Here's why investor community is kicked about Bansals' role change at Flipkart

The clear demaracation of roles between founding members Sachin Bansal and Binny Bansal of Flipkart was only expected and it was just a matter of time before they exchanged roles or took on different mantles, say analysts who have been tracking the growth of the home-grown e-commerce giant.

Sachin Bansal (Left), Binny Bansal. Courtesy: IBN Live

Sachin Bansal (Left), Binny Bansal. Courtesy: IBN Live

When Flipkart was founded in October 2007, did IIT Delhi alumni Sachin Bansal and Binny Bansal, who worked with Amazon earlier and got together to start the behemoth ever think it would have leapt to the growth it has seen? The humongous growth of the company has necessitated changes in the way the executives have helmed the business.

Investors in Flipkart have grown over the years, some have diluted their stakes and a few have exited it. With Amazon panting close to Flipkart, and the oft-reported IPO that has been 'coming soon' for some time now, it would have been prudent for the founders to have different roles to take on the new challenges the market and the ecosystem offer.

Consider the target set by the company: a GVM of $8 billion, an addition of 100,000 sellers on its platform and annual sale of one billion goods by 2017. This ambitious target could only be achieved if someone is put solely in charge of strategy and another in the daily running of the company.

The investor community welcomed the change in roles at Flipkart and felt it would bode well for the company.

The Bansals' change in roles could be a transition on how they will look at each other and their business roles in the future. It shows mature thinking on the part of the founders, many believe.

The change at Flipkart is not a path-breaking move in India Inc. Infosys has done this before and in their case it has been a well-thought out strategy where founders have helmed the CEO’s role. "I don’t see this change at Flipkart as an anomaly and the bonhomie between the partners will continue," says Ankur Bisen, Senior Vice President, Retail & Consumer Products, Teknopak Advisory Services, a management consultancy firm.

The new role for Binny Bansal will mean he will have to be groomed into it. He has never been the CEO before. So a few rough edges will have to be smoothened out.

Haresh Chawla, Partner, India Value Found and a start-up investor, says that the move will be significant only if Flipkart is trying to become larger than itself. He believes that with the change, one founder will be in charge of transactions to Flipkart's large customer base while the other will focus on consolidating business.

"I think the company with millions of customers will follow what is happening in China where Alibaba, for instance, which uses its large consumer base to sell other products and services to the same consumers," he says, adding that he sees this change in roles at Flipkart as a precursor to that.

Each founder has to change roles so that they get an experience of the other's role. That is one of the ways to grow. With Amazon catching up fast, it was inevitable that this change would have to take place, says Paula Mariwala, Executive Director, Seedfund. Mariwala believes that this could also be an investor-led decision with the investors becoming sensitive to team dynamics and also seeing a lot of changes in the ecosystem which is not quite healthy. Like the extreme case of and the shifts in the ecosystem like layoffs, too, for instance.

Mariwala says that with a lot of heavyweights from the Silicon Valley and others joining Flipkart, it was only time for Sachin to focus on strategy and Binny to focus on day-to-day business. "There is room now, with the phenomenal growth the company has seen over the years, to have an ex-chairman to be involved in strategy side of the business," says Mariwala.

Founders have to change roles as the business grows. Flipkart is echoing that need with the change in roles. A start-up needs different individuals at various stages of its growth, says Sanchit Gogia CEO and chief analyst, Greyhound Research. The one who is in charge of strategising the business at the initial stages takes the company to one level, and then another kind of chief or head is required to operationally run the business on a daily basis.

However, it would be too early to say how the change in leadership roles in Flipkart will impact its business. Bisen says that this change is a good first step and other things like executions, business plans among others have to fall in place.

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Updated Date: Jan 13, 2016 10:57:16 IST

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