Human foresight

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Priya Cinema Complex in front of Fact & Fiction bookstore, New Delhi, December 15th 2009
Posted in Culture & research

Can big business save the world? It depends…

Jared Diamond's op ed in the NYT
struck me with the question he posed, which is whether big business can
save the world. Diamond went on to use Walmart, Chevron and Coca Cola
as examples. I leave  it to you to decide, but my preferred choice of three in
answer to that question would be Tata, Nokia and the brand called you.

You wouldn't be reading this otherwise.

But
I'm not a big business you'd say… true, by the metrics used by the
behemoths above, but all of you out there (whether you read this or
not) working to save the earth add up to the biggest business of all,
dont you?

I sure hope so.

Posted in Bottom of the pyramid/Poverty, Business, Culture & research, Design, Ecodesign, Environment, Ethics, Marketing, Minimal footprint, Mobile platform, pay as you go economy, Strategy

*This* is a design revolution

Reading Helen Walter's review of Emily Pilloton's book Design Revolution in Businessweek titled "This is a design revolution?" made me wonder what would happen if we approached doing business with the BoP without the filter of "social impact" or "doing good" or other fuzzy wuzziness etc? What if the design of a product or service was simply considered the same way one would for any other demographic? And metrics of profitability, viability and sustainability of the revenue model applied to the decision to enter a new market, regardless of whether they were "the poor" or simply humans? How does this influence the success of the product or service in the market and, critically, how does it influence design?

Tatawater_372241artw

It seems to me that this is what Tata is doing when they consider the overlooked and the underserved that comprise the majority of their domestic market. This week, Ratan Tata launched the Tata Swach, a water purifier designed and developed to serve the base of the pyramid market in India. A snippet from the news,

“The whole group has been fired with the view of how can we create
products which were earlier not within reach of the vast number of
people through innovation and technology, not just stripping down the
value of the product,” Tata Sons chairman Ratan Tata said.
[…]
The Swach, a pet project of Ratan Tata, is the group's bet that the
private sector can offer a better, consumer-based solution to one of
the world's most persistent health problems than most governments in
the developing world can.

This is interesting because the product is one which is not really in line with any of the TATA Group's current line up, and the water purifier market in India is currently a battleground. Hindustan Unilever, yet another firm with no history of consumer products of this sort has its Pureit – the first mover in the BoP segment, is facing challenges from the incumbent water purifier maker Eureka Forbes, who only recently woke up to the potential of the lower income demographic. One would think that in this situation the timing of the Tata Swach's launch would be a disadvantage but apparently not if this input is anything to go by,

Tata will sell two versions of the 19-litre Swach container, priced at
749 rupees ($16.11) and 999 rupees ($21.48), depending on the material.
The filter itself costs 299 rupees ($6.43). It will purify 800
gallons (3,000 liters) of water – enough for a family of five for a
year – before it automatically shuts down.

 Hindustan Unilever's Pureit filter, which also does not require
access to running water or electricity, costs 2,000 rupees ($43.01),
with a replaceable battery kit that costs 365 rupees ($7.85) and can
purify 1,500 litreof water.
[…]
The Tata Swach – Hindi for “clean” – meets U.S. Environmental
Protection Agency standards, and doesn't require running water,
electricity, or boiling, executives said.
It's cheaper than boiling water, cheaper than bottled water, and 2.5
times less expensive than Hindustan Unilever's low-cost Pureit filter,
according to data provided by the companies.

This implies that Tata has applied the lessons learnt from developing the Nano, as  well as approached the whole market entry strategy as carefully and as rigorously as it would in any segment. Their primary criteria – as a business – for the design and development of this product was to take the concept of the Bottom of the Pyramid as a viable demographic to serve, setting the design criteria and constraints for both the product itself as well as their revenue model and pricing structure accordingly. The fact that it will "do good" or "improve life" is as important but this aspect has not been permitted to overshadow the need for the product to be competitively priced and attractive to the consumer, offering value for their hard earned rupee, even as it prevents their children from suffering from diarrhea.

This interview with the product's designer, award winning NID alum, Satish Gokhale, quotes him accordingly,

"Once the technology was finalised and tested, we were mandated to design the container and other features," recounts Satish Gokhale. "The most important part of our brief was the target selling price of Rs 999. The design had to therefore be simple in construction, easy to manufacture and easy to use.''

