2011 bt-monitor special issue on innovation

8/3/2019 2011 BT-Monitor Special Issue on Innovation

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INN VATION

Eight global case studies that promise to spark

50 BUSINESS TODAY December 11 2011

KAPIL

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dozens of ideas for Indian businesses

A WorldA WorldofofJugaadJugaadIIf corporate buzzwords wereice cream flavours, innova-tion would be the most indemand cone today.Some think innovation isabout breaking new groundlike, say, the bottom-of-the-pyramid markets. Many mul-tinational companies thinkre-purposing their products for affordabil-

ity is inn ovation. Others see it in everyday

life: a direct-seeding machine that plants

rice seeds six inches deep, eliminating the

need for flood irrigation in fields. Or, themuch chronicledjugaadtractor which has

a water pump as its engine. Yet others

equate innovation with fundamental

research an d technology advances.

The bean-counting types see innova-

tion in cash flows: reducing receivables or

increasing credit periods, for instance. And

the more cerebral among them call for

business model innovations: ingenious

tweaks or overhauls of the way business is

done so that it yields more.

Much before innovation became the

buzzword it is today,Business Today tracked

it with the rigour it deserves. In our first

special issue on innovation, which featured

a stu dy partnering consultan cy firm,

Monitor Group, in April 2008, we identi-

fied 28 companies that did things differ-

ently. One no longer exists (Air Deccan

was bought in a fire sale), another h as new

owners (Ranbaxy), and Jet Airways is hob-

bling a long. Barring these, the remaining

are doing reasonably to spectacular ly well.

(See the package at http://bit.ly/btinnov1 .)

In May 201 0, we looked at eight busi-

ness models in India that were innovative

and delivering th e goods. (Seehttp://bit.ly/btinnov2.)

This year, we decided to look at the

best innovation cases the world over, and

filter th em th rough the world view of

Indian business leaders for a relevance-

check for India. The effort is spread over

the next 29 pages. We are sure that at

least some, if not all, the case studies will

resonate with your business or throw up

what B-school professors call analogs

(replicable examples, basically) for your

workplace. Happy innovating.

Josey Puliyenthuruthel

businesstoday.in/innovation-india

December 11 2011 BUSINESS TODAY 51

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INN VATION

The authors of Monitors analysis explaintheir choice of case studies and the

lessons to be learnt from them

WinnersWinnersTeach UsTeach Us

WhatWhatGlobal

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TOYOTATOYOTA P70P70 GEGE P74P74 TOSHIBA-UPSTOSHIBA-UPS P78P78 FORDFORD P82P82 HOLLARD-PEPHOLLARD-PEP P86P86

hile innovation is a key lever

for enhancing competitive-ness, as a discipline it remains

nar rowly un derstood. Inno-

vation is not just about coming

out with new products, where

successes are notoriously few and

even if achieved, are often copied by com-

petitors. For a real breakthrough disruptive

and sustainable innovation companies

must look beyond products and core offer-

ings, and incorporate inn ovations across

multiple aspects of the business.

Monitors proprietary Ten Types

of Innovation Framework enables organisa-

tions to innovate in Finance, Process,Offering or Delivery. These have been fur ther

sub-divided into Business Model, Networking

(Finance); Enabling Process, Core Process

(Process); Product Performance, Product

System, Service (Offering); and Cha nn el,

Brand and Customer Experience (Delivery).

Thus, for instance, Apple iPods continued

success goes beyond its novel product line

and encompasses multiple types of innova-

tion that have helped create and defend its

sources of value.

Last years Business Today-Monitor

Group study How innovation really works

introduced this framework and drew oninsights from some leading Indian organ isa-

tions. There were a number of Business

Model innovations: Dainik Bhaskars research

at scale prior to launching a new newspaper,

for instance, or education provider Gyan

Shalas distinctive approach to the way edu-

cation is delivered to the bottom of the pyra-

mid. Examples of Product Performance in-

novation included ITCs e-Choupal offering,

a web-based platform to procure from and

sell to farmers, or Tata Consultancy

Servicess use of cloud computing to provide

affordable branchless banking facilities in

rural areas. However, we unearthed few in-novations around Product System, Service,

Channel or Brand.

Each one of the ten types of innovation

is valuable and the value creation through a

particular type depends on the quantum of

effort in each type. It is often inversely cor-

related to how common that type is in the

industry. Putting it simply, if a majority of

competitors are innovating in one dimen-

sion, it becomes difficult for any one of them

to gain disproportionately from that innova-

tion. Hence, it becomes essential to remain

businesstoday.in/innovation-monitor




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aware of the patterns of innovation

within an industry, and where a

companys efforts may yield a dis-

proportionate benefit.

In our third annual issue on in-

novation, we wanted to introduce

the key principles of innovation

insights into what makes organisa-

tions innovate su ccessfully. These

principles are based on Monitors

experience and expert ise in the fieldand are illustrated using examples

from across th e globe.

Often, innovation is an-

chored in something

other than the core prod-

uct performance. For in-

stance, Toyota launched Scion a

brand specifically conceived for

Gen-Y customers. (See Page 70.)

Scion leveraged its dealer network to

offer personalisation, used innova-

tion in pricing and financing to fa-

cilitate customisation, and commu-nicated this through segment appro-

priate messaging and media vehicles.

Successful innovations are not

predicated on germinating numer-

ous ideas fewer ideas based on the

organisations capabilities and cus-

tomers unmet needs are more criti-

cal. Incremental change is where

conventional innovation tends to

take root. However, compan ies that

aim to conquer a new market or

want to radically reshape their posi-

tion need to be brave and th ink big.

C o m p u t e r g a m i n g g i a n t

Nintendo managed one such trans-

formation. Having dominated th e

computer gaming scene at one point

with offers like Gameboy, it later lost

out to the quicker and more

graphics-heavy systems such as

Sonys Playstation. Nintendo walked

away from a performance fight and

instead developed Wii based on in-

sights on what play means to cus-

tomers. This simple but intuitive

concept allowed Nintendo to acti-

vate an erstwhile untapped con-

sumer segment by allowing custom-

ers to experience games, such as

bowling and bridge.

While many organisations sub-

scribe to the if it aint broke, dont

fix it philosophy, fast evolving mar-

ket dynamics often warrant revisit-

ing the status quo. Innovative com-

panies succeed by defining new

business models an d finding n ew

ways of creating and/ or enhan cing

value for t heir customer s. Thesechan ges are among the most power-

ful types of innovation, and funda-

mentally shift the competitive dy-

namics within an industry.

Path-breaking innovations are

not restricted to developed econo-

mies alone. For example, Hollard

Group, an insurance company in

Johannesburg, succeeded in making

micro-insurance work for low-in-

come customers. (See Page 86.) In a

market with a tradition of hosting

expensive funeral services, Hollard

focused on providing funeral insur-ance that was until then only pro-

vided by informal societies. By part-

nering with PEP, a popular low-end

clothing reta il store, Hollard sepa-

rated the sales and distribution ele-

ments from the costly insurance

processing, making it more afforda-

ble. Hollard cha llenged th e prevail-

ing business model, transitioning it

from a contract value focused game

OVERVIEWINN VATION

How the enterprisemakes money

Apple sells songs for99 cents, insteadof whole albums

Assembled capabilitiesRelies on digital rights

management software thatprevents file copying

Enterprisestructure/value chain

Established relationshipswith music cos, movie and

TV studios, universities

Proprietaryprocessesthat add

value

Process

Enabling process Core processNetworking

Finance

Business Model

Successful innovationsdo not need numerous

ideas. Fewer ideas basedon the organisations

capabilities andcustomers unmet needs

are more critical

MONITORS TEN TYPES OF INNOVATIONMONITORS TEN TYPES OF INNOVATIONTMTM FRAMEWORKFRAMEWORK




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to a volume one, and opened up a

new market.

Companies can also be success-

ful innovators by reconsidering their

role in the industrys ecosystem.

