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C.K. Prahalad: Sustainability Can Lead to Innovation

Tue, 10 Nov 2009 17:40:47 +0000

He's going green. After core competence and the bottom of the pyramid, the world's best-known management guru of Indian origin, CK Prahalad, is talking sustainable development. Why? Because, as he argued in a recent article in the Harvard Business Review, "Sustainability is the mother lode of innovations that yield both bottomline and topline returns". In an exclusive interview to ET Now , the Paul and Ruth McCracken professor of strategy at Stephen M Ross School of Business at the University of Michigan, talks about sustainable development, the bottom of the pyramid, and his own intellectual journey. Excerpts:

You say that for companies there's no alternative to sustainable development. That's a sweeping statement to make.

I am just recognising the inevitable. If you look at the water shortage, high commodity prices and certainly global warming, then the need for sustainable development is obvious. So, my starting point is, don't deny the obvious, get on with it and innovate.

But most companies today are fighting for wafer-thin margins. So, what's the incentive for them to invest precious capital in sustainable technologies or processes?

If you deeply understand sustainability, then it's just like the quality movement some 30 years ago.

If you recall, there was a lot of debate about whether quality will increase cost. What did we find? That if you deeply understand quality and you put methodology in place, costs automatically come down. I believe sustainability can be the next quality challenge. It's going to drastically reduce costs and increase consumer acceptance. Don't look at sustainability as compliance and regulation, but as an opportunity for breakthrough innovation.

India can argue that it's not a big polluter compared to developed countries, so the companies here don't really need to start thinking of sustainable development. What would you tell such companies?

In India, you don't have to start (on sustainable development) because you are a big polluter. You can start because there's a shortage of resources. If I look at a washing machine that recognises when electricity was cut off and starts the wash cycle from there and not the beginning, then it saves energy, it saves water and it is acceptable in India because it is sustainable development and it's good business. The beauty of this is, if you innovate here, you can take those innovations back to the US.

You also talk about consumers at the bottom of the pyramid. But the irony is, if we create consumers out of millions of poor people, we are putting greater stress on the environment. How does this marry with your argument on sustainable development?

That's an important question. As you start including additional 4 billion people into the process of globalisation, you are going to put a lot more pressure on sustainable growth. Therefore, inclusive growth and sustainability are joined at the hips. In fact, what inclusive growth and sustainability force us to do is to recognize how to do more for more people with less. And this is the organizing principle I am proposing.

World Economic Forum India Summit to Ponder Over Social Issues

Tue, 10 Nov 2009 17:36:58 +0000

Social issues have never taken up so much corporate and CEO attention since the world wars. Income inequalities, public health, labour unrest, climate change, poverty, ethics, values, the role of business ... all that kind of thing.

Suddenly, corporate social responsibility has come to acquire a brand new meaning. It's not about the Gates Foundation any more, it's about bankers bonuses. It's about climate change, green technology, social justice. Developmental and behavioural economics is edging out the discredited mathematical and pure market economics.

This post-modern, socially sensitive world order is something that global business is going to have to learn to live with, for a long while to come. We're all in it together, is no longer an ideology, but a brutal market truth. If the global recession proved that global finance is intricately interlinked, swine flu proved that pandemics don't, despite masks and quarantines, respect borders either.

Manmohan Singh and Madame Gandhi can take a few bows - their 'inclusive growth' mantra has now gone completely global - it's not just good politics, it's the key to global economic survival. Here's just a sample of the 'new' economic insights that are cropping up all over the place. The emerging market consumer, in China, India, Russia, with her high savings rates and increasing purchasing power will come to the rescue of global consumer companies even as their core consumers struggle with huge debts. And this has to be balanced without wiping out the world's environment. Sustainable consumption is the buzzword.

The prosperity and growth of even marginal and poor nations isn't just a matter for charity or social justice, it's an imperative if wealthy nations want to maintain their own populations in comfort. In India, what we call youth power, and the rest of the world calls a demographic dividend is the buzzword. But there's a caveat to demographic dividends -- young people need food, education, training, housing, jobs, skills. They have aspirations, needs, demands. And when there are so many of them around, you can't just let them hang around the edges of economic activity getting bored and restive.