Most details about the materials and methodology that went into manufacture of Swach is under wraps, but Gokhale said there was the dual need of using right priced material without compromising on the strength of the unit and its usability with the ultimate aim of making it affordable to everyone who drinks water in the country.

This sounds more like design for a demanding client, no aspect of "social impact" or "doing good" being allowed to overshadow business needs. After the three year long project has finally seen the light of day, Gokhale's wife is quoted as saying,

"It was a
tiring journey of dozens of sketches, and renderings and e-mails going back and
forth," Falguni Gokhale told TOI, adding that Tatas wanted a perfect product and
nothing half-baked would do.
Meanwhile back at the ranch, Unilever's response to the "water purifier for the BoP market" marketing war, from the previously linked article throws up this interesting nugget,

HUL says it has subsidised the machine as it knows it can bank on
making money through the replacement of battery kits that cost Rs 365.

Compare the difference in approach and in framing of the problem (market entry strategy for low income demographic) between Tata and Hindustan Unilever (HUL). No subsidies for Tata, no compromises and from all that one can read and find, greater value for the rupee offered to the discriminating investor that is the BoP consumer. To quote our own marketing ;p "Price is simply a design constraint, not the sole criteria".

Yet one can already see that when the market awareness and education of the poor user has created the demand, this latecomer to the product category will walk away with the lion's share of the sales. Tata is a global brand, poised apparently to become the Nokia of drinking water, since their next goal is entering the African market with the Swach.

Now bringing this whole blather back to the questions posed in the beginning of the post, what if "BoP Design" was approached from the same perspective as  design for business and not design for social impact or doing good or any number of heart warming phrases that seek to imply improving the lives and livelihoods of the poor.

Is there any doubt that better quality water would do all of the above? And is there any doubt that this shows all the signs of being a successful commercial product for Tata?

This is just good design doing its job – making stuff that people want to buy. (For the BoP are people too)

Posted in Bottom of the pyramid/Poverty, Business, Culture & research, Design, Ecodesign, Environment, Ethics, Marketing, Minimal footprint, pay as you go economy, Strategy

Women at the BoP: what does it mean when your money belongs to you?

BOP1Photocredit: WSJ slideshow

I came across the following anecdote from the CGAP blog referencing biometric identification technology as a means for financial services to serve their BoP customers and it gives rise to some food for thought. Here's the snippet from Claudia McKay's post,

I remember encountering an elderly man arguing with a teller.  His son
had died, leaving a widow and three children, and he wanted his
daughter-in-law’s savings. It is tradition that all of the family’s
possessions belong to the husband’s parents, regardless of the wife’s
contribution.  The wife had accumulated about $150 in her savings
account, but because her account required her fingerprint, the man was
denied access. The next day the wife came to the bank, filled with
gratitude that she still had the money she needed to support her
children. 

This incident repeated itself many times and before long,
standard marriage advice to brides included opening an Opportunity Bank
account that offered ‘magic’ protection from drunken husbands and
desperate in-laws. Others called the ATMs a tool of Satan that scanned
your soul through your fingerprints.

Connecting some dots here, such as the future biometric ID cards to be made for all of India, not to mention the rural banking services now being made available, what will be the influence of "owning your own money" be on the women at the BoP? I'll focus for a moment on India, since my own experience makes it easier for me to ponder the consequences.

[Takes a moment to reflect on drunken husbands and desperate in-laws.]

Wow.

Already we're seeing a sense of pride, accomplishment and empowerment among women in India, particularly outside the urban metros. And the ladies I interviewed at Dastkar Ranthambhore for the Prepaid project talked about the sense of power that their income gave them, enabling their evolution from passive daughters in law to decision makers in control of their own lives.

Now, if technology can prevent fraud, misuse or forgeries, and one hopes does NOT give rise to incidences of fingerchopping (akin, I imagine to dowry deaths and bride burning), then truly, its influence will be felt in the patriarchal hierarchies of rural Indian households far beyond what the actual earnings or income may provide to women who work for their livelihoods.