In recent times, organisations have

made a conscious decision to move

away from sitting at a discreet point

in a linear value chain to positioning

themselves within a non-linear

network. An interesting example isthe tie-up between Japanese laptop

manufacturer Toshiba and UPS, the

global pa rcel-delivery behemoth.

(See Page 78 .) Witnessing declining

share in the US market, Toshiba

needed to reduce customer down-

time by providing quick repair serv-

ice. UPSs certified technicians would

repair returned Toshiba laptops at

the UPS shipping hub. This initiative

helped Toshiba dramat ically reduce

repair turnaroun d time, and helped

UPS generate an alternate revenue

stream.Typical go/ no-go investment

decisions for new projects can often

be boiled down to financial viability.

In case of incremental innovation,

there are typically enough similar

examples to provide data for as-

sumptions in the business case.

However, for genuine innovations,

organisations need to imagine what

it might require to m eet evolving

consumer needs or emerging market

opportunities. Rapid prototyping is

a way to achieve this by bringing to

life future offerings and services, and

defining future experiences. These

prototypes can be externally ori-

ented around the offering, customer

experience, or internally oriented to

give executives a feel for how the

business will operate. Most impor-

tantly, prototypes help de-risk the

concept in the earliest stages and

enable organisations to learn and

iterate the business concept.

Following the prototype phase,

compan ies may choose to first pilot

their innovation into the real

world. For example, initially, Toyota

restricted the availability of Scion to

California. This allowed the com-

pany to test the product within a

specific geography and consumer

segment and the scarcity associ-

ated with th e product helped in cre-

ating an additional buzz across the

country prior to the laun ch.

Innovating is often believed to

be expensive; however thereare several examples of exem-

plary innovations that lever-

aged existing resources. Cemex, the

global cement major in Mexico, cre-

ated a new business model for

affordable housing at minimal in-

cremental cost.

In the mid-1990s, with the

Mexican economy in a crippling

economic crisis, Cemex witnessed a

sharp decline in its regular business

and decided to cater to its construc-

tion segment. (See Page 66.)

The poor, who relied on self-con-struction of homes, were finding it

increasingly hard to gain access to

affordable construction materials,

technical advice or financing.

Besides providing access to building

materials cement, concrete blocks,

and steel Cemex provided micro-

financing, technical advice, and lo-

gistical support at minimal cost, by

leveraging its network of local dis-

Offering

Product performance ServiceProduct system

Basic feature,performance and

functionalityDesign language ofextreme simplicity

is used acrossApples products

How youconnect youroffering to

the customerOnline itunes &

Apps stores

How to expressyour offerings

benefit tocustomers

How youcreate an

overallexperience for

customers

How youservice

yourcustomers

Extended systemthat surrounds

an offeringInherent inter-opera-bility between devices

and online platform

Delivery

Channel Brand Customer experience

Innovating is oftenbelieved to be expensive,but there are examples ofexemplary innovationsthat were brought aboutby leveraging existing

resources

AppleApples iPod goes beyond product to encompass multiple innovationss iPod goes beyond product to encompass multiple innovations




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tributors an d commun ity-based

women promoters.

Creativity is important, but crea-

tivity without discipline is detrimen-

tal. In an innovation exercise, lead-

ers need to diagnose their situationand declare the innovation intent. Is

it category reinvention such as

Nintendo did with Wii or is it serv-

ing new needs and categories, like

Safaricoms use of its existing mobile

technology to provide banking serv-

ices for a large unbanked populace

in Kenya?

S

imilar discipline is required

during the design and im-

plementation of the innova-

tion. At the design stage,

discipline is required to get genu ineinsights and build compelling con-

cepts instead of a laundry list of

ideas. Toyotas research led to in-

sights about its new consumer seg-

ments (Gen-Y) yearning for indi-

vidualism and guided development

of an offering with high ease of

customisation (accessed online).

On the other hand, point ideas

that address known issues or

sources of dissatisfaction do not

yield an advantage to the innovator.

They increase costs of implementing

the point idea, but often do not have

sufficient power to let the organ isa-

tion gain share or command a pricepremium. It is only when multiple

elements backed by insight are

combined together in a reinforcing

system, that they provide a sustain-

able advantage.

In conclusion, as markets ma-

ture and become more competitive,

innovation h as become an impera-

tive for firms to survive and win.

Organisations have to think beyond

just product and ensure tha t the

innovation, while rooted in a par-

ticular aspect of the Ten Types,

spans multiple other a spects. Theglobal examples demonstrate this

and highlight the key principles that

help an organisation innovate

across the Ten Types: focusing on

fewer, bolder concepts; challenging

of industry orthodoxies; leveraging

of internal and external networks;

de-risking through prototyping;

adopting a disciplined approach;

and thinking beyond product.


OVERVIEWINN VATION

Here is how leadersenable innovation in their

organisationsThey use context to mobilise andThey use context to mobilise andcatalyse organisational actioncatalyse organisational action

They set a clear level of ambition forThey set a clear level of ambition forthe innovation effort with appropriatethe innovation effort with appropriatepermissionspermissionsThey commission cross-functionalThey commission cross-functionalteams whose members work as anteams whose members work as anintegrative, multi-disciplinary unitintegrative, multi-disciplinary unit

They challenge orthodoxies the indus-They challenge orthodoxies the indus-try or the company may have adheredtry or the company may have adheredto over the yearsto over the yearsThey refuse to think innovation is anThey refuse to think innovation is anaccident or the result of a strokeaccident or the result of a strokeof insightof insight

THE LEADERS WAYTHE LEADERS WAY

Nikhil

Prasad Ojhais the ManagingPartner for India at

Monitor Group.His work is

focused on growthand transformationagenda at Indian

businesses

Sachin

Khandelwalis an Associate Partnerat Monitor Group withextensive experience incorporate & business

unit strategy,innovation, and sales& distribution across

the B2C space

Parijat

Ghoshis a Partner atMonitor Group withextensive experience

in innovation,corporate & business

unit strategy, andcapability

development

Harsh Kapooris a Manager at

Monitor Group withsigni ficant experiencein helping clients

both pri vate andpublic formulatewinning strategiesand build relevant

capabilities fordriving growth

THE AUTHORSTHE AUTHORS



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Safaricoms initiative, enabling Kenyans to transfer moneySafaricoms initiative, enabling Kenyans to transfer moneysafely using mobi le phones, has proved hugely popularsafely using mobile phones, has proved hugely popular

A NA New Velocityew Velocityto Moneyto Money

GETTY IMAGES

Sanjay Kapoor, CEO (India and South Asia), Bharti Airtel

Financial inclusion is the road th at India n eeds to travel towardsbecoming a global player. Since n ationalisation, the number ofbank branches has mu ltiplied 10-fold from 8,000-plus in 1969 to80,000-plus today. But a number of rural households are stilldeprived of basic banking services like a savings account or minimalcredit facilities. The propor tion of r ura l residents who lack access tobank accounts is nearly 40 per cent, and this rises to over 60 percent in eastern an d north -eastern India. The major barriers are lackof reach, higher cost of transactions and time taken in providingthose services. The existing business model does not pass the test ofconvenience, reliability, flexibility and con tinu ity.

Quick Fix to Indias Unbanked

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KENYAKENYA AREA OF INNOVATION:AREA OF INNOVATION: ENABLING PROCESS/ENABLING PROCESS/ YEAR:YEAR: 20072007

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SSeventy-five per

cent of Kenyans

have no access to

bank accounts,

whi le 38 per

c e n t a r e e x -

cluded from any

form of formal

financial serv-

ices. Given this scenario, most reliedon largely informal, highly inconven-

ient and invariably unsafe options for

transferring money done in-person

or through long-distance bus com-

pany couriers. In 2007, Safaricom,

Kenyas largest mobile network op-

erator, having identified the need for

a convenient, reliable and mu ch

cheaper form of money transfer

mechanism, launched M-Pesa, an

innovative payment service for the

unbanked populace. (Pesa is money

in Swahili.)Within a month of

launch, Safaricom had registeredover 20,000 M-Pesa customers, well

ahead of initial projections.

