Ajit Mohan & Ananth Narayanan On Super Charging A Digital Future | Ascent Conclave 2022

As the world explores the shift to the Metaverse, what is the future of work? How will digital businesses function with the likes of artificial intelligence, automation, and the Metaverse? Will augmented and mixed-reality enhancements become more useful in people’s daily lives? Ajit Mohan, former Country Lead, Meta India, and Ananth Narayanan, Founder, Mensa Brands, hope to uncover some of the answers in this fireside chat. Editorji is the Exclusive Media Partner for this session.

Here is the full transcript of the panel discussion:

Ajit Mohan
Given everything that's happening in the digital world, we thought it would be useful to just talk about what's happening in India. And, with all the changes in technology; For most people here, who are entrepreneurs, some of you are starting up, and others have established businesses, to share thoughts on our journey.

We have a common shared experience in McKinsey, but that was a very long time ago. And since then we have had two very different paths, but both paths were digital, and the transformation in India has been a big part of it, so we thought it will be useful to have that chat. Ananth, do you want to start by just talking about your background and how you got here?

Ananth Narayanan
I'll start a little bit with what I do now. I founded a business called Mensa Brands, which builds brands digitally in fashion, beauty, and home. And before that, I was actually in healthcare with MetLife, and before that in Myntra in fashion. Then before that, 15 years at the firm, at McKinsey, where we actually overlapped but didn't really know each other. So, it's been an interesting set of experiences. Both of us have sort of gone from consultant to, running businesses and scaling them. And so that, I think, could be an interesting topic for us to explore.

The other thing that's happened is over the last five years, multiple things have changed in India. I think just the digital transformation that's happened at the back of mobile phones. But, now just with the internet users that are there, I think businesses are getting built very differently. So, we should probably explore a little bit of that, but excited to have this conversation. And, we can also hopefully make it a bit interactive with the audience and get folks to ask questions.

Ajit Mohan
I'll just explain a bit of my background as well. I did spend a bit of time, when Ananth says The Firm he's not referring to the Mafia, he's referring to McKinsey & Company, and most people who spent time there call themselves as The Firm. In my own background, I did spend a long time in consulting and then a bunch of time in media. I had the opportunity to build Hotstar, and then the last few years in Facebook, which is now called Meta. I'm currently unemployed, which allows me to be particularly articulate and insightful about things that I don't know anything about.

Ananth Narayanan
So, you've had a ringside view to scale up, right? I mean, Hotstar was a startup within a large company and you really sort of helped scale it up. How was that like? And, maybe you can start a bit with the size and scale of just the Indian digital audience, both video and digital consumers, and how you did it?

Ajit Mohan
I think for a lot of you who are looking at what's happening in the Indian economy and we were having this conversation earlier over coffee. If you look at the change that's happened in India, it's happened in a very short period of time. You circle back about six years in 2016, there were only about 50 million people who had access to good quality internet in India that number today is well north of 800 million, and all of that has happened in the last six years.

So what are the things, the work that I had in the last four years at Facebook and earlier; What kept coming back to me is there aren't a lot of countries in the world that have seen the pace of this transformation that India has seen. Not even China has seen this kind of dramatic expansion in access to the internet. In that last six years, you also have two years, where people were in many ways forced to sample a more digital way of living.

I think we all lived through it. I know it was traumatic from many different points of view. A lot of us lost a lot of people. But if you really think about it in terms of an economy where different versions of the lockdown happened, it was in many ways a forced introduction to a more digital way of living, and therefore the India that's emerged out of the pandemic, the India in 2022, and looking at the next decade, looks dramatically different.

And one of the things that strikes me, and this is something that I try and make a point to entrepreneurs all the time - so much change has happened in such a short period of time, companies and entrepreneurs have not fully imbibed how dramatic this change is. They haven't understood the depth of this in terms of how this changed how people behave, how people discover things, how people shop for things, because that 50 to 800 million people expansion in access has happened very quickly.

