Mr. Taneja's decision to leave Samsung raises questions over Micromax's management structure, highlights the company's arrival on the global stage and also brings up the issue of no-poaching policies
The Indian smartphone industry has been a game of musical chairs over the last one year. The most recent and surprising chair to change hands is Vineet Taneja, the former head for Samsung in India, who has jumped ship to join Micromax as its new CEO.
Is Mr. Taneja moving the beginning or the ending of the game? A few quick points:
The continuing Micromax structure – Micromax, like its home-grown rival Karbonn, follows a curious management structure. The overall management team comprises of two different sets of people. There are the group of founders—Vikas, Rahul, Sumeet and Rajesh—who stay in the limelight, give media interviews, and generally look after different parts of the company from a long-term perspective. Rahul is the long-term visionary, Sumeet is the technical man and Vikas is the market strategy whiz. (Rajesh is the one who must no longer be named; he’s in jail over a spot of bribery)
The other group is a bunch of professionals who actually spearheaded the company’s smartphone growth: they look after sales, build up the retail chain, manage the supply chain, and handle advertising campaigns. The first group of professionals -- Deepak Mehrotra, HTC's Ajay Sharma and Sony Ericsson’s Khaja Muzaffarullah-- was installed back in 2012. This group slowly came apart by the end of 2013, Mr. Mehrotra and Mr. Sharma both quit to join different companies, with most people thinking the job had been done ( Micromax’s smartphone growth had been kick-started).
However, with the appointment of Vineet Taneja, Micromax (or to be more precise, the company’s investors) has apparently decided to build yet another professional management team. This can mean two things: One, the co-founders of Micromax are (still) unable to move into more professional management roles. The second is that this is a vote of no-confidence by TA Associates and Sequioa Capital (the PE backers of Micromax who have long had issues with the company’s corporate mis-governance).
Both options are unsettling for the company’s future. It also means that Mr. Taneja may be serving a short-tenure at Micromax; no more than two years.
All the world’s a stage- While Mr. Taneja choosing to work at Micromax cannot be compared to Xiaomi stealing Hugo Barra away from Android, the intent behind the gesture is still the same. It’s an open secret that the growth of Micromax and Karbonn has coincided with a chipping away of Samsung’s market share in the <Rs.20,000 smartphone segment and Micromax hiring Vineet Taneja is a sign that it intends to dethrone Samsung.
More importantly, it doesn’t bode well for Samsung that it can lose its India head to a company that it often describes as not being a competitor at all! Hiring Vineet Taneja boosts Micromax’s sense of growing legitimacy and will hopefully wash away some of its more murky history.
No-poaching policies – It’s a little surprising that there are no formal, or informal, agreements between smartphone companies that restrict the poaching of senior executives. Or even if there are no such agreements, the fact that there are no contracts that prohibit a senior executive from joining a rival within the space of a few months is a little surprising.
By all accounts, Mr. Taneja put in his papers, at most, a few months ago. Is Samsung not worried about the trade information/company secrets he carries with him? (If they aren’t, it reflects on how good Mr. Taneja really is) When Scott Forstall was pushed out of Apple, it was widely speculated that he was given a hefty severance package in exchange for not joining a rival technology company for at least a year. A sort of non-compete clause if you will.
For the longest time, Samsung and LG had no-poaching agreements between themselves; a deal that extended to both company’s India operations. It may be that Mr. Taneja’s move will usher in an era of ‘garden, no-compete leaves’ of absence.
A vanilla formula: Last, but not the least, this development signifies how utterly formulaic the Android smartphone market is in India. It no longer truly matters whether your phone is HTC or Lenovo or Samsung or Micromax, and it certainly no longer matters to executives who work at these large companies.
Selling a Samsung phone is not too different from selling a Micromax phone. In the end, profits are realized from more mundane things such as control over manufacturing operations, whether one keeps design in house, and how quickly one can control inventory rotation. There are India-specific factors, such as the dual-sim craze, but these are competitive opportunities that only come by once in a few years.