The product concept is fairly

simple yet powerful: an M-Pesa cus-

tomer uses his or her mobile phone

to transfer money quickly, safely, and

across great distan ces, directly to

another mobile phone user. The cus-

tomer need not have an existing

bank account. He can register withSafaricom for an M-Pesa account.

M-Pesa account holders can convert

cash into e-money through a

Safaricom dealer, and then follow

simple instructions on their phones

to make payments through their

M-Pesa accounts in a safe and con-

venient way. While originally

thought of as more of a mechanism

to allow those who borrow from mi-

crofinance institutions, or MFIs, toreceive and repay loans in order to

reduce MFI costs and improve bor-

rowers ability to track finances

M-Pesa quickly evolved into the most

preferred way of conducting mone-tary transactions in the country.

The success of M-Pesa can be at-

tributed to a combination of several

key elements in the product offering:

It gave users the facility to deposit/

withdraw cash at any one of more

than 20,000 outlets of its strong

agent network nearly 20 times the

number of bank branches; the serv-

ice was backed by the Safaricom

brand and catered to a large gap in

the market given the low levels of

formal banking penetration in the

country; and ultimately, it was aneasy-to-use product that offered a

superior value proposition provid-

ing a more reliable and cheaper alter-

native for transferring money than

what existed.

Within five years of its inception,

Clearly, the task to cover the 1.2 billion population

with banking services in India is gigant ic in comparisonto Kenya. Harnessing the power of mobile technology toprovide customers with a secure and convenient way ofsending and receiving money by effectively leveragingthe existing distribution reach and a trusted brand nameresonates strongly. From our experience, poor people areviable customers and there is tremendous potential forgrowth by providing banking services to them. The pro-gressive regulatory environment in the country is show-cased by policy moves made by the Reserve Bank of

India, or RBI. Most recen tly, RBI allowed domestic mon eytransfers within defined limits for non-bank players. This

step is in the direction of proportionate r egulatory

regime advocated across many markets that have seensuccessful mobile money deployments.

Indias diversity requires mobile money innovationto suit various customer segments urban youth, mi-grants, housewives, rural. Each of these segments hasits own need. Similar to Kenya, most operators will usetheir existing mobile network to connect within theirown base and provide a reliable, consistent store networkthat serves customers needs. However, unlike Kenya, wewill see multiple models being innovated some will bebank-led an d some telco-led. Therefore, innovative busi-ness and delivery models co-created by leveraging the

M-Pesa continues to be abig driver for business atSafaricom. M-Pesa reve-nues grew 49.3 per centin April-September 2011

from a year ago to 7.9bill ion shill ings (`418.7

crore). This makes forabout one-sixth of Safari-coms overall revenues forthe six months. Safaricom

is 40 per cent ownedby Vodafone

TODAYS CONNECTIONTODAYS CONNECTION

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M-PESAINN VATION

M-Pesa has gained over nine millionsubscribers, more than one-third of

Kenyas adult population. It has

helped change the way small busi-

nesses operate in Kenya by eliminating

bank visits, unnecessary travel, and

providing additional security to the

money transfer process. M-Pesa ac-

counts for half of all money transfers

and attracts 11,000 new subscribers

a day, and manages two million trans-

actions daily. The concept has been

transferred to other countries, such as

Tanzania and South Africa.

While providing money transferservices is clearly not the primary

role of a mobile network provider, the

immense popularity of this offering

has allowed Safaricom to build

greater traction with its mobile

customers, and provided it a new

revenue stream.

strengths of banks, telcos, and technologysolution providers will emerge. Additionally,factors of scalability and sustainability inbusiness models will be imperativefor growth .

Within the current regulatory regime,cash-out through retail channel is not per-mitted for a telco wallet, which is the mostwidespread use case for Safaricom. Therefore,it appeals to customers with a bank accounton the recipient end. To drive customer adop-tion, players will need to enable a wide rangeof use cases across merchant categories.

Since payments is a low-margin business,mobile money through its penetration in theexisting mobile base will provide a strongreason for our customers to stick to their ex-isting telecom operator, besides generating anadditional revenue stream.

Unlike in Kenya where Safaricom enjoysmonopoly, cross-industry participation andcooperation to create this category will bekey in India. Therefore, it will require jointefforts on messaging standards, customereducation and driving adoption to generatethe network effect.

MONITORS TEN TYPES OF INNOVATIONMONITORS TEN TYPES OF INNOVATIONTMTM FRAMEWORKFRAMEWORKFinance Process DeliveryOfferingBusinessModel

Enablingprocess

Productperformance

Channel Brand Customer experienceServiceCore processNetworking Product system

Using its existingmobile network tofirst connect MFIswith customers,before extendingit to all types ofbusinesses andprivate individuals

While money transferis not the core valueproposition of a mobilenetwork provider, M-Pesaspopularity has helped boostmembership for its businessand provided Safaricomwith a new revenue stream

Effectivelyleveraged theextensive networkof airtime resellersto build a reliable,consistent storenetwork that servedcustomers needs

Safaricom investedsubstantially inbuilding a verystrong service brandfor M-Pesa, whichrode on a strongsense of customerstrust in the operator

M-Pesa lever-aged the existingagent network toprovide multipleaccess points,remove consumerilliteracy andusability barriers

Standing out: M-Pesa stores(in green) ensure a uniform ap-pearance, and make it easier forcustomers to locate the outlets

Satisfied: An M-Pesaadvertisement

Unlike

Kenya, wewill seemultiple modelsbeing innovated some bank-

led, sometelco-led



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Deep Kalra, Founder & CEO, MakeMyTrip.com

In th e rapidly growing and dynamic market of today, innovationis necessary for a companys growth, as well as to establish abran d. In this fast-paced world, increasing efficiency is the key re-quirement in order to face competition and susta in growth. Hence,innovation is essential as it breeds efficiency. With the impact ofglobalisation, increased access to the Internet and Web 2.0 , thereis significant development for compan ies that un dertake qu ick,intelligent solutions t ha t will help them build sustainable com-petitive advan tage.

Innovation Breeds Efficiency

INN VATION

Straddling Two WorldsStraddling Two WorldsLuxury brand Burberry reinvented itself by combining the traditional with the digital

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GLOBALGLOBAL AREA OF INNOVATION:AREA OF INNOVATION: CUSTOMER EXPERIENCE/CUSTOMER EXPERIENCE/ YEAR:YEAR: 1997 TO DATE1997 TO DATE

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TTo survive

in the in-

t e n s e l y

competi-

t ive in-

dustry of

h i g h

fashion,c o m p a -

nies typically compete by con-

tinuously reinventing their

styles and offerings. Burberry,

the traditional British clothing

brand, decided to gain a com-

petitive edge by focusing on pro-

viding an enhanced customer

experience both in their brick-

an d-morta r stores as well as

online. The new customer expe-

rience was created by combining

traditional British fashion de-

signs and in-shop boutique dis-plays, with cutting-edge tech-

nology. This unique mix enabled

Burberry to reinvent itself as a

highly desired and admired lux-

ury fashion house.

To deliver superior customer

experience, Burberr y prioritised

its own branded boutique

outlets over multi-brand stores.

The new bou t iques wer e

re-styled to combine the tradi-

tional Burberry designs and

classical British style with mod-

ern technology, such as touch-screens, iPod docking stations

and the like a mix that reso-

nated well with todays luxury

shoppers who value tradition,

but at the same time embrace

modern technology and lifestyle.

Burberry did not limit itself

to embracing modern technol-

ogy only in its stores it aggres-

sively exploited the opportunities

offered by the Internet, digital

marketing and social media bymaking its online experience just

as distinctive and branded as its

in-store experience. By doing so,

it also widened its reach to a

wide global audience.

Burberry began streaming

3D live broadcasts of its run way

shows from five cities arou nd

the world and then putting

these shows online through

80 partner websites, reaching a

potential audience of one mil-

lion. In comparison, the tradi-

tional catwalk show in Milan orLondon is limited to a few hun -

dred of its exclusive clients.