Posted in Bottom of the pyramid/Poverty, Business, Culture & research, Design, Ethics, Marketing, pay as you go economy, Strategy

Research and the blog: The medium is not the message

Dear students,

As I see your invisible wanderings page by page with nothing overlooked in the index section – yes, I'm tracking you guys from tu delft particularly of late – I have a small request to make. I understand that academia considers the "blog" an informal medium, with low credibility as a reference or citation, particularly if you are submitting to the most rigourous and obscure journals, not simply writing a conference paper or making a presenation. However, I do hope that somewhere in your acknowledgements section you will find a valid way to mention your sources, all of them. Such as the body of work under the "bottom of the pyramid" category you come back to so diligently every night for hours at  a time, here on this ephemeral website. These are still the result of hard work, deep and considered thought, and based on walking through the villages, making observations. They deserve to be acknowledged, simply blog posts on the anonymous world wide web though they may be, accessible via google right at your desktop.

I'll address again at some point the increasing chasm I'm seeing between what academia considers credit able sources, and the real world where things change from day to day. Never has the ivory tower felt so distant or so closed. Soon, as information technology and McLuhan's visions manifest themselves more and more, it is a divide that we must find a way to bridge, if only so that what we do and say and hear and learn feeds back and informs the processes, methods and cases emerging from your hallowed hallls and vice versa. The rate of speed of information flow, as evidenced by twitter feeds and RSS that keep our conversations ongoing everyday, might make your "not to be published for a year or more" research irrelevant to the real world challenges and situations we observe and deal with every day.

In the meantime, I simply posit some questions to you all out there reading this, whether you are practitioner, theoretician or somewhere in between – what is the role of a concept or idea or finding, if it is simply in a "blog post" or "personal website"? Where does it stand in the continuum of credible sources and is this a rigid definition? Will this state continue or will our perceptions of the value or reference ability of material evolve along with the way our communication tools are changing the way we share and publish our materials?

Sincerely,

just another blogger

Posted in Bottom of the pyramid/Poverty, Culture & research, Design | 1 Comment

Godrej: Setting the bar for BoP innovation in consumer marketing?

BOP2
Image of Godrej Chotukool from the WSJ

Distracted by the coolness of the product, I overlooked the real story developing in the Indian consumer market. New ways of distributing, new ways of creating and meeting demand, in ways that proffer dignity to members working to solve the last mile connectivity problem are the real innovation in the saga that is the BoP.

Microfinance institutions are getting involved in Indian retailing, using their networks to reach out to end users in villages and small towns across India. The perfect mashup, the win win partnerships provide a reason for the microcredit being offered.

P44_CS1 

Rukmini Adsule (left ) and Anita Mane, from the microfinance fold, sell
Godrej & Boyce’s nano refrigerators and Hindustan Unilever’s water
purifiers, among other products, in Osmanabad, Maharashtra. Adsule
earns Rs 3,000 a month as commission.
(outlook india)

Young school educated women are selected from the end user communities to be trained as product cum financial advisors, for sales is not that simple among the BoP. You have to educate them on many things first, before they can begin to appreciate the value of your product or service, thus lowering the barrier to their purchase. Ironically, its perhaps the most transparent sales and marketing channel of all. All the patterns of behaviour of BoP consumers, from their high bullshit meter to their need for proof of performance before they shell out, are covered in these new channels.

Innovation, it seems, means overturning the rules that govern the design of supply chains and distribution networks, sales staff and marketing communications. These are emerging BoP ventures, either as brand extensions of wellknown behemoths or category creators who are baking their own pies.

By what criteria do we now evaluate "design for the 90%" now? 

From this interview of Adi Godrej with Forbes India yesterday,

Bala Balachandran, one of the longest serving members of the Godrej
Consumer board and a professor at Northwestern Univerity’s Kellogg
School of Management, recalls a strategy meeting that led to this
reorientation towards rural markets and low income housing. Asked what
they think Godrej Consumer’s main product was, most executives came up
with Cinthol or Godrej No 1. But Adi Godrej, who is known around the
office for his punctuality, said it was something more, including the
brand’s connect with the customer and its distribution system. “All the
focus on rural and the segment that he concentrates come from the
‘customer centric culture’ of GCPL [Godrej Consumer Products],” says
Balachandran.

Usercenteredness, I don't hesitate to say, is a critical starting point for BoP and rural market development strategy, and an emphasis on the bottomline tradeoff between cost of serving this customer and ensuring that value was being delivered to the bottom of the pyramid market. Zoroastrians aka Parsis, like the Tata clan, the Godrejs are not unknown for their socially responsible businesses and charitable activities.

Posted in Bottom of the pyramid/Poverty, Business, Culture & research, Design, Marketing, Minimal footprint, Mobile platform, pay as you go economy, Strategy

Indian brands take Prahalad’s BoP challenge to heart

BOP7

Now that the design and development of innovative product solutions for customers challenged by income seems have become mainstream, a slew of products are  being launched by long established brands in India for the "BoP" market.

