India: INNOVATIONS in Business and Economy

The Big Story What is INNOVATION ? Innovations in India? Innovations in Indian Economy Corporate Innovations in India

What is INNOVATION ?

Innovations in India?

Innovations in Indian Economy

Corporate Innovations in India

What is INNOVATION? I N N O V A T I O N VALUE CREATING SUSTAINABLE Dynamic ON-GOING FINDING NEW WAYS OF DOING ANYTHING BUT ‘BUSINESS AS USUAL’

I N N O V A T I O N

Innovations in Indian Economy

Innovations in Indian Economy Indian Economy before REFORMS

Indian Economy before REFORMS

India before REFORMS Closed Economy License Raj: tangle of regulations giving bureaucrats too much control over too much of economy Unabated corruption Public Sector: fountainhead of industrial development Private Sector under constraint Restriction on growth and diversification (license raj) Restriction on technology and capital flow ( import, forex control) Reservation for small sector Government dominance of R&D activity

Closed Economy

License Raj: tangle of regulations giving bureaucrats too much control over too much of economy

Unabated corruption

Public Sector: fountainhead of industrial development

Private Sector under constraint

Restriction on growth and diversification (license raj)

Restriction on technology and capital flow ( import, forex control)

Reservation for small sector

Government dominance of R&D activity

And the CRISIS Over the 80s Government expenditure grew faster than government earnings High level of borrowings by government from the Reserve Bank of India, IMF, World Bank Populist spending policies of the government Expenditure on subsidies grew from Rs 19.1 billion in 1980-81 to Rs 107.2 billion in 1990-91 Resulted large Fiscal Deficit and Balance of Payment crisis Current account deficit doubled from an annual average of 1.3 % of GDP during the first half of 1980s to 2.2 % of GDP during the second half Forex Reserves dwindled to USD 975 million, hardly enough to pay for two weeks of imports

Over the 80s Government expenditure grew faster than government earnings

High level of borrowings by government from the Reserve Bank of India, IMF, World Bank

Populist spending policies of the government

Expenditure on subsidies grew from Rs 19.1 billion in 1980-81 to Rs 107.2 billion in 1990-91

Resulted large Fiscal Deficit and Balance of Payment crisis

Current account deficit doubled from an annual average of 1.3 % of GDP during the first half of 1980s to 2.2 % of GDP during the second half

Forex Reserves dwindled to USD 975 million, hardly enough to pay for two weeks of imports

And the 1991 INNOVATION In the form of LIBERALIZATION

In the form of LIBERALIZATION

1991 REFORMS… Almost all industrial licensing abolished Restrictions under Monopolies and Restrictive Trade Practices Act reduced Private Entry requirements both for domestic and foreign players eased Custom duties, the peak protective duty rates were brought down from 300 % in 1991 to 85% by March 1993 Foreign Direct Investment caps on various sectors relaxed to a large extent Archaic Foreign Exchange Regulation Act amended and replaced by Foreign Exchange Management Act

Almost all industrial licensing abolished

Restrictions under Monopolies and Restrictive Trade Practices Act reduced

Private Entry requirements both for domestic and foreign players eased

Custom duties, the peak protective duty rates were brought down from 300 % in 1991 to 85% by March 1993

Foreign Direct Investment caps on various sectors relaxed to a large extent

Archaic Foreign Exchange Regulation Act amended and replaced by Foreign Exchange Management Act

And the results are…

And the results are…

And the results are…

India today is a… Strong, vibrant and fast growing economy Will be third largest economy in the world after China and US by 2050 Key strengths Dynamic and competitive private sector Sound and independent legal system Large and growing consumer market Vast-pool of English-speakers Skilled managerial and technical manpower Key sectors of influence Outsourcing for MNCs Exporting software Financial, research, technology services GDP growing at average rate of 8% - Industry and Services sectors largest growth drivers

Strong, vibrant and fast growing economy

Will be third largest economy in the world after China and US by 2050

Key strengths

Dynamic and competitive private sector

Sound and independent legal system

Large and growing consumer market

Vast-pool of English-speakers

Skilled managerial and technical manpower

Key sectors of influence

Outsourcing for MNCs

Exporting software

Financial, research, technology services

GDP growing at average rate of 8% - Industry and Services sectors largest growth drivers