Customers arou nd t he world

can n ow view the show on their

iPads, click on a product they

like and have it delivered in a

Burberr y ha s focused on creating cus-tomer delight through innovation in tech-nology and providing best-in-class cus-tomer experience, both online and in itsboutique stores, which is the right stepforward. Burberr ys customer approach isbased on the premise tha t customer experi-ence needs to be enha nced in order to ele-vate the brands perception.

India is potentially a big market for thebrand, an d Burberr y has changed its glo-

bal product, as well as its marketing stra t-egy in accordance with th e demographicchanges in the Indian market. The prod-ucts that have been added to the Indianoffering a re from th e global portfolio, butstill aligned to Indian au diences prefer-ences and taste. So the brand is moving inthe right direction.

Keeping the Indian context in mind, Iwould say it is extremely crucial Burberr yuses Indian models on its website, as it

Burberry trebled revenuesover 13 years, a big

turnaround for a waningluxury brand. It has two

American CEOs to thankfor this Rose MarieBravo and incumbent

Angela Ahrendts

TODAY'S CONNECTIONTODAY'S CONNECTION

Burberry

focused oncustomer delightby innovation intechnology and

providingbest-in-classexperience

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f e w w e e k s v i a B u r b e r r y s

Worldstore portal.

Burberry was among the first

to build a presence in social net-

works. It now has over six million

fans on Facebook more than

any other fashion brand, including

competitors such as Louis Vuitton

an d Gucci.

Focusing on virtual market-

ing has also helped Burberry

reach out to luxu ry-obsessed shop-

pers in emerging markets. With the

he lp o f t echno logy and the

Internet, Burberr y has become one

of the most recognisable and de-

sired fashion brands in the new

world economies like China driv-

ing revenue growth both in the

new mar ke t s a s we l l a s i n

Burberrys traditional markets.This year, while other fashion

retailers continue to report reve-

nue decline and decreasing profits

in the aftermath of the financial

crisis, Burberrys revenue is ex-

pected to rise by around 27 per

cent to 1 .5 billion, with operating

profit close to 300 million.


BURBERRYINN VATION

would give potential Indian customers arealistic product presentation that theycan relate to. In order to drive faster adop-tion, Burberry could try a hybrid model,in which it could display its key productsin a few stores across major cities in Indiaan d use this to drive purchases online.

In the present market scenario, itbecomes important for all companies toinnovate in order to stay ahead of compe-

tition. Local indust ry bodies and the gov-ernment should set up innovation hubsand forums to drive leadership throughinnovation in growth industries such asreta il, travel and techn ology.

Also, companies should allocate fundsto incubate projects that breed innovationand experimentation. But at the sametime, they should build resilience for fail-ure if it happens.

Burberryshould use

Indian modelson its website togive customers arealistic product

presentation

Global Reach:Burberry hassuccessfullyfocused onvirtual marketingto reach out toluxury-obsessedshoppers

Finance Process DeliveryOfferingBusinessModel

Enablingprocess

Productperformance


Adopting modern technologies both in-store and online toburnish its marketing efforts,enabled Burberry to refreshits brand, and at the sametime, reach a wider worldwideaudience

Successfully reinvig-orated the brand byfinding a fine balancebetween its traditionalBritish design roots,and the use ofnew technology andsocial media networks

Relying on costlier brandedoutlets rather than cheapermass distribution channelssuch as fashion warehouses,allowed Burberry directcontrol over the customerexperience the core ofits new brand strategy

Providing a novel customerexperience by not onlyinvesting in building betterbrick-and-mortar stores butalso using technology toprovide the same in-shopexperience to online cus-tomers across the globe




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Mexican cement giant Cemex grew its profits and enlarged itsmarket by helping the poor to help themselves

Treasure at the BottomTreasure at the Bottomof the Pyramidof the Pyramid

Despite its success with the Patrimonio Hoy scheme, Cemexs sales for the latestquarter in Mexico were flat at $856 mill ion (`4,280 crore). Mexico accounts for

about one-fifth of the companys sales. Debt-laden Cemex, which recorded its eightstraight quarter of losses, hit a bad patch after a multi-billion acquisition in 2007


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CCemex, the Mexican con-struction materials gi-ant, with $15 billion inrevenues and over50,000 employees, isthe worlds third-largestseller of cement and ifits other products areadded in, such as ready-made cement the worlds biggest supplier ofbuilding material.In 1994/ 95, Mexico went th rough an eco-nomic crisis and Cemex saw a 50 per cent drop

in revenue. However, during the same period,

revenue from low-income families building their

own houses reduced by less than1 0 per cent.

Cemex believed that th is $500-million markethad the potential for growth, and could help in

diversifying its customer base and hedging it

against business cycle fluctuations.

But building houses for the poor had often

proved a lengthy and risky endeavour in the

past. To establish a profitable and scale business

by serving this segment, Cemex designed and

rolled out a unique programme Patrimonio

Hoy (Property Now) in 1998. Patr imonio Hoy

innovatively addressed the key issues faced in

dealings with this segment. Broadly, there were

three issues that Cemex was faced with:

Issue:With no savings or access to credit, low-income families could only buy small amoun tsof building material at a time. Constru ction of

a single room sometimes stretched over years.

Cemexs Approach:Through a membershipsystem based on small monthly fees, Cemex

provided collateral-free microfinancing.

Issue:Distributors had little interest in deliver-ing small volumes of building m aterial to

remote areas where the poor lived, while

materials saved up over years deteriorated for

lack of adequate storage space.

The unique aspect of Cemexs Patrimonio Hoyinnovation is that it combined a basic hu-man aspiration with an age-old tradition inMexico. Everyone aspires to build his or her ownhome, but for low-income customers it is oftennot financially feasible. In Mexico, there is a tra-ditional system called tanda that essentiallyacts as a rotating credit system. Members of acommunity pool their resources into a commonfund, from which credit is extended by rotation.

Cemex had noticed falling sales and the inabilityof a large number of potential customers toafford the costs that go into making houses.

Patrimonio Hoy was a response to this. Thecement manufacturer studied the savings andcredit habits of the poor to formulate a novel

scheme of financing. This was a combination ofsavings and credit schemes whereby customersshow their savings discipline by regular monthlypayments and Cemex develops trust in them bydelivering building raw materials early on credit.Loans are extended to people who form groupswith other potential customers, akin to self-helpgroups in India. This creates the n ecessary

Trust the Poor,Reap the Benefits

Kishore Biyani, Group CEO, Future Group

Retailers can tap intoaspirations of low-incomecustomers in categories

like furniture and electronics

by providing similarmicrocredit facil ities

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CEMEXINN VATION

Cemexs Approach:Provided professional storage spaceand served as an intermediary for distributors of building

material other than cement, increasing the volumes by

bundling requirements of several families.

Issue:Lack of expertise led to many constructions beingstarted but never completed or being of very low quality.

Cemexs Approach: Provided engineering and archi-tectura l expertise as part of the membership.

Cemex divided th e market into a reas comprising

100,00 0 people each, an d established small managerial

cells in each area consisting of just one to four full-time

staff members typically a manager, an engineer and an

architect. It contracted promoters from the local com-munity, mostly women, and paid them a commission

for attracting clients. Linking the commission to the

customers membership ensured that promoters had

an interest in ensuring long-term financial discipline

of participan ts.

It is not surprising that Patrimonio Hoy turned out to

be a success: Cemex reports the programme has reached

265 million families so far. Over the years, it has been

rolled out in other countries, too, including Colombia,

Costa Rica, Nicaragua, and the Dominican Republic.

checks and balances against defaults.The innovative business model of Cemex

benefits every player in the value cha in.Besides financing, Cemex offers other value-addedservices to customers like architecture and masonryhelp and storage for building materials. Suppliers an ddistributors get guaran teed demand. Cemex gets fixedmonthly revenue.

Through this unique out-of-the-box innovation,Cemex was able to enlarge its market, build customerloyalty and long-term partnerships with distributorsand municipalities, as well as acquire an image of

social responsibility and innovation. Today, almost allmajor retailers in Latin America provide credit optionsto consumers and in many cases the financing arm ofthe retailers is almost as large as its core business ofretailing. It has obviously led to growth of each of theseretailers, but more importantly provided products tothe poor that only the rich could afford.