And therefore, what you see today is that a lot of companies are building for 50 million people or 75 million people. And, if you're really ambitious, you're solving for 100 million people. You're not solving for 800 million people. And, that tells you the scale of the opportunity that is there, in any business that you're in. If you really think about what's happened and start thinking about what it means to be in a country where 800 million people have access to good quality internet, and in many ways over the last couple of years have already been introduced to a more digital way of living. And, then project this over the next ten years, imagine all of the different ways in which change will happen to how we conduct commerce, how we choose health providers, and how we get educated. We are really at the beginning of that journey, but that foundation is already in place.

Ananth, I don't know whether you agree with it. I mean, you had the opportunity to build Myntra in some ways before this big wave happened. And now you're building a company, which is a portfolio of brands right in the middle of the wave. Do you agree with that framing, that we have still not fully understood the opportunity of 800 million people online and the number getting larger every day?

Ananth Narayanan
Absolutely! To maybe build on that, Ajit, I think what's changed, so the numbers, of course, are startling. I just wanted to add a couple of facts to this. So if you look at online retail, all of the e-commerce in India today, is sub 10% of the total retail market, 8-9%. In China, that number is north of 20%, and the same is true in the U.S. The reason this is important is that we haven't seen anything yet. I think the next ten years will be sort of the best years for building out businesses digitally. And, India actually lacks a lot of the physical infrastructure. So, if you look at retail, you look at modern malls, etc., that penetration is much lower than in China or the U.S. And yet, a digital penetration of 800 million is still very, very large.

I wanted to add a couple of interesting facts. When I started in Myntra in 2015, when a consumer first came online, they would usually consume content, buy railway tickets, and then get onto more involved purchases. By the time they bought an article of fashion, which is an involved purchase, because of your size and fit and all that, it was about 18 months. So when a customer came first, to the time when they actually shopped for a complex product online, that period was 18 months. Today, after, by the way, the pandemic, I think consumers have become more comfortable with commerce online, that number is six months. So now every new customer, every hundred million that you add to the Internet, starts doing business online, much much quicker and that transforms that ability to accelerate.

I think that's one thing. The second thing that I think has changed, is the physical infrastructure. You know, we've spoken about this many times. But I think, look, eventually, distribution used to be a big one, right? I mean, you know, to get to 26,000 pincodes in India actually took a lot of effort.

You had to 2-3 tier distribution system. Now with the logistics and supply chain infrastructure that Amazon, Flipkart, Myntra, Nykaa have all built, you know, for a call it ₹140, you can reach any pincode in India with any product in three days. I'm fully agreeing with what you said, I think in the next ten years, I think massive businesses would get built on the digital infrastructure that exists, whether that's the consumers, whether that's UPI, or whether that's the physical infrastructure that gets sort of built around it.

And, I think in the next ten years we'll see massive digital businesses get built, at a scale that we haven't seen yet. I think Flipkart, Amazon, etc. are large businesses, but not really, not if you consider the size of the market, in terms of revenues or consumers. So, I think it's a very exciting time to be building digital businesses in India.

Also read: In the last 6 years, even China hasn't seen the kind of internet access growth India has: Ajit Mohan

Ajit Mohan
I agree with that. And I think you were referring to this earlier as well in terms of scale. And it's a question that I'm sure coming up for many of you, in terms of, if you recognize that the opportunity is big, and if you're solving for even 50 million or 100 million and hopefully 200, 400, and 500. How do you sort of build, and think about building companies or products, that can scale and address the hugeness of India? I have a couple of thoughts from my Hotstar days, but go for it first Ananth, how did you think about scale at Myntra?

Ananth Narayanan
Yeah, I will cover both scale at Myntra and right now what I'm doing at Mensa. The entire thesis, Ajit as you know about Mensa, is really there are 4,000 brands today in India in fashion, beauty, and home, that sell primarily online, and have revenues between ten and 100 crores. I mean, just think about that, there are 4,000 of them.

However, there are less than 30 of them that are north of thousand dollars for the size of India, if you take individual brands and primarily online, therefore I think scaling is a problem. I think scaling is something that needs to be solved, and I think that's a lot of what we are trying to solve.