Over the next two days, some seriously important international and domestic business bigwigs are going into a huddle in Delhi at the World Economic Forum India Summit. And guess what? Almost half the time, they're going to be discussing those old, boring, social sector things like women, children, affordable housing, public health and so on. To mix a few metaphors, you can take society out of mathematical business models, but you can't take business out of society. We look at some of the social issues in the spotlight, women, and health.

B-school is India Shining

Tue, 10 Nov 2009 17:25:12 +0000

Mann Deshi Udyogini is like no other business school. Its students don't come to the class armed with laptops, the faculty does not moonlight by writing reports for big business groups, companies don't fall over one another to give its students jobs with fat salaries. In fact, it does not even have campus recruitments. Yet, its strike rate in producing successful businessmen - no, make it businesswomen - is perhaps better than any other B-school.

Since inception in 2006, it has trained over 7,000 women, 75 per cent of whom are on their own now, having become entrepreneurs in their own right. All its students have been rural women - poor, often illiterate or school dropouts.

The B-school was started in Mhaswad by the Mann Deshi Foundation, a NGO behind the Mann Deshi Mahila Sahakari Bank. With four branches (in Mhaswad, Vaduj, Dahiwadi in Maharashtra, and Hubli in Karnataka), it also has two vans that operate as mobile B-schools.

Polycentric Innovation: A New Mandate for Multinationals

Mon, 09 Nov 2009 17:37:12 +0000

What do John Deere, Cisco, and Obopay have in common? All three companies form a new breed of enlightened Western firms that have embraced what I call "polycentric innovation."

Polycentric innovation is an emerging business practice that consists of networking international talent, capital, and ideas to meet global demand for new products and services. Wait, isn't that what multinationals have been doing for decades? Not really. While it's true that leading American and European MNCs (I won't name any here for fear of embarrassing them) have been operating R&D centers in emerging markets like India and China for years, these regional R&D centers merely adapted existing technologies and products developed in the West for distribution in local markets.

While some MNCs do conduct original research in emerging markets, the products and services produced by their bright Indian and Chinese engineers and scientists have again been primarily geared for local market consumption only. As such most MNCs' R&D centers in emerging markets like India and China have traditionally had a narrow mandate or were not tightly integrated with the firms' global innovation network, whose center of gravity was solidly anchored in New York or London.

But John Deere, Cisco, and Obopay are turning this ethnocentric 20th century R&D model on its head by de-Westernizing their business model and shifting the epicenter of their global innovation network well beyond the borders of USA and European Union. And they are using India as the launch pad for their "polycentric" innovation approach.

Investor in People

Sat, 07 Nov 2009 18:00:36 +0000

The former banker Jacqueline Novogratz founded the Acumen Fund to provide capital for small businesses in developing countries. She explains to Helena Frith Powell why, if you want to help the world's poor, you have to invest in them, rather than just giving them money.

World’s Top Biz Thinker Reflects on Global Impact of His Work

Sat, 07 Nov 2009 17:57:27 +0000

With $18 in his pocket, local resident C.K. Prahalad emigrated from India 32 years ago accompanied by his wife and their two young children.

$18 was the amount of money he was allowed to take out of India at the time due to government currency restrictions.

Fortunately, when he arrived in Ann Arbor, Michigan, he had a couple of other things going for him.

He had a doctorate in business administration from Harvard Business School that he had earned two years earlier and he had a job waiting for him - as an assistant professor on the faculty of the University of Michigan's Stephen M. Ross School of Business.

Today, Prahalad still teaches at the University of Michigan, but since coming to the U.S., things have been looking up.

Tatas Going Global with Low-Cost Housing

Fri, 06 Nov 2009 20:28:25 +0000

Kochi, Nov. 5

The Tatas are giving a global perspective to their successful affordable housing model, which was launched in Mumbai. Mr Ratan Tata, Chairman of Tata Sons, said that Tata Housing has got enquiries for replicating the Mumbai housing model from other countries and is likely to start out from Maldives.