It is quite obvious that such an initiative wouldwork wonders in all emerging economies, includingIndia. In the fast-moving consumer goods category, wehave seen how the advent of sachets allowed low-income customers access to brands and products thatwere till then unaffordable for them. Retailers can tapinto aspirations of low-income customers in categorieslike furniture and electronics by providing similar

microcredit facilities.But for this the retailer will have to acquire a

detailed understanding of saving and spending habitsof diverse communities here. Next, he will have to chal-lenge the existing norms and regulations related tooffering credit in India. Conventional procedures forextending credit in India involve elaborate address andincome verifications. We have to also find a way inwhich these can be bypassed and social and commu-nity norms need to be leveraged to keep defau lts low.


Enablingprocess

Productperformance


Bundled servicesvalued by thelow-incomecustomers in acost-effectivemanner, whilemitigating the per-ceived credit riskassociated withthis segment

Partnered withwomen from localcommunities aswell as acted asan intermediaryfor distributorsof other buildingmaterial notdirectly suppliedby it

Employed a set of coreprocesses to serve afragmented customerbase, e.g., adopted alean local organisation,hiring technocrats,while leveraging localcommunity structuresto manage themicrofinancing

Made servingthis segmentan economi-cally viableopportunityfor distributors

Helped the poorbuild their homesin a relativelyshort time-frame,a distant dreamotherwise

Enabled low-incomecustomers toovercome key issuesin building theirhomes by offeringfinancing, materialssupply, technicaladvice, storage, etc.

Unique scheme: Cemex engineers at work




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A consumer-centric innovation helped ToyotaA consumer-centric innovation helped Toyotaestablish relevance with young consumersestablish relevance with young consumers

Getting ItsGetting ItsGroove BackGroove Back

D. Shivakumar, Chairman, Nokia India

The Toyota Scion case has great relevance to India since the averageage in India in 2020 will be 29 as compared to the United States andChina at 3 7, Europe at 45 and Japan at 48 . Young people have a hu geaspiration level and th is shows in the bran ds and styles they buy. At onelevel they want a no worry choice and at another level they wantsomething that is customised and reflects their personality. They aretech savvy and reject the old selling methods of most industries.

Toyota Scion attacked the youth segment with a base car that couldbe customised through 40 -plus accessories. The car was priced low andthe dealer and Toyota made their margins th rough accessories. I am not

Imperatives of Innovation

INN VATION

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IIn the early years of the

21 st centu ry, execu-

tives at Toyotas US

headquarters faced a

dilemma. The Toyota

brand was perceived as

old-fashioned and was

failing to appeal to the

countr ys youth. This

was a segment of significant impor-

tan ce the population of Gen-Y, orpeople born after 19 77, outnum-

bered Gen-X, or those born between

1965 and 1976, by nearly 50 per

cent. Competition had already

started to capture th is younger mar-

ket Honda Element, VW Golf, BMW

Mini, amongst others. Given previ-

ous failed attempts, Toyota needed a

new approach to tap into this

increasingly relevant cohort of new

car buyers.

Following thorough consumer

research, Toyota was able to identify

compelling insights about the mind-set of Gen-Y. This was a generation

that assigned greater importan ce to

individualism, and was far more web

savvy than previous generations. It

wanted its vehicles to make a per-

sonal statement without burning a

hole in the pocket. It was relatively

immune to or sometimes even re-

pulsed by traditional car salesper-

sons and marketing techniques.

In 2002, Toyota launched Scion,

a new sub-brand targeted at young

buyers. Scion offered customers a

choice of three standardised models,with a large number of optional

accessories that gave buyers tremen-

dous freedom in personalising their

vehicles. Each model was competi-

tively priced below $20,000, as

Toyota sacrificed margins on the

vehicle in order to profit from acces-

sory sales, whilst simultaneously

hoping to establish cradle-to-grave

loyalty that is, from Scion to Toyota

to luxury brand Lexus as a young

persons age and income advances.

However, Scions innovat iveness

did not end with product features.

The use of channels to market the

cars and manage the business model

was also a cornerstone of the inno-vation. Channel innovation in

reaching consumers makes market-

ing and delivery critical, given the

target audiences media consump-

tion habits and unfavourable atti-

tude toward ha rd-selling. Scions

marketing team responded by focus-

ing on web-based initiatives and

non-traditional marketing tech-

niques designed to create a pull

effect for the product, rather than

explicitly pushing it.

Scions website allows potential

buyers to customise their cars online a feature so popular that by 2005 ,

the site was receiving a million hits

a month. Around this time, it was

estimated that two-thirds of buyers

configured their cars on the website

with the colours and options they

sure this is a sensible strategy, since the preferences and life

cycles of accessories change qu ickly. A change in oil priceor some tax change will kill the business as it happened withCharms, a youth cigarette brand in India.

Leaving low margins on the base product also restrictsresponse in case of a competitive threat. This strategy willwork as long as the accessory design is innovative and isalways leading the offer. Else, the consumer will move on.

MTVsaid many years ago that it wants to change before theconsumer changes. That is an absolute necessity for ayouth brand.

Toyota Scions approach to media and targeting of theyouth with digital activity is excellent. Young people believe

they are more tech savvy and trust the opinions of others

in social media. This is something many brands are doingin India durables as well as non-durables.

Innovation is a discipline which needs consumer under-standing, cross functional working and an open ecosystemto really flower. For Indian companies to be more innovative,they need to get a better grip on consumer understandingand the relevance of the brand and the category in theconsumer life space. Cars are very important to the youthas we know in th e Toyota case, giving the youth an oppor-tunity to customise their car digitally and get their friendsopinions is a great way of building a pre-sale sale. This sim-ple idea can be used by clothing brands as a digital solution

Toyotas innovative Scionbrand has been a big

success since its launchin 2002, but now, sales

have moved into adownward curve. In

October 2011, sales fell18.3 per cent to 3,952

units in the US. New carssuch as the four-seater iQ

and entry into newcountries such as Canada

might help lift sales


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TOYOTA-SCIONINN VATION

wanted before walking into the deal-ership. Scion was the first au tomaker

to run a campaign on the online

virtu al world Second Life, releasing

virtual cars at various points in the

popular metaverse for citizens to

drive and, of course, cu stomise.

Scion also launched in Whyville,

another virtua l world for teenagers,

where Toyota also provided an edu-

cational slant by allowing members

to take out virtual car loans through

the sites Club Scion and Toyota

Financial Services.

The company supplemented itsweb activities with real-world initia-

tives such as supporting up-and-

coming hip hop artists, hosting

nightclub events and backing bud-

ding filmmakers, with a clear focus

on seeking out the next underground

sensation. To solidify this image,

Scions tattooed, pierced and dread-locked crew held test-drive events in

front of popular restaurants, clubs

and record stores, whilst print adver-

tising buy was restricted to under-

ground magazines.

Scions innovative channel cam-

paign was quick to deliver results:

When Gen-Y was asked to name the

bran ds it would consider for its next

new ca r pu rchase, Scion rocketed

from No. 30 in 2004 to No. 9 in

2005, according to Kelley Blue

Book, an automotive vehicle valua-

tion company in the US. The impactwas visible in sales too: In the first

quarter of 2005, Toyota had sold

32 ,972 Scions more than Volvo or

Suzuki and only slightly less than

Mitsubishi, all erstwhile established

players in the relevant vehicle

classes.

in changing rooms.Next, true inn ovation happens at the edge

of cross functional interaction. In most Indiancompanies, we assign innovation to the market-ing team. That should change. Innovation is

just not about product as the Toyota case showsus, it is beyond the product, th at is, accessoriesand also a new business model and a new

media strategy. TVS scooters have followed acustomised colour strategy and that hasworked. Laptops have enough accessories.Mens clothing brands have the potential to ac-cessorise more. We need more womens bran ds

in the lifestyle area.Indian companies must embrace open

system innovation where each player pools inhis precious resources for the whole ecosystemto gain. This is what I term dependent growth.The Indian market has moved from a penetra-tion-led market to a consumption one. Thiswill present innovation opportunities in con-sumer retail experience, in virtual businessmodels, in personalisation and partnerships.To capitalise on th is, the innovator must workwith like-minded companies and not be afraidof par tnerships or failures.

