AURORA: How is Creative Chaos positioned as a company?
SHAKIR HUSAIN: We are a technology group. Technology and software has always been the DNA of this company and that is what the differentiator is. Technology changes so fast. With traditional advertising, you have print, electronic, outdoor and BTL – fairly standard platforms. With technology, the platforms change so fast, you have to keep evolving, which is what we have been able to do. We started off in 2000 with two people; today we are about 400 plus people, across seven locations.
A: Where are those locations?
SK: Karachi, Lahore and Islamabad in Pakistan; Boston, San Francisco, London and Dubai. One of the things that really helped us is the fact that we had work from outside Pakistan from the very start and this has given us the luxury of being able to choose who to work with and at what price. In the last five years, about 100 digital agencies have opened up in Pakistan and as a result commoditisation has set in and everyone is playing on price. We have always been able to afford not to take up every project that came our way – and that has been good for us.
A: What do you mean by commoditisation in this context?
SK: For example, if someone wants a CRM, they will have 50 choices in front of them, all with very different price points; one company may charge as little as $15,000, another at the top end may quote two million dollars. You cannot compare them because they will give you a very different result, so it boils down to pricing; people who want quality will go and get it, but most people will look to save a buck. So in Pakistan, we do have that luxury where we can dispense with having a software sales team; the leads come, we respond to them and that’s it. However, we have a sales team outside Pakistan, because companies there are willing to pay a premium.
A: Who are your clients in Pakistan?
SK: Locally we have pretty much worked with all the larger players. Essentially, when someone is looking for a 360 digital agency, they come to us. We are one of the oldest and probably the biggest in terms of size and that allows us to do a lot for our clients.
The breadth of experience we have had with our customers has also helped us learn. When our team in Karachi works with our team in Seattle or in London (or wherever) they learn a lot. Creative Chaos is known as a kind of digital university.
A: Is the business primarily marketing communications in orientation?
SK: The digital agency is. However, the business is much larger than that; it has a software side as well as a venture side, where we invest in start-ups and help them grow. We have taken some bets in ecommerce and some in media. For example, we recently invested in a platform called Food Fusion; in just four months they have achieved the same reach as BuzzFeed India. They have 15 million unique visitors every single month. In my opinion, media consumption is going to go towards online videos.
A: Are these ventures mostly Pakistan based?
SK: No, we are geographically agnostic; our bets are out of the US as well as Pakistan.
A: How do you identify them?
SK: We have been in business for 16 years, so we have a reputation in the market and we have always have been very generous with our time which is why a lot of young entrepreneurs come our way. We toss around ideas; we are often the sanity check on the technology side, and if we like a deal, we may end up investing in it. In the past seven years, we have probably invested in 15 to 18 companies in various ways. Every year about 40 to 60 deals come through our doors, we sift through them and we will possibly be interested in four to six. We are early stage investors; we work with entrepreneurs who either have an idea or a very basic MVP (minimum viable product).
A: Statistically, what is the lifespan of these start-ups?
SK: About 90% of all start-ups end up failing. As an investor you know that 75% to 80% of the stable will fail and about 25% will make it to the next round. We encourage young entrepreneurs to fail fast, because if it is not going to work, it’s better to move quickly on to the next thing rather than watch it die a slow and painful death.
A: Where does your return on investment come from?
SK: Exits – i.e. when the start-up is acquired. In Pakistan it can be a challenge because exit opportunities don’t really exist. In the tech space you are not investing for dividends, you invest for the big hit, so to speak.
A: In Pakistan, which aspect of the business is your biggest source of revenue?
SK: It would be digital and software, although probably software makes more money than digital. The opportunity costs when it comes to working with local customers are high, so typically even our software guys are workings on projects outside Pakistan. Our US company has a different angle altogether. We deal with far more mature companies. For example, recently a company paid us $100,000 just for research, before they did the User Interface (UI) and user experience overhaul of their site. This is what they were willing to pay just to understand what their users think of certain features.
A: Which kinds of companies approach you in the US?
SK: We work with companies such as Amazon, eBay, GoPro, Groupon, Sears and Staples on projects that range from software and product development to agency work, such as redesigning their website or reviewing their mobile experience. Design in the post-Apple world has become the cornerstone of a lot of businesses and companies abroad are invested in paying for good design and ensuring that their user experience is superior to that of their competitors. In these markets we compete with the big boys such as Accenture, Digitas and SapientNitro. The US market is not new to us because we have been operating there for 16 years. A significant portion of our revenue has always come from outside Pakistan and that has been a cushion for us; if we did not have that we would have to bend backwards to close a deal. We have the flexibility and elbow room to tell customers that we may not be the best fit for them and they may want to look elsewhere.
A: From where do you draw the skill set and experience to do this?
SK: We have a creative director based in San Francisco and we have a fantastic brand design team both in and outside Pakistan. One of our differentiators, especially compared to the local market where a lot of our competitors are former traditional ad agency folks who have gone digital, we have a technology team that can bring a great design idea to life, because they understand how these things work, what is possible and what is not – and it really does come down to execution. The breadth of experience we have had with our customers has also helped us learn. When our team in Karachi works with our team in Seattle or in London (or wherever) they learn a lot. Creative Chaos is known as a kind of digital university. The first port of call for agencies is to poach folks from us. Some folk have been with us for more than 10 years and they know a lot! You can put them on a call with people anywhere in the world and they know their stuff.
