Fortune at the bottom of the pyramid - Getting to the bottom with value innovation

When I was young, people used to flock to a market popularly known as Burma Bazaar, located in North Chennai to buy electronic gizmos and gadgets made in countries like Singapore. A "Made in Singapore/ Japan " watch bought from this bazaar used to be a prized possession of localites. Trade restrictions were high at that time and India failed to figure in the list of target markets for any of the big MNCs. But, what we were observing at that time was silence before a storm.

Over the next decade or so, opening up of the economy followed by rapid expansion across sectors, and a burgeoning, tech-savvy middle class led to a retail phenomenon that was unprecedented. Malls, spanning millions of square feet of retail space, sprang up across major cities from virtually nowhere. Cinema theatres got converted into multiplexes; road side haircutting salons gave way to swanky beauty parlours; road side eateries were suddenly competing with KFCs n Dominos. And, I forgot to tell you. By this time, even Swiss watch makers like Swatch  had set up stores and started selling their products in India. But, that is not the end of the story. They all came and they all saw, of course. But, did they all conquer? No. Certainly, not many.

Some realized the ground situation very soon. Some others took some time to draw their conclusions. But, all MNCs invariably began to realize a fundamental set of things. First. It is not possible to sell what you have been selling in developed markets without an iota of localization. Advertisements and promotional offers may help one sell a few but marketing mechanisms are, in themselves, not substitutes for products. Second. India is a country where spending is still considered a sin; and saving, a virtue. So, what is offered alone does not matter. What it is offered at also does matter. Third. Even though supply chain specialists would love to assume India as a network of airports; the reality is that India, and by that I mean a majority  of Indians in terms of numbers, still lives in its villages and most parts of India are away from rather than near to airports or even railway stations for that matter.

India was certainly too big a potential market and too promising an investment destination to leave out. So, exit was out of question. But, how to stay put and continue to expand? Should one be satisfied with meager revenues obtained from low volume sales of highly priced products built for developed markets or should one take a deep dive and develop and deliver products that would be "Made for India"? Should one price products so highly so that margin is unaffected or should market penetration, rather than margin rationalization, be the dominant strategy? Finally, should one get their products into the countryside and try to touch the heart of India or just stay keep their products close to the airports with an eye on the time to leave, if need be?
Certainly, these were tough questions waiting to be answered.

The other day, I was travelling by bus near Ujjain, in Central India. On both sides of the road where fertile lands cultivated with wheat, the staple crop consumed across the sub-continent. The city of Ujjain itself is a good 60 km away from airport. A smart looking young man got into the bus when it halted at some intermediate bus stop. He was carrying a huge black bag, which caught the eye of passengers, especially ones like me, who were seated within the first few rows. Before we could realize, he took out a lemon from nowhere and started with what was to be a quick 5 minute demonstration on what the juicer, he was trying to sell, could do. The juicer came in two variants, the first meant for lemon and the second for bigger citrus fruits such as oranges.An interesting feature was that the orange juicer could be attached to an artificial rubber based nipple and fresh and pure orange juice could be fed directly to babies. Finally, when he announced the price, we were awestruck. Both variants of the juicer together cost just Rs. 20 ($ 0.4 approx.). Here was a guy selling a product, which had immediate use for the local populace; at such a low price; and at a place, far from the cities.Within the next few minutes the guy had successfully more than ten pieces and before I could finish counting, he was off the bus. Yes, fortune at the bottom of the pyramid is for real. And, value innovation is certainly the path to it.

Keep your windows open

A couple of months ago, on a Sunday afternoon, I just happened to open my bedroom window and was struck by the presence of a huge truck, partially loaded with household items ranging from wooden cupboard to sofa set to washing machine to what not. As I was preparing to leave, I could see a few men bringing a huge cot towards the truck, parked right in front of the gate leading to a block of apartments on the other side of the road. I watched the men as they skillfully loaded the cot and put it firmly in place. I was curious to see what was going to be the next item to be brought out and put inside. The next item turned out to be a mattress, and it was promptly followed by a chest of drawers and a table lamp. Suddenly, I got reminded that I had to recharge my mobile and left the place abruptly.


A week or two after that, I was standing in the balcony and hanging some clothes. And, when I just gave a casual glance towards the street below, I found it again. Yes. A huge truck had been parked outside the gate of our own apartment building. After checking out the uniforms of the guys getting in and out of the truck, I realized that the truck belonged to some other logistics provider. My mind started wandering and I started wondering about things like how frequently are these trucks used, how much it would probably cost to transport a full load of goods to the neighboring city and so on.   Then my mind went into the risks that are probably involved in driving these trucks, especially during the night and I returned from the balcony after completing my chores.

A few days later, there was a knock at the door and when I went and opened, I was surprised to see the postman with a big carton. I checked twice whether it was meant for me, as he read out my dad's name from the slip he was carrying. After convincing myself that the package was indeed meant for me, I asked how much I needed to pay for it. ''Its pre-paid'', was the quick response from the postman.  I gave a smile and a sigh of relief, as though I was getting it free, and took the carton into my drawing room. I could not resist even for a minute and quickly tore open the carton along the sides and peeped in to see what was inside. I found some blankets and came to know later on that they had been sent by my aunt. 

After contemplating on the two episodes involving the trucks and the carton episode, I got reminded  of a concept I had learnt in management - strategic window. Put in layman terms, Strategic Window is a temporary period where an organization's capabilities align with the market's requirements. As with the trucks, the logistics providers had been around for quite some time, but the increasingly floating nature of the population owing to a new wave of job opportunities in the IT sector in South Indian cities was resulting in a strategic window to be jumped into. Coming to the postal service, India Post is a massive organization with an unmatched network of offices. It has been around ever since the days of colonization, and, in the past decade, its top managers have been constantly on the look out for newer areas to diversify into. And, here was a strategic window opening in front of them. In India, in an era dominated by the twin revolutions of IT and Telecom, more than the need to send snail mails, there was a need to send goods, both small and big, safely, securely and swiftly across cities. And India Post had grabbed this opportunity with both hands to stay as relevant as it had ever been. 

Prima facie, the turn of events surrounding these changes may appear as mere coincidence. But, if we delve deeper, we would realize a hidden truth. Organizations that invest in building capabilities would invariably tend to find opportunities, that suit their capabilities, some time into the future, if not in the immediate present. At this point, the wise words of Louis Pasteur, the inimitable microbiologist come to my mind. He once said, "Did you ever observe to whom the accidents happen? Chance favors only the prepared mind."