I think there are three parts to the scaling problem, and I'd love to hear your experience in a bit, but the three parts that I've seen, both in Myntra and now at Mensa, first is technology. And just to make this a little bit real, if you have 20 brands or 25 brands and you have 10,000 SKUs and you have five or six platforms you want to sell, even simple things like how do you catalog, how do you price, what do you do? All of that I think can be automated using technology, and I think there's a lot of tech that can be built that creates non-linear growth. I think that's one.

I think the second is actually building people for scale and you know, building a team ahead of when you actually need the skill. Both in Myntra and now in Mensa, we've got people from Unilever, from many of these companies that basically have seen scale, maybe in the offline context. And they come in and actually help us think about how you put systems and processes in place that can allow for scale.

So the first is tech. The second is really building with people ahead of time. And the third and it'll be interesting maybe as a side to explore, that is capital. I think the availability of capital now, I think there's a lot of discussion around the funding winter, so maybe we can cover that in a bit. But a lot of the capital that is available, how do you actually deploy it? Not perhaps in subsidies, but in brand building and scale and infrastructure and systems.

I think these are the three things that get in the way. And maybe one thing is actually a mindset, which is a little bit of, can you think of building five? So I have this grouse - almost all of Zara and H&M is manufactured between India and Bangladesh, 60%, or something like that. But we haven't built a Zara and we haven't built an H&M yet. The question is why?

I think having the aspirations to say I can build a global scale from India, I think is the fourth sort of reason. But I'm curious, I'm sure you've seen this in Hotstar, and I'm curious how that scale-up happened.

Ajit Mohan
No, I agree with all of it Ananth. I think the one thing that I would add and I'll tell you the story of one of the big cricket matches that we were streaming on Hotstar at the beginning. What I discovered is scale really is a function of the weakest link that you have not solved for. I think when you really sort of look at the brass tacks of what you're building, finally, where your weak will get exposed and it will break when you try and scale anything.

And that scaling can be, you know, when you're starting to build a product fast or hitting it from one to five million or 50 to 100. And my discovery of that was early days of Hotstar. We launched in January of 2015, and we thought, you know, we had a precursor service called Star Sports dot com, which we had run for a couple of years. We thought we had tuned the engine.

We could take a lot of load and we were getting ready for the World Cup in Australia, which was in February, but we had put a lot of thought into it. The general wisdom at that point was that you won't really have a demand of more than a million people trying to watch cricket at the same time.

This was pre-Jio. We hadn't seen sort of the huge rise of the India internet yet. A million people watching a live cricket match which was still very expensive. Mobile data was very expensive. I think it used to cost something like ₹400 to stream a minute of video on a 3G network, at that point. So, you know, if you're solved for a million, it was way above anything that you thought was needed.

And I'm a huge cricket fan, so my wife and I, decided we're going to go and watch the India-Pakistan match in Adelaide live because all the hard work had been done.

The match starts and within the first 5 minutes, I start getting calls from India. About 50% of them being abusive and the other 50 saying what the hell is happening? Because within the first 5 minutes of the India-Pakistan match streaming Hotstar had broken down.

I think it was such a great lesson that we learned early, in the very early days of Hotstar. We had to literally think about looking at the whole chain of streaming a live cricket match from, you know, what were the delivery networks from partners to, how could we make sure that we were being optimized about the Hotstar app itself. But the big Aha moment was that when you do build something that is a proposition, you may not be able to predict how attractive it is, but the market will expose your weakest link. And in this case, at that point, it was the ability to handle a large number of concurrent livestreams on Hotstar. That lesson was learned very well.

Hotstar built the infra way ahead of time, I think, to all of what you were saying Ananth. We thought about it, in terms of how could we organically solve for five and ten, and 15 million people. And today, you know, the peak on Hotstar I think is 35 million people watching cricket at the same time. Just to give you a sense, of order of magnitude, the next highest would be two or three million in North America.

So which is kind of the other part of it, which is that if you look at a lot of what has happened in the last five or six years in India. A decade ago, we used to look at what are the western models that need to be replicated. And largely you had a model that worked elsewhere and you could replicate it and make it work here.

