senior executive (such rumours are commonplace in the start-up world).
With a dismissive laugh, Bansal answered the employee, “The only people who can ask me to leave are the board members, and they seem to be pretty happy with me. I am not going anywhere.”
Given recent developments, Binny’s reply was an understatement.
On Monday, Flipkart named Binny as its new chief executive officer (CEO), replacing his long-time friend and business partner Sachin Bansal, who’s moved on to the role of executive chairman of the company.
The move, which was kept a secret even from many of the company’s senior employees, comes as a surprise, especially since Flipkart undertook a massive management restructuring less than a year ago. Last February, Flipkart split into three units, or businesses, giving Binny charge of its supply chain function. Sachin was to look at new initiatives, chiefly, advertising, while its core business of online retail and marketplace would be run by Mukesh Bansal, Myntra’s co-founder who joined Flipkart in May 2014 when it bought the online fashion retailer.
That structure was changed on Monday. Flipkart’s backroom mastermind and its other Bansal, Binny, will now control all day-to-day responsibilities as CEO. The company said Sachin will now “provide strategic direction for Flipkart, mentor the senior leadership of the company and look for new investment opportunities.” Mukesh Bansal, who will report to Binny, continues to lead the commerce platform and will also oversee the company’s fledgling ads business.
Binny takes over at Flipkart when it is potentially facing its toughest test, even for a company that is all-too-familiar with volatility and adverse market conditions. Flipkart is engaged in a high-stake market share war with the local unit of Amazon.com Inc. and Snapdeal (run by Jasper Infotech Pvt. Ltd), the outcome of which will help shape the future of India’s entire start-up ecosystem.
If Flipkart can maintain its market leadership and stave off Amazon, for whom the Indian market is very important, it will be seen as a strong validation of local entrepreneurship. If Amazon, however, becomes No. 1 over the next two to three years, Flipkart’s lofty valuation (currently at $15 billion) may be eroded, destroying billions in investor wealth. The ripple effect will be disastrous for India’s start-ups.
Over the course of last year, Amazon gained market share in India, at the expense of both Flipkart and Snapdeal, India’s second largest e-commerce marketplace, according to publicly available data and several company executives. Exact market share figures aren’t available as Flipkart, Snapdeal and Amazon India are all private.
The logistics footprint of Amazon India grew three times to more than 2,100 cities and towns in 2015 as the online marketplace invested hundreds of crores of rupees to make its delivery service a key differentiator, Mint reported on 22 December. Since Amazon CEO Jeff Bezos promised in July 2014 to invest $2 billion in India over time, the company has pumped in more than $700 million into its operations here, regulatory filings show.
To be sure, Flipkart is still the market leader by a long distance.
Yet, Amazon’s tech and logistics expertise as well as its deep pockets are formidable and the company is clearly catching up fast with local rivals.
Flipkart has tasked Binny with ensuring his old employer Amazon doesn’t upstage his start-up.
The new CEO
Binny, a Chandigarh boy, studied software programming at the Indian Institute of Technology (IIT), Delhi. After college, he worked at research and development firm Sarnoff Corp. before joining Amazon as a software engineer in January 2007. Within nine months, he quit Amazon to start Flipkart with Sachin, his college classmate and Amazon colleague.
The two Bansals, who are unrelated, started Flipkart with Rs.5 lakh of their own money. From the time the company was founded in 2007, Sachin was its designated leader and public face, while Binny was the nuts-and-bolts, operations chief.
Still, the 33-year-old Binny is not new to the actual responsibilities of a CEO.
When Flipkart was fighting for survival in the start-up winter of 2012 and 2013, Binny often ran the firm on a day-to-day basis as CEO while Sachin was out trying to convince investors to bet hundreds of crores of rupees on an unproven company.
In those two years, Flipkart was also in the middle of a gruelling government investigation into allegations that it was violating foreign direct investment (FDI) rules.
The status of that investigation is unclear. Given the time-consuming nature of dealing with government officials and raising money from investors, Binny became the go-to guy at Flipkart during that time, though Sachin was still closely involved in the company’s operations.
“From 2012 to early 2014, Binny was running the show. At that time, Sachin had to travel extensively. The ED (enforcement directorate) investigation was on in full flow and fund-raising was also difficult, so that was taking up most of Sachin’s time,” a Flipkart employee said, speaking on condition of anonymity.
While the decision to appoint Binny came as a surprise, several people who have worked with him say he’s the best candidate for Flipkart to run what has become a large, complex company with more than 33,000 employees.
At nearly 6 feet, Binny—with piercing, green eyes, a messy side parting and a measured smile—comes across as an easy-going but reserved person. He’s calmer, more tactful and “data-driven” than Sachin, who has a short temper and is known to be a more intuitive decision-maker, these people say.
For instance, last year, Sachin was pushing Flipkart into becoming a mobile-app only platform. Already, Myntra, Flipkart’s online fashion unit, had shut its desktop and mobile websites and become an app-only platform last May. By that time, Flipkart had also shut its mobile website. Sales at Myntra dropped over the next few months, benefitting rivals Amazon India and Snapdeal.