Enquiries have come from various other States and the affordable housing model would soon be extended to Kolkata, Bangalore and Assam.

He said there exists tremendous potential at the bottom of the pyramid for new and innovative products in developing countries. The group companies would pursue new products targeted at the segment.

The free fall in demand for steel in global markets wasover, but it would still take couple of years for the pre-2007 demand to manifest, he said. The worst of times for Corus Steel might be over but it was still difficult days ahead. A team from Jaguar-Land Rover had visited India to assess the viability of sourcing components from India.

The viability and technological capabilities would be assessed before a decision on buying components is taken.

Apollo Hospitals: 'We Are Trying to Build 10 Hospitals Every Year'

Thu, 05 Nov 2009 21:35:30 +0000

Apollo Hospitals, the country's largest healthcare chain, wants to add 10 hospitals a year for providing services to the population at the bottom of the pyramid. The aim is to reach out to a billion people in a decade. In an interview with Joe C Mathew, Apollo Hospitals Executive Chairman Prathap C Reddy says the challenge is not in the funding, but in finding the human resources. Excerpts:

Apollo is the first and only hospital in the country to have a stamp bearing its name. Have you achieved what you set out to do?
To provide an Indian the same level of care as a patient could get abroad — that was the vision with which I raised $50,000 (to start Apollo Hospitals in 1983). I wanted that void to be filled and I think I have done it. Today whatever we do is as good or better than the best hospitals in the world. Recently, hospitals like Mayo Clinic accepted that Apollo standards are as good as theirs and at a cost that is one-tenth of theirs.

But as a healthcare provider, do you feel you have given what the country expects from you?
We need to reach the bottom of the pyramid and for that we need to work hard. We can't do it the same way as we are doing now. What we need to do is to innovate and use technologies to get there. This is why we are doing the 'Touching a billion lives' programme where we are trying create hospitals through a 'Reach' model.

MChek Aims to Grow 10-fold in Five Years with Telecom Majors

Thu, 05 Nov 2009 19:44:42 +0000

Bangalore: Sanjay Swamy has hit it off with the big daddies of telecom and banking— Bharti Airtel Ltd, State Bank of India and ICICI Bank Ltd—offering their customers options to make payments over the increasingly ubiquitous mobile phone.

The cheery Swamy heads Bangalore-based start-up mChek India Payment Systems Pvt. Ltd. Its payment feature comes inlaid on every subscriber identity module (SIM) card issued by Airtel and Tata Docomo, allowing customers to use it through a built-in menu rather than a text message or mobile Internet...

MChek was incubated at Mumbai-based technology company A Little World Pvt. Ltd.

In 2006, it was spun out as a separate entity with funding from venture capital firm Draper Fisher Jurvetson and angel investor Rajesh Jain; Jain brought in Swamy to run the show.

The company, which today employs at least 100 employees, has five areas of focus—bill payments, Internet shopping, over-the-counter purchases at merchant establishments, mobile banking and enabling payments for the bottom of the pyramid.

Mobile commerce started in India some four years ago but failed to take off for varied reasons, including regulatory clearance, low telephone penetration, expensive mobile phones, lack of applications that work on all phones and customer reluctance.

Nokia Launches Its Cheapest Phone Yet for Emerging Markets

Thu, 05 Nov 2009 19:42:33 +0000

Nokia has unveiled the 1280, a mobile phone for emerging markets that is 20 percent cheaper than its predecessor, the 1202.

The unsubsidized cost of the 1280 is €20 (US$30), which makes it Nokia's cheapest mobile phone yet, according to a Nokia blog post. But the prize squeeze won't end there: The concept of a €5 mobile phone doesn't seem so far fetched, the blog post said.

The difference between mobile phone markets is the Western world and developing countries is stark. In the U.S. the average monthly revenue per user was approximately US$51 last year, compared to about US$6.40 in India, according to data from IE Market Research and Research and Markets. That doesn't leave much room for local Indian operators to subsidize expensive smartphones. Instead users have to pay for the phone themselves, and in a country where the average annual per capita income is about US$805 that isn't much. So phones like the 1280 are needed.