INDIAN INSTITUTE OF MANAGEMENT, BANGALORE

Term-III, 2021-23

Case analysis: Basket Options

New Product Development

Prof. G. Prabhu

Case submission
Submitted on 11th January, 2022

Group N
Ayushi Agarwal 2111302
Rutuja Shinde 2111057
Aditya Kanthraj 2111325
What were the challenges faced by Basket Option?
1. Lack of Financial industry expertise and knowledge: Initially Basket Option Pvt Ltd started
with investing in a range of stocks which soon fell rapidly, and Abdul Sait had not analysed the
stocks properly. Due to lack of financial industry knowledge, Basket Option did not study the
stocks well and straight away invested. Even after advice from Dr. Roychand, Abdul did not rely
on the portfolio and went on to sell the stocks, which incurred huge losses for company.
2. High risk-taking attitude of the Founder: Founder heavily relied on trial-and-error method or
his instincts rather than proper study and analysis of the stocks. Due to is risk-taking attitude, firm
incurred heavy losses initially. Moreover, after diversifying the portfolio, there was huge
expansion in short time, which was very dangerous.
3. Difficulty in collaborating with banks: When Basket Option started with Education Loans to
address pain point of delays in loan approvals and procedures, they faced with challenge to
collaborate with the banks. In order to reduce processing time from 3 months to 1-2 weeks, they
had to convince banks and fasten the procedure. It was a challenge to negotiate with banks and
design a standard procedure to arrive at the application process and relevant documents.
4. Industry profitability levered on long-term investments: Basket Option only relied primarily
on short term investments. But the challenge posed by the financial services industry for small-
scale players is that profitability is heavily hinged on long term investments.
5. Issue in employee recruitment and retention: Basket Option, initially looked for fresh
graduates as they were available for low salaries. But, employee retention was a major challenge
for Basket Option as these fresh graduates after receiving training from company easily switched
to other companies that paid high salaries. The company faced lack of expertise as it was unable
to pay high salaries to experienced people.
6. Initial scale-up strategy posed execution challenges: Basket Option went on to expansion very
fast and opened about six branches without any structure and analysis. This incurred huge losses
as trained employees were not available and sudden large scale recruitment was costly. This
expansion also caused increase in marketing expenses and lower clients acquisition rate as fresh
graduates were not enough capable.

What are the products of Basket option, which pain points did they address and analysis of
product success?
S. Products Pain-Points Potential Metrics to Scope of Alternatives/
No addressed Threats Target Success Recommendations
i. Student Inaccessibili PolicyBazza Annual High demand Comparison of
Insurance ty of health r website Customer customer various insurances
and displays Acquisition segment, high with premium
accidental comparison and success rate details should be
insurance between Retention expected available on
for students various website or app,
due to high insurances cashless payments,
premiums available. etc.
ii. Claim Delay and PolicyBazza Annual High demand Launch app with
Express complexity r and Customer as claim cashless payments,
in Insurance Securenow Acquisition processes take advertise with
claim offers and time, broad- statistics of claim
process vibrant Retention, based process time
options No. of customer
among claims, targeting
available Lead time required to win
for claims
 iii. Education Delay in Indian Loan Annual Intermediate Launch app for
Loans education Consultants education demand, can students to given
loan specialize in loans target on multiple loan
processes this sector provided, students going options, advertise
and signed abroad and can with loan process
simplifies students, also help them times, give
the research time of loan with research specific to
process processing investment every student
options
simultaneously
iv. Stock Losses in FISM and Enrolled Highly Offer online
Market stock DISME was students, demanding courses, guide
Institute markets, in this portfolio of segment, high students to live
lack of segment students margins invest, record
knowledge, since 1996, before and expected testimonials and
no such offered after publish on website
institute courses or app.
was with diverse
available modules
v. Red Online Many well- No. of NRIs Less Can explore other
Lounge investment established enrolled, demanding segments like
guidance firms are portfolio sector. corporates, high
for NRIs already analysis paid individuals
doing well, before and and not restrict to
high after the only NRIs
expertise guidance,
with other cost of
competitors acquisition
vi. Street Software Different No. of Intermediate Launch an app for
Smart for established employees demand, low corporate
corporate firms are enrolled, chances of employees which
employees already in investment customer can be used
to build this market amount, conversion anywhere, give
diverse and with specialized
heavy experience recommendations,
return and record testimonials
portfolio expertise and publish them
since years on website or app.

What are the potential threats to the company Basket Options?

Indian stock markets and equities are more volatile than most of the markets in the world and being
in this business as a small firm will pose its own risks. Basket Options being a relatively small firm in
terms of financial powers and experience, will face tough competition from bigger competitors like
Kotak Mahindra, Policy Bazaar, Loan Hub etc. Even in the insurance space, having little capital with
bigger premiums promised is risky. In order to stay relevant and have distinguishing features, the
company needs to invest constantly or be in the game for a long time. This is not the case with Basket
Options. Moreover, in an industry like insurance or education, capital is one of the most imitable
resource a company can have (especially with the abundance of VC and PE funds in the market)
There is also a risk of being acquired by some of the bigger players like their deep pocketed
competitors. These big-shark companies will also have a better negotiating power with the banks and
agencies for loan and claim transactions.
As we have seen in the E-commerce and Fin-tech space, a lot of new players are coming up with
technology that is making the incumbents less and less relevant. To survive this onslaught of
disruptions, Basket Options need to always stay ahead of the curve, adopt new technology or
strategies by investing. This is not possible for Basket options as much as the big players. This is
even riskier provided that Basket options is diversifying at an alarming rate and the profit margins are
very low.