Innovationhappens atthe edgeof cross

functionalinteraction...

It is justnot aboutproduct

Mark ofsuccess:Scion, targetedat young buyers,came in 2002

Custommade: Buyershad the freedomto personalisetheir Scions


EnablingProcess

ProductPerformance

Channel Brand Customer ExperienceServiceCore ProcessNetworking Product System

Sacrifice marginon the core product,the vehicle, to profitfrom sale of caraccessories. Usethe dealer channelto manage costs andcomplexity successfully

Accessories areinstalled at thedealer outlets toenable deliverywithin a week andprovide a highermargin businessto the dealer

Leverage dealerchannels tooffer optionalaccessories thatallow buyers thefreedom of signifi-cantly personalis-ing their vehicles

Having attemptedand failed toleverage theparent (Toyota)brand withGen-Y consumers,Toyota introducedScion

Greater autonomyto Gen-Y inpersonalisingtheir vehicles(online) evenbefore physicallyentering thedealership

The affordable and highlystandardised base vehiclescan be personalised with40-plus accessory optionsusing online kiosks. Theaverage buyer adds about$1,000 worth of profitableoptions to the base vehicles




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How GE went green, turning a potential business threatinto a brand building opportunity

Seize the DaySeize the DayINN VATION

GE fell short of i ts aggressive Ecomagination revenue target of$25 bill ion by 2010, but still has some $18 bill ion coming

from environmentally-friendly products


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IIn the early part of this century itwas clear to GE, one of th e worldslargest diversified technology an dindustrial supply companies, that itwas operating in a world whereenvironmental issues are right inthe centre of all its key stakehold-ers agendas, including consumers,customers and governments. Whileother technology companies would have per-ceived this as a threat, GEsaw potential.In 2005, GE announced a unique initiative Ecomagination; a term emerging out of thecompanys corporate slogan Imagination atWork. It was designed to drive business growthand profits through commitment to clean en-ergy, as well as to build its brand image as that

of an environmentally aware company.

In addition to being an umbrella branding

ofGEs different product lines, Ecomagination

has expanded to include increased research anddevelopment spending on creating environment

friendly technology for its customers, reducing

emissions and wastage, and regulating use of

natu ral resources for its own operations with the

emergence of an increasingly stringent regula-

tory framework on carbon dioxide emissions and

other pollutants, and as firms face a world of

decreasing fossil fuel resources, GE sought to

become the lead provider of relevant products

and services for this new reality.

In just a few years, Ecomagination has

spawned everything from low-energy digital

mammography machines an d aircraft engines

to gas turbines and nuclear plants. By 2010, GEhad shown impressive progress on each of its

Ecomagination targets, developing over 90

Ecomagination products, which contributed at

least $18 billion in revenues. It invested around

$1.5 billion in clean technology research, meet-

ing its 2010 target a year early. It successfully

reduced its own energy intensity by half and

greenhouse gas emissions by over 20 per cent

below the 2004 baseline. The companys water

consumption has also reduced by 30 per cent

GEs Ecomagination strategy is a classiccase of a great company proactively re-sponding to emerging opportu nities andadapting itself to drive business return. In anera of de-stabilising climate conditions andrising competition for fossil fuels, corporatehouses need to play a responsible role in cre-

ating a sustainable green environment. GEwas swift to grasp the opportunity to leverageinterna lly and externally.

Apart from the marketing leverage, GEinvested ahead of the curve to adapt goinggreen as a strategy and renew business proc-esses to align with the new world require-ment . This called for a complete transforma-

tion in the way GEapproached market situa-

tions and required commitment to th e envi-

ronment at all levels inside GE. By doing so,innovation was driven, a iding th e launch ofnew products, improving savings by reducingwaste, and strengthening the organisationsbrand value to deliver a healthy return oninvestment.

Learning from GEs success in creating alocalised framework, I am tempted to refer tothe movie 3 Idiots where Aamir Khan playingRancho presented local inn ovations. The

How to NurtureIndian Innovators

Sanket Akerkar, MD, Microsoft India

We need to build mechanismsto reward and promote localtalent to build a sustainable

pool to drive innovation

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from the 2006 baseline. GE has also gone down the

inorganic route by acquiring relevant assets, including

expertise in water purification, waste water treatment

and water reuse, amongst other areas.

The Ecomagination initiative has helped GEgener-ate over $70 billion in revenues since its inception, and

its success has prompted it to commit a fur ther invest-

ment of $10 billion in related research over the next

five years. It hopes Ecomagination revenue will grow

at twice the rate of the companys total revenue.

As part of its commitment, GEpublicly reports its

progress on an annual basis. Driven by focused product

development and sustained brand building efforts

under its Ecomagination initiative, GEs overall brand

value has grown by 17 per cent to $52 billion.


GEINN VATION

film highlighted innovations of littleknown Indians the exercise-bicycle usedto run a washing machine, or the scooter

powered flour mill. We need a plan to build our in-novative talent base an environment which pro-motes little known innovators to build business op-portunities around their innovations. I call it inno-vation on the groun d.

India is a powerhouse. We have abundan t sun -shine, rain and wind. We have a solid resource poolof people. We need a plan and part icipation from allto harness it. This cann ot be the responsibility of the

regulators or the government alone; corporatehouses need to play a more active role as well.Enabling innovation by improving infrastructure andhelping protect intellectual property would fallwithin the purview of the former; the latter needs tobring in the specific ideas, the investment and thewill to take the innovations to market.

We need to build mechanisms to reward andpromote our local talent to help build a sustainableand effective pool to drive innovation. Perhaps themajor reason why most new ideas fail is that there isno plan to turn them into business realities.Corporate houses need to actively identify local tal-ents from schools, colleges and the large base of re-search institutions, and provide them opportunitiesto scale their ideas and take them to market.

Indian companies need to localise global best

practices to be successful. GEs story is particularlyexciting from two perspectives. First, it created acompelling vision. Second, it had a proper actionplan to build a profitable business around the same.Such initiatives can create new jobs, support localeconomies and increase consumption. Darwinianevolution principles are always in practice inno-vate or perish.


Enablingprocess

Productperformance Channel Brand Customer experienceServiceCore processNetworking Product system

GEs decision to treatenvironmental regu-lations as a strategicbusiness opportunityled to a consciouschange in its strategyof investing in newtechnologies

The launch of theEcomagination initia-tive was preceded bymonths of interac-tions with key clientsacross industries, whowere asked what theyexpected from GE

GE made significantinvestments andchanges in itscore processes. Itdeveloped cleantechnologies andcommunicated thiseffectively to all

GE ensures sustained andconsistent communication ofits Ecomagination initiativeto both internal and externalstakeholders. The companyprovides a public update of itsprogress on an annual basis

The company developeda range of environmentfriendly productse.g., low-energymammographymachines

Charged up:GEs WattStation is an

easy-to-use electric vehiclecharger

Save energy: GEsOptima CT660 Seriesscanner, designed to

reduce power consumption




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The partnership with UPS enabled Toshiba todrastically speed up its laptop repair service and

benefitted both companies

A HappyA HappyMarriageMarriageINN VATION

UPS continues on a

strong wicket with aneight per cent expansionof revenues in the latestquarter. Toshiba is backto the No. 5 spot in the

US laptop market


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IIn the face of increasing competition from thelikes of Dell, Hewlett-Packard and IBM, indus-trial giant Toshiba lost significant share in theUS laptop market and fell to the fifth spot bylate 2004.Toshiba realised that for it to regain lostground, one vital element it would have toprovide was quicker repair service a keycriterion for laptop customers while making apurchase. Such customers are typically highly reliant ontheir laptops and cannot afford downtime. On analysing its

entire supply chain, Toshiba realised tha t the challenge of

notebook repairs was more about logistics than technical.

