Allied Inc. is our first pilot incubator. We began operations on January 1st, 2010 out of Lahore. Our objective is to inspire, train and facilitate entrepreneurs – both inside Pakistan and abroad (when they want development teams in Pakistan). Through this process we hope to develop and refine a practical model for encouraging entrepreneurship within organizations and in the industry and society at large. We hope to document and then share this model freely with the community at large so the model can be replicated.

We envision a three step process for new entrants:

1. Inspire: Inspiration is usually the first step in the transformation into entrepreneurship. It is also the fuel that picks us up on days when things are not going so well. I recall reading the story of Shabeer Bhatia (fonder of Hotmail) and how he built a 400M company in less than a year with no prior experience of running a company or even managing a team. This is more than the budget of many of Pakistan’s cities.

   You don’t need to look too far to see that there is amazing content already available online for this purpose. To name a few examples:

• PASHA is going great work in collaboration with CIO Pakistan to develop a series of interviews with key players in the IT space in Pakistan
• Stanford and MIT have great entrepreneurial content
• Forums like greenwhite.org are cropping up as online communities to discuss startups

1. Educate: Once an individual decides that he wants to start a business, he is usually met with the realization that he doesn’t know how. For young fresh graduates, the gaps are huge. For experienced individuals, gaps lie in the financial management and S&M side.

   Our training focus is in two broad areas:

   1. Business Management content with an entrepreneurial focus. This would be content you would give to someone who has several years of technology experience is now wants to move to a technology entrepreneurial role. These include basic finance and sales and marketing skills.
   2. Technical training content required for a startup. This would be focused on last mile technology content that a typical university grad can take and be ready to work in the industry.
2. Facilitate: Once an individual feels they are ready to take the plunge and start off a business, we aim to provide additional facilitation. The table below details what our incubator currently provides now and our plans for the future

Canned Business template #1 – IT Consulting

Since most of the people in the incubator are IT professionals, our first template for businesses has been around the IT industry. This, we feel can fairly easily be extended to the engineering sector in general. Most of our participants so far have been 30-somes that have significant experience in the outsourcing IT industry and are fairly well aware of the risks they are taking.

The business model is that of a typical offshore IT outsourcing firm. Target markets are the US and the EU. In particular we focus on the entrepreneurial sector in these markets due to the ease of access to this sector directly from offshore. There are however, notable differences in how the organization is structured internally and they are listed here

One of our key themes is to develop a high degree of ownership in people. Academic research details 5 factors that influence the perception of ownership:

Within Allied we’ve tried to implement it using the following policies:

1. All policy making is based on a shared vision of fairness. We define fair as values of greatest combined mutual interest.
2. Employees have unusually open access to information.
3. Financial pay-off: In many cases, the companies we host are also employee owned. Consultants get paid what the clients pay for them (minus overheads). This leads to great value for both the employees and their consultants.
4. Greater independence: all employees are free to experiment in their free time and are open to solicit other companies and customers for business. If they succeed in bringing in business, they are free to setup their own teams or businesses the way they see fit.
5. We present no grand plans or strategies for the future. Our growth comes ecologically depending on what the employees of the companies are most excited about. There are no grand plans or long term strategies. We encourage constant experimentation with delivery and sales models guided by the training options available internally as a training portal.

[Note: To give credit where it’s due, most of these ideas are derived from Dr. J Robert Beyster story of how he started SAIC. The company was started in 1970 with total revenue of $250k. By 1990, they were doing $1 Billion, which grew to $8 Billion a year in 2006. Our operating philosophy derives heavily from the guiding principles for SAIC.]

