1. Industry Studies 1
Seminar:
Unilever applying Jugaad Innovation
principles in rural India
Topic Number: 8
2. Overview
In this seminar we will examine a form of innovation that is of
particular importance in the East and gaining traction in the West.
Jugaad Innovation uses a variety of tools and techniques to help
organisations innovate in a more frugal manner. We will take the
case of Unilever’s Project Shakti and explore how they managed
to implement a strategy, perhaps unconsciously using the
principles of Jugaad Innovation.
We will initially look at how Project Shakti started and then in
groups explore how the principles of Jugaad may apply to
different aspects of their approach.
3. 3
Learning outcomes of this seminar
• Be able to determine the key principles of Jugaad
Innovation
• Apply these principles in the live case of Project Shakti
• Determine and describe the key challenges Unilever faces
• Demonstrate an understanding of the context and
environment that facilitate innovation of this nature
4. 4
Analysing Project Shakti
through Jugaad Principles
Seek opportunity
in Adversity
Do More
with Less
Think and
Act Flexibly
Keep it simple
Include the
margins
Follow your heart
5. 5
Seminar structure
Get into groups of
4 & choose one of
the 6 Jugaad
Innovation principles
(cant be the same as
anyone elses)
Each group will have
20 minutes to research
How their principle
applies to
Project Shakti
Groups will have 10
minutes
to present your
findings &
5 minutes of Q&A
7. Project Shakti: The Origins
In 1990s HUL wanted to expand its reach in rural India. It had a choice
to adopt the traditional distribution model which could have set the cash
registers ringing. But HUL adopted an approach which was rooted in its
belief of ‘Doing Well by Doing Good’. It created a unique micro-entrepreneurship
model with the aim of integrating business interests
with societal need.
This model has been guided by the belief that the private sector can
help create solutions to social challenges through innovative strategies
that meet both business and social objectives. By promoting micro-enterprise,
Project Shakti not only made great business sense but also
had deep social impact.
Sustainable
investment
opportunity for
village
community/rural
women.
Increase in the
household income
of poor families
of Shakti
Entrepreneurs
Empowerment
to
rural women
Better
standards of
living though
access to health
and hygiene
products.
Benefits of Project Shakti:
8. Project Shakti: Objectives
• HUL’s New Venture Division identified rural India as a key
source of growth and competitive advantage
• HUL argued that access to rural markets would be the big
differentiator among FMCG companies
• Business objectives: extent HUL’s reach into untapped
markets and to develop its brands through local influencers
• Social objectives: provide sustainable livelihood opportunities
for underprivileged rural women
18. Key Characteristics: Opportunity
c600k villages
untapped villages
Strong peer to peer
network
Growing awareness
of brands
Social need for better
quality products
21. Following their head and HEART to rural
India…Market Creating and CSR?
Source: Unilever.com
22. Following their head and HEART to rural
India…Market Creating and CSR?
View video: https://www.youtube.com/watch?v=utSYAkQi5hY#t=31
Source: Unilever.com
23. Following their head and HEART to rural
India…Market Creating and CSR?
Source: Unilever.com
24. A Path Set for Growth
The project is being customized and
adapted in several South-East Asian,
African and Latin American markets
like Bangladesh, Sri Lanka and
Vietnam. In Bangladesh and Sri
Lanka, it is being promoted as project
Joyeeta and Saubaghya respectively.
Source: Unilever, 2014
28. Using technology as an enabler to deepen
relationship
i-Shakti is an IT-based
rural information service
network that has been
developed to provide
information and services
to meet rural needs in
medical health and
hygiene, agriculture,
animal husbandry,
education, vocational
training and employment
and women's
empowerment.
33. Choosing their sales team; a women initiative
• Women are the target consumers for most of HUL products
• Rural women constituted the most marginalised group in
society
• Rural women were more likely to appreciate the additional
income than affluent ones in urban areas
• Women were more likely to access into homes of potential
consumers in villages
• Focus on women would have greater impact on the entire
household – leads to improvements in health, hygiene and
education levels
• Most men would be occupied with other employment and
would not devote as much time to the activity
34. However now also include men; Shaktimaans
The programme was extended in
2010 to include ‘Shaktimaans’
who are typically the husbands or
brothers of the Shakti ammas.