Corporate Innovations in India

Innovations in Global Economy Both the developped as well as emerging markets presents attractive opportunities for the corporates However making minor adjustments to existing products, lowering prices or replicating existing sales channels does not led to success in the current global economy Corporates need to be innovative enough to rethink value propositions Understand consumer behavior and needs of the individual target markets Develop new product offerings keyed to unique needs of individual markets Globalise research and developments Develop and retain the key employees for the different markets and integrate them into the global network Ways to manage regulatory risks of the different markets

Both the developped as well as emerging markets presents attractive opportunities for the corporates

However making minor adjustments to existing products, lowering prices or replicating existing sales channels does not led to success in the current global economy

Corporates need to be innovative enough to rethink value propositions

Understand consumer behavior and needs of the individual target markets

Develop new product offerings keyed to unique needs of individual markets

Globalise research and developments

Develop and retain the key employees for the different markets and integrate them into the global network

Ways to manage regulatory risks of the different markets

Innovations in Global Economy There is a surge in competition in the emerging global economy Markets around the world are being liberalised Long term reductions in the cost of transportation and communication have opened up new markets Consumer learn about new fashions, ideas and products faster than ever before Science technology are providing new opportunities for business to compete based on exploiting knowledge, skills and creativity to produce more valuable goods and services Increasing environmental concerns, growing demand for environment friendly systems All these factors are making challenges to innovate urgent and continuous

There is a surge in competition in the emerging global economy

Markets around the world are being liberalised

Long term reductions in the cost of transportation and communication have opened up new markets

Consumer learn about new fashions, ideas and products faster than ever before

Science technology are providing new opportunities for business to compete based on exploiting knowledge, skills and creativity to produce more valuable goods and services

Increasing environmental concerns, growing demand for environment friendly systems

All these factors are making challenges to innovate urgent and continuous

ITC: e-Choupal

ITC’s national crop procurement network of 6,500 ``e-Choupal,'' kiosks A two way rural direct marketing channel for rural India E-choupal: a computer typically housed in the farmer’s house linked to internet via phone lines Managed by a trained local farmer Serves an average of 600 farmers in 190 surrounding villages in 5 km radius The farmers can use the computer to access daily closing prices on local mandis as well as to track global price trends or find information about new farming techniques Order seed, fertilizer and other consumer goods from ITC or its partners ITC: e-Choupal

ITC’s national crop procurement network of 6,500 ``e-Choupal,'' kiosks

A two way rural direct marketing channel for rural India

E-choupal: a computer typically housed in the farmer’s house

linked to internet via phone lines

Managed by a trained local farmer

Serves an average of 600 farmers in 190 surrounding villages in 5 km radius

The farmers can use the computer to

access daily closing prices on local mandis

as well as to track global price trends or

find information about new farming techniques

Order seed, fertilizer and other consumer goods from ITC or its partners

ITC: e-Choupal At harvest time ITC offers to buy crops directly from any farmer Procurement is at the previous day’s closing price Farmer transports crop to an ITC processing center Farmer is paid for crop and transport fee “ Bonus Points” are provided for products with quality above norm Points are exchangeable for products that ITC sells Farmers that come to sell usually go back with their required FMCG product from the ITC sells counters 3.5 million farmers connected through a IT network in rural India E-Choupal has won the Stockholm Challenge Award 2006 in the Economic Development Category and many more

At harvest time ITC offers to buy crops directly from any farmer

Procurement is at the previous day’s closing price

Farmer transports crop to an ITC processing center

Farmer is paid for crop and transport fee

“ Bonus Points” are provided for products with quality above norm

Points are exchangeable for products that ITC sells

Farmers that come to sell usually go back with their required FMCG product from the ITC sells counters

3.5 million farmers connected through a IT network in rural India

E-Choupal has won the Stockholm Challenge Award 2006 in the Economic Development Category and many more

LG ELECTRONICS

LG ELECTRONICS LG entered India as Lucky Goldstar in 1993 in JV with a local partner Rather unlucky start, JV entered into messy break up Six years after the Reforms, LG re-entered India as a 100% subsidiary ‘LG Electronics India Pvt Ltd’ LG took to localisation of its operation. Established manufacturing plant at Noida in1998, introduced ‘digital manufacturing system’ ensuring local and efficient manufacturing to reduce cost Innovative product localisation Hindi and regional language menus on its TV Introduced low priced “Cineplus” and “Sampoorna” range for the rural market First brand to introduce gaming in CTVs. Cricket gaming in CTVs Created R&D set-up in India Indianised electrical goods matching the tastes of Indian consumers designed a standard 220 volt appliance to withstand India's 170 volt to 350 volt power surges

LG entered India as Lucky Goldstar in 1993 in JV with a local partner

Rather unlucky start, JV entered into messy break up

Six years after the Reforms, LG re-entered India as a 100% subsidiary ‘LG Electronics India Pvt Ltd’

LG took to localisation of its operation.