But I think increasingly it's clear that India is setting the benchmark. Whether it's in innovation, products, and services that don't exist anywhere, or the example that I gave, the scale of a live streaming that still doesn't happen in other parts of the world.

How did you think about that? And based on what you're seen in the last two years at Mensa, how much has it diverged from a Myntra or a Flipkart, where at least in the beginning, those were e-commerce models that were being replicated from other parts of the world, versus what are the kind of companies that you're seeing now? And I am starting to see the divergence, where you're starting to see models that are fairly unique to India and you're thinking this could go global from here.

Ananth Narayanan
I think there's a lot of that happening. I think the first era of the internet businesses that got established, I think took models and sort of replicated perhaps for the Indian context, maybe more efficiently and so on. But they were similar, and I think there are many of these stories. I think there are some fundamental changes in the last five years.

The first is, we've spoken about it. I think just the mobile internet penetration and the cost of data is nowhere like the rest of the world. So it's actually an affordable platform. I think the second base layer that's been built is, of course, UPI, which is enabling financial transactions to happen over mobile phones seamlessly with almost no cost, which enables commerce. And now, of course, you have the other public utilities like ONGC, etc. that are starting to play out.

I also think the Indian consumer, this is one part which is infrastructure. The second that's changed is the Indian consumer's starting to leapfrog in terms of what they want, and what their unique needs are. I'll give you an example, most people think that e-commerce is sort of fully from the U.S. to India, and it's just a replica. One of the things that was invented here is cash on delivery. Cash on delivery enabled consumption to grow 10x because it created trust in e-commerce. And now with UPI, you can do cash on delivery and still get paid at the last mile and you solve the trust problem very differently. So now the same cash on delivery which used to have a lot of issues earlier is now a seamless experience because now UPI has come in.

But just with this background, I'll tell you a bit about what, for example, in Mensa we're trying to do very, very differently. I think the belief from the very beginning is you build brands of global quality and global scale and you build from India for the globe. I think that's just different, I think nobody thought you could build a brand.

So a simple example is, if you think about fashion, the hardest thing to predict in fashion is fashion, which is just what trends happen, why does something sell and not sell, and you're left with a lot of waste. Because now we have so much data, and we'll get to Insta in a bit because I'm curious about what you think of it, but we actually now at Mensa crawl through all of the commerce platforms, all of the especially video-based platforms and actually pick out what are the five colors that will actually work for men or women next year. And what that does for us is, it allows us to make fewer mistakes and allows us to build very differently. That's using tech fundamentally, in terms of how to reshape a fairly traditional and old-world industry. I think these kinds of innovations allow us to build companies that are quite unique. For us, the use of technology is in every element, so you almost build a brand building as a product, as a tech product, and that changes how you build global brands. And I think that's very different.

Incidentally, Myntra itself, not the overall Flipkart platform, but Myntra itself is quite unique. And the reason that is the case is there is no model globally that actually caters to a 'Browse' customer. So when you actually shop as an online customer, you have two types. One is you know what you want and you go and search for something and buy it efficiently, which is what people do on Amazon and Flipkart, you want to buy a mobile phone, you want to buy a computer, you know what model, you go and buy it efficiently.

There are browse categories, which is more fashion, beauty, etc., which are built very differently. You build a platform differently because you need inspiration, you need serendipity. So even there, I think the way you build the app, the way you actually build the business has been very different. You look at time spent, you look at inspiration.

I think the next generation of companies that are coming up are catering to very different sort of Indian consumers, whether it's consumers whose tastes have changed in tier-2 or tier-3, which is what Meesho is doing, to brands like Mensa, which are building from India for the globe.

I think next five-seven years, there are going to be some very, very unique models that get built. As you see Hotstar, I think has been certainly that. But maybe one question I had is, how have you seen large MNC platforms adapt and work globally and adapt to local conditions in India? Because for me I think Insta has always been quite an inspiration in terms of what's actually happened. How did that come about?