Challenges

• Slow decision making: Given the collaborative and democratized nature of our decision making process, it is slow. We need to spend a lot of time developing consensus and doing due diligence on a lot of issues. This is almost always slower than a ‘saith’ making spot decisions and at times speed of making decisions matters more than making the absolute right choice.
• People issues
  • Skepticism: Amazingly, we have had a lot of resistance from people in accepting the idea of a not-for-profit firm. Most of our clients show skepticism on the validity of our claim. More surprisingly perhaps, hiring new talent is even harder. We get the “what are you getting from all this then” question a lot. This is however natural since few, if any, references are available for people both here and abroad.
  • Behavioral Inertia: Another related issue is the lack of people to take on responsibility. Most of our hires are senior people with 7 or 8 years of experience in the local services industry. During that time, their company environments groom them to take as little ownership as is absolutely necessary. Participate only when absolutely necessary and that doing better will not necessarily lead to better reward. We’ve found that this re-adjustment process takes a while to sink in for most people.
  • Strange definition of risk: People in Pakistan have a strange definition of risk. I once interviewed a person who told me that ours was a small setup and it was a big risk for him to join us because he wouldn’t know how long we’d last. I offered to give him a few months advance salary and extended notice periods for termination but he wasn’t very interested. I asked him how much guarantee he had from his current employer and if he knew how well that company was doing internally. I asked him if his current employer had a million dollars in reserve but chose to shut the company down anyways, would he have any control over it. He got the point, but he still didn’t join us J.
  • Patience: Being a Pakistani, having your dreams of change shattered by every successive government. Being young and full of ideas and no real outlet for them and having an entrepreneurial flame burn in you are a really bad combination. Many times our patience for results is that of a hungry two year old in front of candy. This is however a happy problem. We would rather have people too eager for change than those who have given up on it.
• Lack of guidance: One of our major issues is not having a reference business model for incubation and in particular non-profit/cooperative consulting firms. There are few of these out there in the world and even fewer that are openly documented for references. Hence a lot of our learning on incubation is experience based.
• Making the training unit break-even: One of our key challenges on the training front is monetizing the effort required to build and maintain the training portal initially. Although technology training remains a major hurdle for the growth of the local industry, most companies are not willing to act on it. Our attempts to form an industry fund to develop the training portal have gone has so far met with stalling tactics. This lack of funding has made the training development slow and stuck in a chicken and egg situation.
• Avoiding external funding: Since one of our basic objectives was to setup an incubation unit that a small community itself can develop, we adopted a basic policy of no external funding. All the capital expenditure is made by the employees themselves. This has the positive side of increasing the ownership level of people but making inventory management and accounting all the more complex. It also challenges us to create aggressive growth since some of that (especially in the services industry) is heavy on capital investment when growth kicks off.
• Making the P&L break-even: Being a small company, the biggest challenge of course is always to make ends meet at the end of the day. With all the energy spent on the incubation and consensus building process, there are days when there is little time for the things that actually bring in money. A lot of this has to do with the fact that we are in early stages and systems and processes are being streamlined. However, our biggest challenge remains stabilizing our sales and delivery units. Only that will enable us to survive long enough to call this a success.
• Creativity and innovation: Understandably our business models are designed to be low risk, predictable stepping stones into entrepreneurship. This, by design, moves away from riskier, highly creative ideas. Our thesis here is that if you have enough free people (financially free and free in thinking) in close proximity, creativity and innovation will occur naturally. While innovation and creativity are not out immediate focus areas, we want to be able to assist people in that to whatever extent possible.

Concluding remarks

As a percentage, too many of our youth are groomed to become docile, white collar employees and to suppress their ideas for ‘practical reasons’. In the long run, this is bad for the nation and the people themselves. Allied is our attempt to try and change that and develop nurseries of entrepreneurship in Pakistan. To develop a mindset that looks at problems as opportunities but with a realistic, long term lens. These are still early days however for us and we have a long way to go to prove our point. Our biggest challenge is perhaps to survive long enough for us to bring about perceptible change.

If you feel you can assist in any way or if you have ideas on how we can do things better, please share your feedback with me at[email protected]. Our website is located at www.alliedc.com where you can find details of our specific IT offerings.