Established manufacturing plant at Noida in1998, introduced ‘digital manufacturing system’ ensuring local and efficient manufacturing to reduce cost

Innovative product localisation

Hindi and regional language menus on its TV

Introduced low priced “Cineplus” and “Sampoorna” range for the rural market

First brand to introduce gaming in CTVs. Cricket gaming in CTVs

Created R&D set-up in India

Indianised electrical goods matching the tastes of Indian consumers

designed a standard 220 volt appliance to withstand India's 170 volt to 350 volt power surges

LG ELECTRONICS Adopted Regional distribution model, distributors work directly with the company, stock rotation Innovative marketing strategies Sponsored 1999 Cricket Worldcup, followed it up to 2003 Brought in four captains of the Indian Cricket team to endorse it products Cultural marketing in the form of discounts and special offers in time of festivals specially during Diwali LG today is one of the most formidable brands in the consumer durables and home appliances Total turn over of the company in the year 2006 was Rs 82.5 billion and is expecting a growth of 15% this year

Adopted Regional distribution model, distributors work directly with the company, stock rotation

Innovative marketing strategies

Sponsored 1999 Cricket Worldcup, followed it up to 2003

Brought in four captains of the Indian Cricket team to endorse it products

Cultural marketing in the form of discounts and special offers in time of festivals specially during Diwali

LG today is one of the most formidable brands in the consumer durables and home appliances

Total turn over of the company in the year 2006 was Rs 82.5 billion and is expecting a growth of 15% this year

INNOVATION

INNOVATION For more than 50 years HUL served India’s elite class who can afford to buy MNC products ( top of THE PYRAMID ) Nirma’s offering of detergent products for poor consumers in 1990s was an eye opener for HUL In 1995 HUL took to product innovation Drastically altered its traditional business model of high margins Approach towards profits driven by volume and capital efficiency New detergent ‘Wheel’ was formulated, substantially reducing ration of oil to water in the product responding to the fact that the poor often wash their clothes in rivers and other public water systems Decentralized production, marketing and distribution of product leveraging the abundant labour pool in rural India

For more than 50 years HUL served India’s elite class who can afford to buy MNC products ( top of THE PYRAMID )

Nirma’s offering of detergent products for poor consumers in 1990s was an eye opener for HUL

In 1995 HUL took to product innovation

Drastically altered its traditional business model of high margins

Approach towards profits driven by volume and capital efficiency

New detergent ‘Wheel’ was formulated, substantially reducing ration of oil to water in the product responding to the fact that the poor often wash their clothes in rivers and other public water systems

Decentralized production, marketing and distribution of product leveraging the abundant labour pool in rural India

Initiated micro-credit initiative “Shakti” expanding its distribution system mutually beneficial alliances with rural Self Help Groups (SHGs) SHGs are being offered the option of distributing relevant products of the company as a sustainable income-generating activity Shakti has over 19,000 women entrepreneur reaching out to 80,000 villages in 345 districts in 12 states of the country By the end of 2010, it aims to reach out to 1,00,000 entrepreneurs covering 5,00,000 villages and touching 600 million population HUL’s news business yield 20 % growth in revenue per year and a 25 % growth in profits per year between 1995 and 2000 Market cap grew to USD 12 billion- agrwth rate of 40 % per year HUL’s parent Unilever transported these principles to create new detergent market among poor in Brazil ‘ Bottom of the Pyramid ’ is a corporate ‘ strategic priority ’ for Unilever now INNOVATION

Initiated micro-credit initiative “Shakti” expanding its distribution system

mutually beneficial alliances with rural Self Help Groups (SHGs)

SHGs are being offered the option of distributing relevant products of the company as a sustainable income-generating activity

Shakti has over 19,000 women entrepreneur reaching out to 80,000 villages in 345 districts in 12 states of the country

By the end of 2010, it aims to reach out to 1,00,000 entrepreneurs covering 5,00,000 villages and touching 600 million population

HUL’s news business yield 20 % growth in revenue per year and a 25 % growth in profits per year between 1995 and 2000

Market cap grew to USD 12 billion- agrwth rate of 40 % per year

HUL’s parent Unilever transported these principles to create new detergent market among poor in Brazil

‘ Bottom of the Pyramid ’ is a corporate ‘ strategic priority ’ for Unilever now