Most smart people work on side projects, whether it is freelance work or a venture they are tinkering with. If you want to retain smart people, you have to encourage this, because they are going to experiment and they have a lot of avenues open to them, so trying to curtail that in is probably not the smartest thing to do in this business.
A: Do you find that in this business you have to keep playing ‘catch up’ because the technology changes all the time?
SK: No, and that is where our technology ‘DNA’ comes in. Every year there is a new programming language which will become the flavour of the moment. The trick is to hire smart people who have the fundamentals and who are passionate and invested in this space, who keep retooling and have the ability to learn new frameworks and technologies quickly. The internet has been a great leveller and some of the best people we have are self taught; they taught themselves by reading stuff online, watching YouTube videos, and taking up online courseware. The tools keep on changing, but if you understand one tool, you quickly become familiar with another. Our main focus is on the fundamentals; how people think about things. When you design for digital, you have to look at 50 different things that you would not look at with traditional design. An app will have a business objective and you have to be able to marry those objectives with good design – and that is where the secret sauce comes in. You cannot just conceptualise something, sell it to a client and then outsource it to two kids sitting in a basement and think that they will be able to put it together the way you envisioned it.
A: In terms of new design or product development, who owns the copyright to the work?
SH: As a technology company all the intellectual property developed at Creative Chaos belongs to us. However, we have a lot of folks who come up with ideas and want to go and do their stuff and if we like the idea, we encourage it. Within our digital agency, we do a lot of R&D and a lot of people from other teams come in, collaborate and come up with new stuff. Very often, we have young folks who want to do their own thing within the company and there have been instances where we have invested in their ventures. Most smart people work on side projects, whether it is freelance work or a venture they are tinkering with. If you want to retain smart people, you have to encourage this, because they are going to experiment and they have a lot of avenues open to them, so trying to curtail that in is probably not the smartest thing to do in this business.
A: Is the churn within technology companies higher compared to other companies?
SK: In terms of the industry we are in, it is relatively low at Creative Chaos. However, it is in the nature of this business for people to move on. In the technology space you will always have people going off for better opportunities. You see a lot of people moving from Pakistan to the Middle East, the US, Canada and Australia. Then there are instances where folks will decide to work from home and make $10,000 to $15,000 a month and it’s hard to compete with that!
A: How do you maintain optimum quality?
SK: We have an internship programme as well as a management training programme. Within our HR team we have a talent acquisition team which is constantly working on bringing people on stream. Our internship programme is very structured. Typically we take third or fourth year students, although we will also make space for exceptional candidates even if they are in their first or second year. They intern with us for six weeks and it gives us the opportunity to identify future stars – we then get in touch with them closer to their graduation date and make an offer to come work with us. The management training programme is even more structured and lasts for about a year, and we rotate people in different teams to see who makes the cut. But yes, HR can be problematic, but because we have offices outside of Pakistan we are able to access talent there as well, which is great because we are looking for the best folks to do the job.
A: Given the pace of technology, could a company such as Creative Chaos become obsolete?
SK: I hope not, but it is possible. This is a fast moving business. Kids are interacting with technology in a completely different way compared to people in their mid-20s and they in turn interact with technology in an equally different way compared to people in their mid-30s. We often talk to our customers about how to future proof their business, which is why I always advise against putting all their money into Facebook. There is so much else out there, including owning your own platform and creating your own ecosystem. The experiences are going to be different. Mobiles have changed the way we consume media; even locally the traffic is driven by mobile devices as opposed to tablet or laptops.
We look upon Creative Chaos as the place that pays our bills and then we do lots of fun things on the periphery. We have the brand where we don’t feel the need for a foreign agency element. Some of our larger customers have also expressed an interest in buying a strategic stake, but so far nothing has attracted us to this kind of arrangement.
A: Does this mean it is going to be increasingly difficult to work out what works and what doesn’t in the digital space?
SK: Analytics really help and digital gives transparency. We are among the very few companies that give dashboard access to our customers; we show them how we spend their money and what are the results achieved. Most companies do not give that access. Yet, for customers to be able to account for every last cent they have spent is tremendous. Spends regionally and globally are all moving to digital; Pakistan was one the last holdout markets, but I think the regional HQs of many of the multinationals have decided to juice up their digital spend and everyone is having to retool. It’s good to see multinationals sending their people off to various courses and seminars. A couple of years ago, when we first began a relationship with one of our clients, I insisted that their management team spend six hours with us so that we could give them a one-on-one session to help them understand what technology and the digital space could do for them.
A: Earlier we spoke about exits and buyouts; have you ever thought about that in terms of Creative Chaos?
SK: We have had a lot of offers over the years; in fact a large foreign-based ad agency was interested at one point. Then my partner and I thought about what would be that number that would satisfy us. They wanted to buy a stake rather than do an outright buy and we thought that unless it’s a sizable amount, we were really very comfortable with how we work. We look upon Creative Chaos as the place that pays our bills and then we do lots of fun things on the periphery. We have the brand where we don’t feel the need for a foreign agency element. Some of our larger customers have also expressed an interest in buying a strategic stake, but so far nothing has attracted us to this kind of arrangement.
A: What about the kind of buyout where you could then afford to simply retire?
SK: As an entrepreneur you cannot be emotional about these things and if there were a really solid offer on the table we would take a look.
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