Ajit Mohan
No, that's true. I think there's a tension there for global platforms in many ways because, you know, platforms like Facebook or Instagram or WhatsApp, in many ways, have been successful everywhere. But they've been global because they've been able to transcend language barriers, cultural barriers, and the intrinsic difference in behaviours between people in Brazil, Indonesia, and India. And yet it's also clear that different countries are starting to fork in different directions.

A lot of global platforms, or try to think of it as, can they build out their products, which originate, where the heart and soul of it could be a country outside of North America or Western Europe, but you're still learning from that market in a way where it can still win globally. And obviously, a great example is TikTok, which is obviously not allowed in India, but it did a lot of its experimentation in China before it went global.

I think you could argue that in many ways the success of Reels on Instagram. Reels is a product that in the early years had a big focus on India. A lot of the short video format, you know, in a country like India, which is clearly video first, it was skewed and cooked and refined in India before it went global. Reels on Instagram obviously is very big in India, but it's very big across the world.

I think there's a balance for global companies in terms of being both responsive to large markets that have intrinsic scale, a market like India. And you want to make sure that you are responsive to what is uniquely happening in the market. But then it's also an opportunity to use that market to refine the product and take it global and win global.

I think that tension is there and obviously, I think there's no question that India stands out, both for the scale of the domestic market, the massive rise of a confident entrepreneurial class, especially in the last five or eight years, a lot of them built around digital and tech. And then I think the point that you were making earlier Ananth, and that finally, we have almost unconstrained access to capital. It's very rare today that a great business emerging out of India won't succeed in India or doesn't have the opportunity to win globally because it doesn't have access to capital, that's unlikely to happen. And that's again a big shift from ten years ago.

Ananth Narayanan
Just shifting topics. One thing I wanted to ask you is, and I'd love to talk a little bit about funding, and you know maybe we should because there are a lot of aspiring entrepreneurs, so we can talk a little bit about funding. But before that, you talked about the tension and you talked about how products are getting adapted.

How are you seeing the Indian consumer change? Because you've seen it from both the Meta world and the Hotstar world, and what have you seen? One thing I find is there are a lot more regional languages that are coming up. There are a lot more consumers outside of the metro cities that are coming up, more women.

What are you seeing at least in the consumer brand world? We are seeing a fairly massive change where branded products are growing dramatically more in Tier-2, and Tier-3 towns because you now have mobile phones and access, and now you can get them the physical product. So language has become very important, and appealing to that customer becomes very important.

So the nature of consumer brands, of retail seems to be changing. Are you seeing something similar as you see the digital journey of consumers?

Ajit Mohan
The changes do reflect the complexity of India. I think that's the uber headline on this. If you look at the 800 million people online, you know that it is all of India. It cuts across states and therefore it cuts across languages. It cuts across different degrees of urbanization, income classes. So all of the differences that were there in the real world is showing up here as well. Except I think the one thing that stands out is, especially given our demographics, given how young the country is, I think the average age is 26, if I'm getting my numbers right. And if you look at the aging curve, we get younger for a few more years before we start aging, which is quite different from almost every country in the world.

I think it's reflected in people's willingness to embrace new things. I think when you have a product or a format that hits the bull's eye, you don't get friction from people resisting adopting something new that is different from how they've done it before. Whether that is how they discover a product, whether that's how they get in touch with a doctor.

We saw for example a massive explosive rise in the use of WhatsApp, during the last two or three years in terms of accessing healthcare information. That's the one thing that stands out. And I think it stands out even relative to most other countries in the world, that there is very little friction to the idea of adopting something new.

You're not constrained by legacy. Obviously, a lot of it is enabled by the fact, that a lot of people who are coming online are younger people. I think that is clearly one place where our demographics is working in a big way to our advantage. But some of the old stuff continues to remain relevant.

I think it's a country that is growing really fast, but it's still a country with a lot of disparity in income. So the classic cliche about you having to get the value equation right continues to be true, I think, even in this new world. But digital is playing a huge role, and that hasn't changed. So I think it's as complex as the country is. But I wonder what are the other things that you've picked up on.