This made the company take a fresh look at its repair proc-

ess and come up with a unique solution: it wouldexpand th e scope of its relationsh ip with logistics firm UPS

to significantly improve warran ty service levels by drasti-

cally reducing the t ime taken for laptop repair.

As part of the new arrangement, UPSs traditional role

in shipping and handling of Toshibas for-service laptops

was expanded to include the entire laptop repair

operation. While partnering with a logistics firm is prob-

ably not the most obvious of choices for providing machine

repairs, the owners of Toshiba notebooks would benefit

greatly from having the choice of dropping off their lap-

tops at any one of 3,300 UPS stores around the US. The

laptop would then make its way to a UPS Supply Chain

Solutions facility in Louisville, Kentucky, for servicing as

required. Because the parts are in-house now, UPS can fixthe laptop and ship the product the same day speeding

up a process that took 14 to 21 days to four days or less.

The new service model was enabled by a number of

initiatives by both companies:UPS dedicated a 10,000 sq.

ft. space at its Louisville facility for repair of Toshiba laptops,

and h ired a team of technicians with eight to 10 years of

experience in notebook repairs. The technicians were then

trained and cer tified by Toshiba. The facility itself is located

adjacent to the UPSworld air hub, and thus facilitates faster

procurement of critical parts from Toshiba in Japan.

The fact that a third-party logistics provider cancontribute deeply to the success of a business ispersonally very satisfying to observe. Such innovativesolutions can significantly contribute towards businessstrategies, improve customer services, accelerate ordercycle times, consolidate services to increase efficien-cies, and reduce costs and time in transportation,inventory an d order fulfilment.

Third-par ty logistics providers have been gaining

importance and the trust of businesses to createoperational excellence. With best practices in third-party logistics services, clients can address complexglobal supply chain management issues by better vis-ibility of their worldwide inventory, lower costs forsystems integration and management, and lowertran sportation expenses.

The philosophy of our company has been similar

where we have opened offices in remote locations ofthe country such as Leh, Kargil, Port Blair, etc., toservice our customers needs. We have also sent teamsto our customers international operations to studyand then implement best practices in th e Indian con-text. For an auto company, our team assisted in actualproduction of the vehicle when the company wasgoing th rough an industrial strike.

In India, innovation, especially in the area of

Bravo, Logistics Firms

Vineet Agarwal, Joint MD, TCI

For innovation to succeed,companies need to create specialteams that work on specific areas

in collaboration with clients

businesstoday.in/innovation-toshiba-ups



26/32


TOSHIBA-UPSINN VATION

Toshiba can also use UPSs sophisticated transaction collat-

ing system that provides data about what parts are being

replaced most often and can be improved on by the com-

pany for the next generation of its laptop models.

The arrangement ha s had a tremendous impact on

Toshibas service levels tur na roun d times for laptop

repair have reduced by over 50 per cent from an average

of eight to 10 days to just two to four days un der the new

system. The partnership with UPS has played a key role

as well in helping the company win back market share:

by 201 0, Toshiba had become the fourth largest player

in the US laptop market with a 10 per cent share.

Besides the direct impact in terms of customer satis-

faction and market share, the agreement has also yieldedother benefits for both companies; UPSs sophisticated

system for tracking transactions provides data on what

parts are causing the most problems with Toshibas lap-

tops, enabling Toshiba to modify future hardware

design to improve performance an d minimise downtime.

Toshiba also reaps the added benefit of smaller staff

requirements for servicing. For its partn er, UPS, the agree-

ment has helped create a new revenue stream, and a

means to differentiate its service offering and lock in

valuable customers.

logistics, is mainly driven in the guise ofkaizen (continu ous improvement) an dprocess optimisation. True innovation in

this sector is very difficult to define since th e busi-ness of logistics is directly dependent on customerdemands and available infrastructure, includingphysical, such as roads, warehouses, etc., and move-able infrastructure such as trucks, ships, etc.

For innovation to succeed, companies need tocreate special teams that work on specific areas incollaboration with clients. One such example in ourcompany is the introduction of a three-deck two-wheeler carrier that changed the paradigm oftransportation to accommodate 35 per cent more

vehicles in the same truck. This was possible withthe assistance of the two-wheeler manufacturer

who helped during the testing of designs. TCI cur-rent ly holds the paten t for this tru ck design.

The other way for innovation to succeed is tocreate a culture of continuous improvement. Thiswould enable the teams to think out of the box and,perhaps, radically change operating models leadingto innovation. For another automotive manufac-turer, during the process of looking at areas of opti-misation, we implemented a just-in-time warehousewhere our teams would kit several componentstogether an d supply to the production line, leadingto a new business model for both companies.

Innovation can only succeed when there is trustbetween the stakeholders. In order to build thistrust, regular sharing of ideas and best practices inforums is critical. This shou ld also be across indus-try verticals so that ideas/innovation from oneindustry can flow to the other.

As patent holders get a benefit of several yearsbefore they become generic, innovations that havesignificant impact on society could enjoy certainincentives in the form of innovation credit loansat cheaper rates and lower taxes.

Servicing: The UPS Supply Chain Solutions facility in Louisville


EnablingProcess

ProductPerformance Channel Brand Customer ExperienceServiceCore ProcessNetworking Product System

Outsourcing repair work hasreduced costs and improvedcustomer service for Toshiba,while UPS has created anotherrevenue stream by expandingits business model from ship-ment to repair and service

Toshiba/UPS successfullyleveraged their partner-ship and complementarycapabilities to minimisedowntime and improvecustomer service andsatisfaction

Downtime minimisationand subsequentproduct improvementshelped Toshibaimprove its customerexperience

UPSs sophisticated toolshelped Toshiba identify andimprove design of faultyhardware components,thereby improvingproduct performancein the long run




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Ford trucks retained their top slot by undergoing a makeover, addingFord trucks retained their top slot by undergoing a makeover, addinga host of pioneering digital features to improve consumer experiencea host of pioneering digital features to improve consumer experience

Macho, ButMacho, ButBright TooBright Too

Tara Thiagarajan, Chairperson & MD, Madura Micro Finance

Fords innovation stems from a shift in focus from product to con-sumer experience. Taking the value proposition from a reliable truckto a complete mobile workstation that includes on-board inventorymanagement and tracking, Ford has gone from product to solution, fromunidimensional to multi-dimensional. Lines begin to blur as distincttechnologies and services roll into composite offerings.

The framework is simple. Ask yourself who uses the product andwhy, what for and how, and imagine how that experience of what theyare doing could be made a whole lot better and more successful. This

Putting the Customer First

INN VATION

UNITED STATESUNITED STATES AREA OF INNOVATION:AREA OF INNOVATION: PRODUCT SYSTEMS/PRODUCT SYSTEMS/ YEAR:YEAR: 20082008


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FFords F-Seriespickup truckshave been avail-a b l e i n t h eUnited States forsix decades withan establishedreputation forp e r f o r m a n c eand reliability, an d have been thecountrys best-selling pickups for thepast 30 years. As a result, theF-Series had become Fords singlemost valued product category andbrand. In 2005, Ford held nearly

37 per cent of the market.

However, the truck market was

expected to shrink significantly and

increasingly strong competitorswere matching the F-150s signa-

ture features a round power, towing

capacity and toughness, making it

harder for Ford to stand out. Digital

technology was outpacing Fords

own platform development, and

the enormous cost of tooling and

setting up manufacturing meant

that standard vehicle platforms

evolved very slowly.

In order to retain market leader-

ship and reverse the decline in

share, Ford knew it needed to move

beyond product performance. Fordwent about understanding not just

the functional aspects of trucks, but

also how a core consumer group

general contractors and construc-

tion workers went abou t its every-

day work life and the role Fords

tru cks played in it.

