Forget e-com, there8217;s money in the poor

Unilever and its Indian subsidiary Hindustan Lever, for instance Prahalad told a totally captivated audience of India8217;s top business leaders like Rahul Bajaj and C K Birla, had actually replicated its Nirma experience to gain a huge market in countries like Brazil. Hindustan Lever, as is well known, took a real beating in the 8217;80s when Karsanbhai Patel created Nirma, a detergentat a fraction of Surf8217;s cost. Well, what Hindustan Lever did was to replicate Nirma8217;s management style 8211; outsourcing of production and distribution to much cheaper suppliers with quality control by Lever 8211; and today 30 per cent of its laundry profits come from Wheel.

Unilever has now sent out Indian managers to Brazil, and is even using partly Indian machinery to produce ALA detergents in Brazil. Using techniques learnt in India 8211; travelling shows in vans in poorer localities, and so on 8211; in two months, ALA is selling in 10,000 outlets.

Prominent among the audience today was Shunu Sen, largely responsible for Lever8217;s turnaround strategy. Lever8217;s return on capital on Wheel is 93 per cent as against 22 per cent on the high-end products 8211; clearly there8217;s big money in selling to the poor. India has just 10 million rich customers, but 800 million who fall in the lower-income segments, and the challenge and big money is here.

The crux is really in how you see an opportunity, Prahalad repeated. But no one intoday8217;s well-heeled audience raised a hand in acknowledgement when Prahalad asked them if they saw, for instance, an opportunity in the fact that India has 6 million blind people and 12.5 million commercially blind, those who can barely see and can do no useful economic work. Well, the Aravind Eye Hospital in Madurai does around a lakh cataract operations a year India has a cataract backlog of 22 million cases at a cost of 10 that8217;s right, ten versus a cost of 1,800 in the US!

How8217;s it doing this? Through a use of eye camps to identify and study patients initially, and McDonald8217;s style assembly line operations using state-of-the-art laser surgery. It even makes its own contact lenses at a cost of 5 versus 150 in the US and Prahalad says the lenses are acknowledged to be world class. It8217;s a non-profit organisation, but if you look at its costs, the return on capital is 115 per cent for the surgery and around 200 per cent for the lens making! Guess what? The only film on Aravind is by a UStelevision channel and the only case-study of it is by a Harvard professor. An Aravind family member is now studying business administration at Michigan and plans to take the model to Vietnam.

Do you see opportunity when you see the traditional Indian cow, or a family of five milking them? No response. And then, when Prahalad gave the obvious answer, the audience collectively beat itself for missing the obvious 8211; Amul. Over two decades, Amul got 6 lakh families to collect their milk the traditional way, sell it to co-operatives, and then take it over and run the business commercially after this. There8217;s opportunity at the village level, Prahalad moaned, but only Amul saw it.

Similarly, why bemoan the fact that India has just a limited number of Internet connections, when India has figured out the solution 8211; Internet cafes. Access8217; is the key to the Internet, and at a low cost, this has been solved 8211; don8217;t buy a computer, buy a few minutes of Internet time!

Nor is knowledge of the English language, orany other one for that matter, the constraining factor as far as the use of computers or the Net is concerned. By using primarily graphic-based icons, NIIT demonstrated last year, that even illiterate slum children near its Balaji Estate office in South Delhi and in Shivpuri in Madhya Pradesh could use the Net to access information they wanted.

It8217;s innovation such as this, a part beaming and a part-sad at the poor audience participation Prahalad said would ensure that business, and not just Indian, succeeded in the new millennium. Citibank, and not any Indian firm for instance, has learnt valuable lessons on how to successfully run commercially viable lending programmes among the poor from the Grameen Bank model of Bangladesh and has started limited work in a few South Indian cities already.

Did the enthralled audience benefit from CII8217;s millennium gift today? It8217;s difficult to say, but someone in the audience did ask an amused or was the expression one of shock? Prahalad if all these models 8211; Amul,Wheel, Aravind, etc 8211; really happen in practice?