Cos forge lean biz models to tap villages

India has gained a reputation for creating a wide range of products sturdy enough to handle its demanding environment,easy enough for a wide range of people to use — and most importantly,affordable — from solar-powered ATM bank machines to detergent requiring little water. But getting these lean products to consumers is not as easy as distributing them in the developed world.

Anil Gupta should know. He started the Honey Bee Network to support India’s grassroots innovators and is an advisor to the National Innovation Council. He can rattle off a list of fantastic bricolage inventions,from an amphibious bicycle to a washing-cum-exercise-machine,that had no chance in the market. “Innovators are not necessarily good entrepreneurs,” he noted. This is where big corporations have the advantage. Domestic and multinational companies based in India are taking that frugally motivated mindset and applying it to their business models.

One of the earliest and most simple business process innovations was started by a south Indian health and beauty company,Velvette,in the 1980s.

Keen to reach Indians who aspired to use shampoo but could not afford to buy a bottle,Velvette began putting small quantities,enough for one or two washes,into plastic sachets.

The idea spread. Multinationals such as Unilever and Procter & Gamble adopted it. Now in small shops throughout India you can find streams of sachets dangling from crowded shelves and filled with anything from detergent and cough syrup to potato chips and mobile phone minutes.

“The aspiration for these products was there,but consumer ‘money in the pocket’ to afford a large cash outlay was not there. So success at the lower cash-out lay in these sachets,” said Geetu Verma,executive director of innovation with Pepsico India,which sells small packets of its sports drink powder.

Sachets worked in markets where people were familiar with the products. But 10 years ago when Hindustan Unilever wanted to reach people in “media blackout zones” where its commercials weren’t seen,it had to think of an entirely new marketing method. Who better to promote its personal and home hygiene products but women looking to increase their household income?

“This is a great way to talk to consumers in those areas,” said K Adarsh,HUL’s head of customer marketing. In a project called Shakti Amma (empowered woman) that started in 2002,HUL tapped an existing network of women’s micro-financing groups,in which women get loans to buy something that can help them earn an income. In this case,the usual cow or weaving loom was replaced with R20,000 worth of shampoos,detergents.

“Shakti entrepreneurs go from home to home talking about relevant brand benefits — like hygiene and healthcare — of our products,” Adarsh said. They sell products not only to households but also small village shops and kiosks becoming a marketing and distribution tool in one go. Today 45,000 shakti ammas push HUL products in India. Last year,the company decided to diversify the network and include husbands and sons in the process.

Like Colgate’s Raj Verma who rides his trusty bicycle around Sitapur district,‘shakti maan’ (empowered man),rides from village to village. They cover much more ground than the women. That has added an additional 23,000 rural shakti distributors,helping HUL triple their rural reach in 2010. The programme is now being used in Bangladesh and Sri Lanka.

Pradeep Kashyap,founder and CEO of Mart,a rural market consultancy company,helped HUL create Project Shakti. If companies want to succeed in an emerging market,they must link up with India’s vast social networks to reach remote customers,he said. “In any developing economy,the physical infrastructure is weak,but the social infrastructure is very strong,” Kashyap said. For MNCs,doing business in India means being the first to set up new distribution networks that developed countries take for granted.

General Electric has 4,000 employees at its research and design facility in Bangalore,many of them products originally designed in the West and being re-engineered for new uses in the India market.

One of them is a lightweight ECG machine that can fit in the backpack of a travelling doctor. It can take 500 readings on a single battery charge and costs only a tenth that of a standard ECG machine.

When GE Healthcare wanted to sell PET-CT cancer diagnosis machines,it met an unexpected roadblock. India had no national network to make the isotopes necessary for the procedure. First GE had to lobby the government for permission to make isotopes in their cyclotron machines. Then it had to get airlines and hospitals on board to create an efficient distribution method to transport the isotopes,which have a limited shelf life.

But it paid off. GE Healthcare has sold 45 PET-CT scanners and nine cyclotrons and expects the market for nuclear medicine procedures in India to grow at a rate of 15-20% a year from 10% now.

Harish Hande took that mindset and the sachet marketing model and applied it to sunshine. Upon returning to India after getting an engineering doctorate from the University of Massachusetts,he set up a company in the mid-1990s that sells small solar panels to India’s vast rural poor,most of whom had little hope of getting on the congested power grid. It took four and a half years to get a system in place. His company Selco now reaches half a million people and provides electricity to 120,000 households.