Yet, Sachin was convinced that Flipkart should go ahead and become app-only, the people cited above said. He reasoned that for Flipkart to stay relevant, the company must shed its traditional mentality of a website-based e-commerce firm. Or, it may be upstaged by firms that offer a superior experience on the mobile, he reasoned. (A majority, though not nearly all, of online shopping in India is expected to take place through smartphones over the next three years.)
Finally, investors and several senior employees who were opposed to the app-only move won, the people cited above said. With Amazon snapping away at Flipkart’s heels, the firm decided it couldn’t risk alienating customers even in the short term, these people said. In November, Flipkart re-opened its mobile website, while Myntra is considering doing the same.
All this while, Binny didn’t openly articulate his opinion of the mooted app-only move. Even inside the company’s offices in Koramangala and Outer Ring Road in Bengaluru, employees weren’t entirely sure if Binny was for or against it. He didn’t oppose Sachin, at least not in front of employees, nor did he advocate it nearly as strongly as Sachin and Mukesh.
Binny, who was born to two government employees, lives with his wife, Trisha Bansal, in an apartment complex in Koramangala, a few minutes’ walk from Flipkart’s headquarters. His wife is a homemaker and they married early.
“His wife helps anchor him. He’s totally devoted to her and the stability at home has clearly rubbed off on him over the years,” a former Flipkart employee said.
Over the past two years, Binny, who likes reading (one of his favourite authors is Salman Rushdie) and playing basketball and football, has worked on improving his communication skills and other leadership qualities, the people cited above said. He signed up for personality training and leadership coaching in 2014, according to people who work with him. That year, Binny, who was previously a hardened workaholic, started to take vacations and strived to pursue his other passion, sports.
“In 2014, he made the extra effort to evolve and find some work-life balance. All of this has helped him become a more mature person. He’s still a very hard taskmaster, but he’s (also) the best at Flipkart in terms of executing strategy and getting things done. His decision-making is very data-driven and he holds people accountable on the right metrics,” a former Flipkart employee said.
He takes at least one, sometimes two, vacations a year.
Over the past 18 months or so, the pressure of delivering heady growth and heading India’s most valuable e-commerce firm seemed to get to Sachin, the people cited above said. Often, he would lose his temper and scream at employees who displeased him, they said. During this time, Binny, who was either driving operations or heading supply chain, was the calming influence within Flipkart.
Under Binny’s tenure as supply chain chief, Flipkart regained some of the ground it had lost on its once-famed customer service. The Flipkart co-founder increased use of technology in warehouses and decision-making, hired several smart, accomplished supply chain executives and sharpened the company’s focus on delivering products on time. Over the past year, the supply chain has become Flipkart’s most stable unit in terms of leadership strength and consistency in performance.
Binny will need to prove his entrepreneurial mettle all over again for Flipkart to maintain its dominant position. Since early 2014, Flipkart’s gross sales have grown more than seven times to an estimated annualized $7 billion, while its valuation has soared more than six times to $15 billion. Binny and Sachin have, in turn, become billionaires, with their potential wealth estimated at $1.3 billion, according to Forbes’ 2015 rich list.
Flipkart’s phenomenal growth both triggered, and was boosted by, the investor rush of 2014-15 into Indian start-ups. Over the past few months, however, investors have turned cautious because of a mix of global macroeconomic factors and concerns about the unproven business models of start-ups.
Prompted by Amazon’s speedy growth, questions are now being asked of Flipkart: can it hold off Amazon? Can it find a sustainable business model? Can it justify its lofty valuation? Does it have the ability to pull off a successful initial public offer (IPO)?
The Flipkart of today is far removed from the company that started out in 2007 as an online book seller. It sells all kinds of products, including smartphones, shoes, apparel, furniture and large appliances. Its corporate structure is a maze reminiscent of older Indian conglomerates. Last year, it began effecting fundamental changes in its business model. Flipkart decided it would shift to the marketplace model from an inventory-led business. At the same time, it is trying to move to an ads-driven model. It’s far from clear if these complex shifts will yield the profits that have eluded Flipkart and deliver high sales growth at the same time.
While Binny has the task of keeping Amazon at bay and figuring out a money-making business model for Flipkart, he may at least not have to worry too much about the company’s expected IPO. That job may primarily be Sachin’s, the people cited above said.
And by all accounts, Sachin and Binny still remain close.
“They’re very close and trust each other 100%. They’re still investing in start-ups together and I’d be surprised if things change after the reshuffle,” a former employee said.
In an interview in September 2013, Sachin referred to his relationship with his co-founder as well as their respective leadership traits.
“Having complementary skills is also important. Binny is able to analyse a lot of data, which I sometimes find difficult. Whereas I come from the other way—sometimes I form a hypothesis and then look at data,” Sachin said then.
He added: “Trust and understanding between founders are very important. Mistakes happen. There are disagreements and sometimes I would decide to do something because I was so passionate about it, but it turned out to be the wrong decision. What we’ve been able to do is not blame each other for mistakes. If we’re not able to come to an agreement, the guy who’s more passionate about the issue will take the decision. But we never do things like, ‘I told you so’. That’s wrong, even if you had told the other so!”
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