Ananth Narayanan
I think there are multiple Indias for sure. And I think what's interesting is, the digital journey allows you to segment better, to target better, and to deal with them in a more personalized manner, whether it's through WhatsApp, for example, all our order flows are through WhatsApp, the post-order experience and so on. But it allows you mass personalisation, which was not possible before.

At least as I think about our brands, we almost think at the pincode level, what sells and what SK you sell, and therefore, how you think about inventory and product assortment very, very differently. And that level of granularity doesn't exist if you don't directly deal with the consumer. So I also think it's a very interesting opportunity to actually build products that create real value for consumers and being able to personalize both the shopping experience and the assortment for each customer. And therefore that I think could be quite interesting.

Also read: India’s digital landscape reflects the country’s complex demographic: Ajit Mohan & Ananth Narayanan

Ajit Mohan
I have one last round of questions before we open it up. Because you've done this both as a consultant, but even at Myntra, where it was run a bit separately from Flipkart. I'm asking because I suspect there are a lot of entrepreneurs here, who may be working in a bit more of an established environment where they are on the hook for driving something disruptive, but it's happening within the context of a large established incumbent company. What's the advice for entrepreneurs, the interprenuers where they want to drive change, but it's happening in an existing company that may have its own way of doing things or a point of view on the future?

Ananth Narayanan
I think it's a great question. I think what worked a lot in terms of the Myntra journey, at least in terms of the larger Flipkart ecosystem, was keeping the cultures quite different because I think we were trying to serve different consumer needs. The recognition of that led to therefore having a very, so the easy way to think about it is, you got a separate tech team, you had a separate brand team, you had a separate so, you know, it was done such that you isolated it.

Now, the lesson in my mind, if you're actually doing a startup within a larger company is one, I think have a dedicated set of resources, don't have shared resources. Second, actually, proximity is not always a good thing. So actually having a slightly different office, with a different feel makes a difference because culturally it's very different. And third, and perhaps most logical but important, is to get alignment to say this is something I'm going to drive over the next two-three years, and here are the things that I cannot cross, maybe compliance, you're always going to be this way, but here are some rules that I can break. And getting that alignment from either the CEO or the board, I think is important. I think getting these three things really helped us at least in the Myntra journey.

Ajit Mohan
And if I can build on that. In my own experience building Hotstar, which was a challenge of business in the context of a large, already successful established company that was Star India. It had already become the largest media company and in many ways, the task that the team and I had was to build a business, that, if it was successful, was going to challenge the core television business.

And I just want to, I know we're running out of time and maybe we'll address it in the questions, but I wanted to kind of add to what Ananth said, for those of you who are in that place. One of my learnings from that experience was, to know when to fight, and to know when to look for allies. If you're in the context of an established company that believes it has its own playbook for success, you need to have conviction about what are the places where you need to be different, and where you need to challenge the incumbent. And that incumbent may be the business model, the incumbent may be your friends in the larger company, in the mothership. You need to know when that needs to be challenged and when you need to be stubborn about that challenge when you will not negotiate. But you also need to know when is the moment when you need to have allies who will help you move the agenda forward. Because in many ways creating disruption in the context of a very successful, established incumbent, can only happen if you can balance the two.

Because the company needs that disruption to work, but the company also needs the incumbent to work for as long as it can. And when you don't get the balance right is when, either the new idea doesn't take off at all, or you bet so much on the new idea that there isn't enough all to propel the new idea forward. That tradeoff is one thing that I would think is important.

Also read: Ajit Mohan & Ananth Narayanan’s advice for entrepreneurs on building digital businesses

Ananth Narayanan
It's interesting and it's absolutely true. I know we covered a bunch of topics, but in an attempt to summarize, I think we covered, why we're so bullish about India over the next ten years. What are some of the trends that are actually driving it? Second, we spoke a lot about scaling companies. What starting and scaling companies both within and outside an organization and how can you make happen? And third is we spoke a little bit, I think, around, people, culture, talent, team, etc. And what are some enablers to make businesses happen?