Was product and organizational integrity displayed by the company and how?
Overall organization integrity is achieved by having consumer focused principle and delivering faster
results. All the departments in the single venture will coordinate seamlessly within the hierarchy to
deliver best industry results to the consumer. There are no confusions or dialectics in the purpose of
the company. This is also helped by the fact that all of the new ventures of Basket options have been
in the space of finance and related industries, thereby helping focus on common organizational coherent
goals. There are 2 aspects of integrity for the organization - Internal and external integrity.
Internal integrity is achieved by having a seamless pattern of organizing, having coherent goals, having
clarity on what to do and what not to do. Basket Options were clear in the value they wanted to deliver.
They were guided by a search of need in the society and exploited that by building around it. Every
venture they had would increase their consumer base and also would act as a network effect. As more
consumers joined in, they adopted financial services provided by Basket option’s sister companies
itself and helped provide product/ service integrity. For eg, Ones who had availed services of Education
loans and gotten better lead times, they would also opt for their insurance claims services.
Internal integrity is driven by effective leadership. A dynamic leader like Abdul Sait, who has
constantly taken risk, ventured into new avenues with a clear goal in mind has helped achieve product
and service integrity. His vision to hire fresh graduates to get more ideas and to give them creative
freedom, ownership has driven the company to mold itself around the personality of its leader. He is a
leader who doesn’t shy away from risks and failures and for a company like Basket options, who
constantly push for new avenues, this trait acts as catalyst. This also has helped the employees and the
external banks to deliver results more than expected, by reducing the delivery time from 3 months to a
mere 8 days in the case of loans.
The other part of product/ service integrity is External Integrity. This means that the product/ service
offerings are in-tune with the needs of the targeted customer segment. This is true for Basket Options
as each of the ventures started by them was to cover an unfulfilled need in the consumer market. For
e.g., Stock market institute was started when Abdul Sait realized that there is very less knowledge in
the market about investing. Each of the new ventures address a customer pain point and solves it by
reducing complexity and lead time and thereby, achieving external product/ service integrity.

What was the differentiating factor for Basket Options?

Adjacent growth into different industries but as niche players - while Basket Options expanded into
different sectors such as insurance, education etc., it ensured that it solved for a niche problem in
each of these industries. Thus it followed the model of focused diversification which differentiated it
from other players in the financial services.
a) Critical analysis of having high variety of products -
There are certain benefits of keeping a large diversified product portfolio:
 Higher number of product offerings in different industries (education, insurance, loans
etc.) implies an increased customer base leading to higher revenues and faster turnaround
of the loss-making company
  Presence in different industries provides experience growth and positive network effects
Pitfalls of keeping an expansive product portfolio:
 Rapid diversification in capital intensive and highly competitive industries (such as
wealth management and stock markets) can lead to growth in long tail products. For
instance, wealth management and Red lounge was contributing only 0.3% and 0.2% to
the profit pools of the company.
Between these trade-offs, it is better for a small scale company to not boil the ocean by putting its
foot through the doors of all the industries. It should streamline its approach
b) Leveraging recruitment, training and entrepreneurial culture -
 They were able to recruit young people with new ideas – this gave rise to the end-to-end
ownership model from product launch to execution and delivery which helped the
company identify commercially attractive opportunities and turn them around fast.
 They were able to recruit highly experienced executives (from banks and financial
services market) who were willing to contribute to the market expertise within the firm
and take up ownership of the products. The retention of these executives was also high.
 Due to the high levels of creative freedom accorded to the entrepreneurs and intra-
preneurs who had complete ownership of the products, Basket Options was able to
identify customer pain points early on and was able to commercialize viable blank spaces
efficiently

Recommendations and future scope for Basket Options

a) Intensive due diligence should be conducted before entering into any market – the ‘trial and error
model’ and ‘learning from failure model’ has led to losses for the firm. A good strategy they have
adopted is conducting pilot rollouts in current customer base to test the waters.
b) The company wants to increase its customer base:
i. Can explore other adjacent markets such as mutual funds and taxation. These require
similar competencies and resources as the current offerings hence the go-to-market can be
time and investment effective. Similar to Claims express, taxation claims can be added to
the offering, which help ease out the ITR filing process of the customers.
ii. Potential to release products based on specific time periods such as 6-month offerings or
1-2 year offerings (example 1-year wealth management program)
iii. Should strengthen marketing efforts to expand customer acquisition – they have released a
poster (exhibit-5), but should look to drive digital marketing and targeted advertising
(since many of their customers are students, they should highlight social media as a strong
tool to reach customers)
c) Technical capabilities should be strengthened – Fintech companies have disrupted the space and
digital competence is a major requirement towards becoming anti-fragile. Basket Options has
started looking at building on their IT resources as per the case
d) Should track metrics to define success apart from profit creation – Currently profit seems to be
the only requirement to win, but keeping track of other success metrics (such as churn rate, traffic
and outreach etc.) will provide a holistic view about product success
e) Given they have expanded into so many products so rapidly, they should cut down the long tail of
products if it does not display significant profitability scope within initial investment period or
yields low/ declining returns at a mature stage. In such a case, focus on growing the core
(insurance and stock market institute)