Tractor manufacturer Mahindra & Mahindra takes a leaf from Tata's book with the launch of the GiO, a

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half ton 4 wheel delivery vehicle for city center use that is directly aimed at the market currently served by alternatives like this,

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Kirana store deliveryman, Kanpur, September 15th 2009

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except that the GiO offers more than simply last mile connectivity or affordability. Their design aims to influence perceptions of the owner's respectability and status as well.  From the article,

Mahindra & Mahindra, on its part, does not want to bank on cost
calculations alone — there is the softer side too that it has worked
on. It aims to restore the pride and status that three-wheeler
driver-owners sorely miss. “They have always felt that despite the hard
work they put in, their families do not accord them the same respect as
the owner of a four-wheeler gets,” says Nayer.

The Gio, thus, has a distinct style, developed in-house by the
company along with design consultant Thairung. The interiors and ride
quality have been revved up to match, the company claims, one-tonne
trucks, so that buyers don’t feel shortchanged in any way. The driver
can enjoy roll-on windows, a roomy cabin, car-like steering, a sliding
seat, windshield wiper and gearshifts (all in sharp contrast to
three-wheelers). Larger tyres, a rear leaf-spring and front independent
McPherson suspension (not found in current one-tonne trucks) for better
stability and load-carrying ensure that the ride quality does not take
a beating.

Even the name for the truck was chosen to phonetically resemble the
verb ‘live’ in Hindi, jiyo. The TV campaign, launched on November 20,
too plays on the theme and is not product- or feature-centric. It
depicts an erstwhile three-wheeler driver-owner commanding respect with
a Gio as he goes about his tasks. “We want to tell them that this
vehicle is going to change the way people look at them,” says Nayer.

Also, tapping into the aspirational element of brand and product choice among lower income consumers is Cadbury Chocolate. From the interview with the MD,

Do small packs contribute significantly to your revenues and volumes?

Yes. They contribute a very material amount. I think for the CDM
(Cadbury Dairy Milk) brand, I would say that the Rs 2-pack could be
almost 15 per cent of the volumes of the brand now. And, it's been in
the market only for the last 15 months. The less-than-Rs 2 price is
about 7- 8 per cent of the market. This happened only recently. Only
when aspirational brands have offers which are accessible, the market
explosion truly happens. I think there is enormous opportunity at that
end of the market.

And finally that hoary old grandfather of healthfood drinks, Horlicks, chooses to extend the brand with Horlicks Asha (hope) for the lower income segment than risk a backlash on the stuff that made us grow up strong and tall,

Calling rural
‘absolutely critical’ for the company, Mr Sen said GSKCH has hinged
its rural strategy on two aspects —low unit packs (90 gm sachets of Boost,
and biscuits at Rs 5) and products tailored for rural consumers, Horlicks Asha
being an example. While regular Horlicks costs Rs 135, the cheaper variant Asha
is priced at Rs 85 for 500 gm.

Observations

Innovation in pricing, business models, distribution networks as well as product design seems to be proliferating now that addressing the BoP market seems to make ROI sense. Mahindra, for example, claims their entire product development cost for the Gio truck was Rupees 25 crore – under 5.5 million USD. Peanuts for a category creating four wheeled vehicle running on diesel.

And these "BoP business" influences are now spreading (virally?) out of the continent, as this Voice & Data interview with Afghan telco Roshan, implies:

Per-second billing has unleashed one of the
bloodiest tariff wars in India. What impact has per-second billing had
on the Afghanistan telecom industry?

In Afghanistan, one of our competitors entered
the market with per-second billing. When our other competitor also made
the switch to per-second-billing, we decided to go down that route.
From our perspective, moving to per second billing had a 30% negative
impact on revenues for the whole industry. Given the stage of growth of
the telecommunications industry, it was too early to move to this
pricing model and, therefore, had an impact on the overall development
and rollout of the services.

Ultimately, we see that price reductions is
good for the consumer, as it really helps the market to open up.
Through per-second-billing, the entry barriers have been reduced, and
it has really allowed us to penetrate to the bottom of the pyramid.

What happens when global market forces start to follow the BoP rather than bask in the current smugness implied by "reverse innovation" ?

Posted in Uncategorized