Shaktimaans complement our
Shakti ammas. They sell our
products on bicycles to
surrounding villages, covering a
larger area than Shakti ammas
can do on foot. There are over
50,000 Shaktimaans across India.
Each shaktimaan covers around 3
villages in his own village’s
vicinity which is a larger area
than a woman, Shakti amma, can
cover on foot.
We can see that they have been in the region for a long time however had not achieved the scale that they desired and only had a tiny amount of the population covered through other strategies that they deployed.
Direct Coverage: HUL appointed a common stockist to service all outlets within a town and sell a limited selection of the brand portfolio. Towns consisted of populations of under 50,000 people.
Indirect Coverage: HUL targeted retailers in accessible villages close to larger urban markets. Retail stockists were assigned a permanent route to ensure that all accessible villages in the vicinity were served at least once a fortnight.
Streamline: Streamline leveraged the rural wholesale channel to reach markets inaccessible by road. Star Sellers were appointed among wholesalers in a particular village. Star Sellers would purchase stock from a local distributor and then distribute stock to retailers in smaller villages using local means of transport (e.g. motorcycles, rickshaws).
Project Shakti: Project Shakti targeted the very small villages (<2,000) and tapped into pre-existing women’s self help groups (SHG). Underprivileged rural women were invited to become direct-to-consumer sales distributors for HUL products. Termed Shakti Ammas (literally “strength mothers”), these women represent HUL and sell its home-care, health, and hygiene products in their villages.
However, consider the fundamental challenge of reaching these individuals that were not connected by any roads
Furthermore, looking at the grid in order to gain any potential from this venture it would have to be done at extremely low cost otherwise it would not have been commercially viable
We can see the impact and effect of the various initiatives with PS aiming to get to villages that had fewer than 2000 inhabitants
Clearly this from a volume perspective is where there was the greater opportunity for them
Vijay Sharma the Head of PS tells us more about the opportunity and rationale for Unilever
Unilever recognizes the applicability of PS across the world and have already made attempts to replicate the model elsewhere
These two countries in particular have had a fair degree of success with the model
In the current business model, a member of a SHG was appointed as Shakti Entrepreneur. These Shakti Entrepreneurs borrowed money from their respective SHGs and with that capital purchase HLL products. The entrepreneurs job was to sell these products in their villages.
Shakti Entrepreneurs have two channels through which they were able to sell products. The first was to sell direct to retailers (for pictorial illustration see appendix F2). However, this channel is less profitable for the SE as a viable retail margin had to be maintained for the retailer, thus the SE would earn only 3% of sales to a retailer.
This compares less favourably then the second and HLL’s preferred option, to sell direct to homes. HLL communicated their channel preference by offering around 10% margin on sales as well as additional cash discounts of 1% on products sold directly to consumers, earning the SE more money.
This distribution channel has a number of advantages for the SE. It allows the entrepreneur to earn more money as she can retain the retail margin in addition to a discount HLL offered. In addition, in selling directly to consumers Shakti Entrepreneurs took on a key role of influencers, impacting category and brand awareness as well as usage.
HLL’s Shakti team knew that for the project to be a success, it had to make a significant difference to the lives of the entrepreneurs. Average monthly household incomes among the women who became Shakti entrepreneurs were less than Rs. 1,000.
The most common source of funds invested in Project Shakti was micro-credit, and repayments had to be in monthly installments that ranged from 0.75% to 2% of principal. Thus for Shakti to impact the entrepreneur’s family, it had to yield a monthly income of at least Rs. 500.
On these grounds, the Shakti team decided that Rs.10,000 had to be the minimum investment made by new entrepreneurs.
With an initial investment of this amount, a Shakti Entrepreneur could achieve sales of Rs. 120,000 per year and soon start earning a regular income of Rs. 700 per month, of which Rs. 200 would go towards the loan repayment.
Here are a number of the challenges these women faced
Here we take a fundamental look at one aspect of the operation; its focus on women
Go through the reasons why they focused on women based on the slide and ask students for views