With the surveys in, Ford intro-

duced a collection of integrated

technologies into its F-Series pickups

in 2008 under the Ford Work

Solutions, or FWS, package. These

were created to provide better con-nectivity, flexibility and security to

this consumer group. It included

four innovative non-traditional fea-

tures that expanded the product

system. It had the first broadband-

capable in-dash computer that

allowed customers to print invoices,

check inventories and access docu-

ments stored in other networks. It

also included Tool Link, an asset

tracking system th at enabled cus-

tomers to maintain a detailed real-

time inventory of the tools or equip-

ment in their pickup boxes. Third,Crew Chief, a fleet tracking, telemat-

ics and diagnostics system, which

provided dynamic location and per-

formance data that fleet owners

need for more efficient fleet and crew

management. And fourth, Cable

Lock, a security system that discour-

aged theft of expensive tools.

kind of approach works well where (i) the tradi-tional product is a medium, conduit or vehiclefor achieving other goals and/or (ii) where thereare many related products that could be easilyintegrated with some intelligence to make theexperience simpler.

Telecom and computing have moved alongthis innovation path for a decade. Think back towhen there was a telephone for voice calling, atypewriter for text, a calculator for computat ionand a camcorder for video. No more. Today we

can have them all on a single device, rolled intoone, feeding each other synergistically. It is nolonger clear which fun ctional element is the coreproduct. These are devices with multi-dimensional purpose. Solutions that enable us todo more, better, faster.

So where else can we use this sort of principlein India? Let us start with the obvious. Whatabout our trucks? They are the main vehicles fordistribution in India, and part icularly in our ruralagricultural ecosystem, we face enormous

Fords innovation hascertainly helped it

maintain the F-Seriespickups market

leadership, though marketshare has fallen from37 per cent in 2005 to

32 per cent in 2011

(January-October). Still,F-Series is way ahead ofsecond-placed Chevrolet

Silverado pickups23 per cent share


Lines

begin to bluras distinct

technologiesand services

roll intocompositeofferings

TOYOTATOYOTA P70P70 GEGE P74P74 TOSHIBA-UPSTOSHIBA-UPS P78P78 FORD HOLLARD-PEPHOLLARD-PEP P86P86 businesstoday.in/innovation-ford



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FORD WORK SOLUTIONSINN VATION

Ford was proactive in using

partnerships to develop the above

hardware and software systems to

ensure their reliability in use and

relevance with contractors. The

in-dash computer was developed

with Magnet i Marel l i using

Microsoft Auto software and con-

necting to the Sprint Mobile

Broadband network. Tool Link was

developed with DeWALT and Cable

Lock in par tner ship with Master

Lock. These strategic partnerships

allowed Ford to integrate new tech-nologies at a much more rapid pace,

an d significantly accelerated the

origina l timeline for pu tting infor-

mat ics into F-Series trucks.

FWS was launched to wide

acclaim after 18 month s in develop-

ment, compared with the average

four-year design-to-laun ch cycle.

Within months, incrementa l sales

exceeded the total cost of develop-

ment. It has also caused many

business owners to consider cha ng-

ing over entire fleets to Ford trucks.

FWS helped sustain F-150s leader-

ship position in the truck category,

was recognised as the North

American Truck of the Year a nd

was quickly extended to other Ford

vehicles. In recent times, severalkey features of the FWSoffering have

been subsumed into the SYNC

system Fords enhanced in-car

connectivity system offered across

its vehicles.

inefficiencies with small scattered output. Turning truckfleets into mobile supply chain management systems couldgo a long way. Imagine truck fleets integrated with trackingsystems that would allow drivers to readily access what pro-duce is available where for pickup en route, keep track ofon-board pickups and drop-offs of partial load inventories,as well as manage payments and collections for loads.

Let us go further and consider something completelydifferent. Consumer finance, for instance. If you define loansas your product, you will look at ways of enhancing the sizeof the product offering, speed of loan processing or findingways to lower interest rates to compete in a price sensitivemarket. Instead, if you define your value proposition ascreating a fast, easy, affordable purchasing experience for thecustomer, you would star t to think more broadly about howthe experience can be made easier through retail, product

and technology partn erships.You can stretch this principle to other completely unre-

lated products as well. Say the lowly storage jar. Right now,I have a store room with innumerable jars an d containersand little idea what comes and goes in my busy household.For restaurants, I imagine, tracking the use of ingredientsmust be a lot more complex. Imagine if someone would takestorage containers and turn them into a programmable stor-age panel for foodgrains that can store and dispense yourrice, dal, flour, sugar, oil, masalas an d other staples in quan-tities that you punch in, and then produce automatic usagereports and order lists. This would decrease the costs of pilfer-age and cut in half the time taken to maintain accounts.

So heres to innovations that turn products into compos-ite solutions that enable us to do more, better, faster, and stillmake our lives simpler and easier in todays complex world.

Multi-dimensional:The Ford pickup boasts on-board

inventory management and tracking


EnablingProcess

ProductPerformance

Channel Brand Customer ExperienceServiceCore ProcessNetworking Product System

Strategic partnerships withcompanies like ThingMagic,Sprint, Garmin, Microsoft,and others, allowing Ford tointegrate new technologiesat a rapid pace

Non-conventionalapproach wherein Fordassembled capabilitiesoutside its traditionalareas of expertise fromestablished partners

Brand enhancementby working with otherestablished brandsand choosing to keepthese partnershipsoutside the hood

Converted trucks intomobile workstationsleading to higherproductivity and costreductions, and facilitatedsports and recreation

Offering expandedbeyond traditionalvehicle features andattributes to satisfyother consumer needs




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Hollard, a South African insurance firm, teamed up with retailgiant PEP to provide insurance for typically expensive funerals

Covering the CostCovering the Costof Dyingof DyingINN VATION

Hollard reported $1.6 bill ion revenues in 2010. The contribution of itsfuneral insurance policies was small, but the initiative addressed an unmet

customer need and boosted the brand



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IIn many par ts of Africa, there is atradition of holding elaborate andexpensive funerals, the costs ofwhich are typically prohibitive forthe vast majority. People are oftenforced to rely on informal burialsocieties for providing funeralcoverage services. As such, thedemand for affordable life/funeralinsurance is immense, but given the unattrac-tive economics under the traditional insurancemodels, the market remains largely under-supplied. Despite the high potential demand,

traditional insurance companies have been

unable to break even within th e low-income

customer segment, given poor peoples inabil-

ity to afford the minimum insurance premi-ums required to make the model viable.

In 2006, Hollard Group, South Africas

largest privately held insurance company,

decided to test a new business model to tap the

large potential market. By par tnering with

PEP, a popular clothing retail store, Hollard

separated the sa les and distribution elements

from th e costly insurance processing an d ad-

visory elements.

PEP, a high-volume, low-margin clothing

chain with more than 1,100 outlets across

South Africa, was the perfect counterpart for

the new model. It already had a captive cus-

tomer base and had mastered the art of profit-ably running a low-margin, optimised distribu-

tion model. While PEP helped make distribution

more viable, Hollard brought in the expertise

to effectively price and manage the associated

underwriting risks.

The insuran ce products, targeted at fami-

lies with monthly incomes from $3 50 to 600,

are PEP-branded and are sold in packaging

similar to mobile phone starter packs. These

packs are placed near the store check-out

This is a classic case of collaboration be-tween players from different industriesseeking to tap bottom of the pyramid, or BOP,customers and underlines the need for inno-vation not only in product design but also inlowering distribution costs.

Providing insurance protection to the BOPpopulation is a challenge due to high opera-tional costs, and cannot be viable withoutinnovating on the business model. Here,Hollard with its expertise in underwriting andproduct design lowered its distribution costs

by tying up with PEP. This was also a symbi-

otic relationship where PEP got additional

revenue from the same set of customers.The case is relevant to India where ac-

cess to financial products and services likebanking, mutual funds and insurance is stilllimited. Take the low penetration of generalinsurance. Penetration measured as a

percentage of total premiums to GDP hasbeen stagnant at a round 0.6 per cent for thelast several years. The social cost of th is lowpenetration is striking. A recent McKinseystudy estimates that only around 14 per centof Indias population is covered by health

2011 bt-monitor special issue on innovation

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