June 10, 2010

55) ITC Limited (eChoupals)

危 wēi  danger

As I outlined in a post last year the Indian agricultural market is tough.  Farm ownership tends to be heavily fragmented, the infrastructure is often poor and historically the supply chain has been clogged by middlemen. This makes life difficult for both farmers and the buyers.  For example, often farmers would have to travel for days to a market with no knowledge of current prices, once there the exploitative middlemen could pay below the market rate and refuse to pay any premium for quality.  It has been estimated that farmers were losing up to 60% of the value of their crop as a result.  This in turn disincentivised the farmers from improving their crop quality and made supply to the industry’s big buyers unpredictable.  Large food buyers, such as ITC Limited (an Indian conglomerate), would surely have to accept this status-quo?

机 jī opportunity

No, to the contrary ITC has harnessed technology to overcome these structural problems by investing in internet kiosks in rural villages.  The kiosks, named eChoupals, enable the farmers to sell direct to ITC at an agreed price, give access to best practices and enable them to place orders for agricultural inputs such as seeds and fertilizers.  In order to instill trust in the system ITC trains a local farmer to run the system and places it in their house – on average each serves 600 farmers in the surrounding ten villages.  To ensure that they remain incentivised the sanchalaks receive a small service fee.  Even after this service fee it is estimated that farmers’ profits have increased by more than a third and ITCs costs have reduced. The conglomerate plans to scale up to 20,000 eChoupals by 2012 (from 6,500 today) potentially servicing 15 million farmers.

How About…

  • Harnessing technology to disintermediate inefficient value chains?
  • Empowering local talent to assist in supporting your customers?

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March 8, 2010

43) Dr John’s Spinbrush

spinbrush logo

危 wēi  danger

John Osher is a serial entrepreneur.  After successfully selling his Spin Pop invention, a lollipop with a battery-operated handle that twirled in the eater’s mouth, he wondered where else he might apply the technology.  He hit on the idea of developing an affordable electric toothbrush. To succeed, the product had to cost only a few dollars more than a conventional toothbrush and had to have a long-lasting battery, to meet this target Osher set about designing up from 80 cents (while everybody else was trying to design down from $79). The finished design, the Spinbrush, was highly popular in early trials.  However, with no marketing budget and a product that was so different to anything else on the market would consumers actually give the product a go?

机 jī opportunity

In the book Diffusion of Innovations (1962), Everett Rogers defines several intrinsic characteristics of innovations that influence an individual’s decision to adopt or reject.

1)    relative advantage – how improved an innovation is over the alternatives (including any previous generations)

2)    compatibility – how easily the innovation is assimilated into an individual’s life

3)    complexity – how easy it is to use

4)    trialability – how easily an innovation may be experimented with as it is being adopted

5)    observability – how visible the innovation is to others

Osher’s experience had taught him that a great product alone wouldn’t guarantee adoption, he understood that trialability and observability were important too.  Accordingly, he launched the SpinBrush at $4.99 – $5.99 in 1999 with a patented “Try Me” feature that allowed consumers to turn the brush on in-store, stimulating fast in-store trial.  This low cost approach maximised ‘observability’, ‘trialability’ and demonstrated the low ‘complexity’ in the product thereby reducing the need for consumer advertising.  The strategy worked and within its first year SpinBrush accounted for 10% of toothbrush sales in the US.  Osher’s company was sold to P&G two years later for $475m and by 2002 the SpinBrush was the best-selling electric toothbrush in the US.  With P&G’s marketing and distribution muscle the product’s annual sales grew to more than $200 million in less than twenty-four months.

how about…

  • Designing for all of Rogers’ characteristics when launching new products and services – relative advantage, compatibility, complexity, trialability and observability ?

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February 23, 2010

39) PSA Peugeot Citroën

危 wēi  danger

The auto industry has experienced the perfect storm over the last few years – rising fuel prices, increasing environmental awareness, drops in consumer spending and the emergence of alternative transport types.   All of which have compounded to hit global sales. PSA Peugeot Citroën, owner of the Peugeot brand and the second largest European carmaker is no exception – in mid 2009 ‘adverse market and industry conditions’ were blamed for falls in sales and increasing operating losses.  Peugeot’s breadth of vehicle types, including trucks, vans, cars, mopeds and bicycles has often been cited as problematic – potentially spreading resource too thinly and preventing the brand from mastering any particular vehicle type.

机 jī opportunity

Peugeot may have found a way to turn its breadth of offer into real competitive advantage with a recently launched leasing service.  After simply signing up over the web to top up a virtual credit card with unités mobilités (mobility units) a member can lease the vehicle of their choice for a few hours or days before returning it to the pool ready for the next member.  Although car membership clubs such as Streetcar are nothing new, Peugeot’s ability to offer such a choice (from trucks to bikes) and the use of its existing dealership network as collection and servicing points differentiates its offer from the alternatives and help keep its costs low.  Peugeot has evidenced that the service nets out significantly cheaper than owning a car for an average city dweller.  After initial trials with Peugeot employees and subsequent roll out to key cities in France uptake has been encouraging and Peugeot plans to launch the service, called Mu, in London early this year.  The company is also considering launching a loyalty scheme to enable its members to collect unités mobilités when making purchases with partner companies.

How About…

  • Exploring new ownership models, including fractional ownership?
  • Examining the opportunity to shift from selling products to services?
  • Trialing new products and services with your employees?
  • Making your consumers stickier using loyalty schemes?

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