 "Big ideas, low cost")
Two years ago, when Philips Lighting India was looking to launch its LED bulbs in India, it stared at a serious problem. It needed to create a product that could withstand voltage fluctuations and extreme temperature conditions. So it needed to add new components while keeping the overall cost of the product low to make a compelling pitch to the price-sensitive Indian consumer. Nine months of research and development paid off when the LED bulb was introduced at a price roughly 40 per cent lower than what was offered in some mature markets.
When GE Healthcare figured it needed to reduce the final price of its ECG machines for the Indian market, so it could reach the countless towns and villages and not just the high-end private hospitals in the metros, the team found an innovative way to do so. Among other things, the use of the bus ticket printer for the reading helped cut the price down to $500, instead of $2,000 for a conventional ECG.
Similarly, Philips Healthcare division has come up with the worlds least expensive cath lab, something that the company designed in its Pune manufacturing facility. Though originally designed for the Indian healthcare segment, the product given its innovation in keeping costs low is now exported to both developed and emerging markets such as the US, Europe and Indonesia.
Nearly three years after the Indian government said this was the Indian Decade of Innovation, the country is emerging as a hotbed for frugal ideas and low-cost innovations. Ask the experts and they will tell you that it is particularly tricky for MNCs to come up with low-cost innovations for India given the challenges that it poses more components and parts are invariably added to most products to make them sturdy and robust, thanks to the infrastructure, weather and market conditions. The winning strategy, however, lies in keeping the costs low for the value-conscious consumers, keeping volumes high and taking an emotional pitch to build a long-term relationship in the market. And if the low-cost innovation clicks here, it is bound to open up many new markets.
Little wonder, MNCs in almost all sectors, from FMCG to healthcare to consumer durables, are putting the whole product development process under the scanner, looking not just at product design, but also at processing, packaging and marketing to offer products that suit both the needs and the budgets of Indian consumers. As Raja Krishnamurthy, head, R&D, India and Sri Lanka, 3M, explains, Low cost innovation will continue being critical. However, companies will increasingly look at value offerings and not just the low-cost offerings.
A case in point is the LED bulb by Philips, the worlds largest maker of lights, that was reworked for the Indian market after its success in more evolved markets. Though the company could have imported the product from the US, it realised that India needed a product that would be both more evolved and low-cost at once. Shipping it from the US would have doubled the final price, which would have made it difficult for the company to gain critical mass.
Almost a year of intensive research led the company to conclude it needed to work on a new product from scratch a product that could withstand extreme conditions such as fluctuating voltage and wide temperature variations. The requirement was that the products performance needed to be higher compared to some developed markets, explains Sumit Joshi, senior director (marketing), Philips Lighting India. Adding components to address the typical Indian market challenges was essential but we couldnt increase the costs. Thats where our low-cost innovation kicked in, he adds.
The company wouldnt compromise on the LED chip, a critical component for the product and that continues being imported from the US and parts of Europe. But instead of importing the glass shell, base, cap, heat sink and holders from abroad, local manufacturers were identified. Finally, the company was able to save a staggering 60 per cent on the component cost. So the final price is 40 per cent lower that what it is available at in some markets abroad.
Philips Healthcares growth story in India has followed a similar trajectory. In less than a year since it was developed, the low-cost cath lab that we spoke of earlier has already found its way into many other global markets. In this case, the challenge for the company was no different than GE: it was about keeping the price low without compromising on quality.
The company realised that manufacturing the X-Ray detectors in India, for instance, would mean a huge compromise on quality. So, while the detector continues to be imported, the company no longer imports the transformers, the cabinets, the power supplies etc (as was the norm earlier). It has thus been able to cut production costs by roughly 30 per cent. Hammering in Indian components has meant the price of the final product has come down from Rs 2.5 crore to Rs 1.5 crore. Many other countries have evinced interest in the product now. Jitesh Mathur, senior director, patient care, clinical informatics & ultrasound, Philips Healthcare India, says that the trend in low-cost innovation in healthcare in India continues unabated. In the next two-three years, you will see a lot of innovation coming out with the aim of keeping costs lower and quality higher, particularly for the smaller towns and cities of India, he says.
A favourite example in low-cost innovation in India is that of GE Healthcares ECG machine, which drastically reduced costs (one-sixth of the usual cost) by stripping down unnecessary parts and modifying a bus ticket printer to keep printing costs down. So, with the aim of reaching out to the masses (remember, India is a ticking bomb with the rate of heart-attacks being among the worlds highest and the ECG machine is the first basic tool to test the heart rate etc), GE Healthcare devised an ECG machine that was high on battery life and could do a whole range of tests at low cost. The machine produces ECG reports at just Rs 9, slashing the price by almost 70 per cent. Its success in India has opened up many other markets like China, Brazil, Africa.
GE Healthcare is gung-ho about driving low cost innovations in India. Our aim is to produce 100 new disruptive innovations by 2020 that address Indias critical healthcare needs lowering infant deaths, lowering cardiac deaths, detecting cancer at Stage 1 itself when treatment is effective, says the companys spokesperson.
Call it jugaad, systematic innovation, low-cost or frugal innovation, in their relentless drive to keep costs under control, MNCs continue to pump big sums into R&D efforts in India and some other emerging markets. A study conducted last year by US-based Roland Berger Strategic Consultants noted that between 2007 and 2012, global R&D spending had doubled from $21 billion to $40 billion in India. Nearly China and India account for almost 20 per cent of global R&D spending. The figure is critical especially given that R&D centres main aim is to design economical, sustainable products and draw blueprints for global rollout.
Whichever way you look at it, the consumer is the ultimate winner with several quality products reaching out to her as companies redesign, tweak or build from scratch innovations that are especially and in most cases solely for Indians.
When GE Healthcare figured it needed to reduce the final price of its ECG machines for the Indian market, so it could reach the countless towns and villages and not just the high-end private hospitals in the metros, the team found an innovative way to do so. Among other things, the use of the bus ticket printer for the reading helped cut the price down to $500, instead of $2,000 for a conventional ECG.
Similarly, Philips Healthcare division has come up with the worlds least expensive cath lab, something that the company designed in its Pune manufacturing facility. Though originally designed for the Indian healthcare segment, the product given its innovation in keeping costs low is now exported to both developed and emerging markets such as the US, Europe and Indonesia.
Nearly three years after the Indian government said this was the Indian Decade of Innovation, the country is emerging as a hotbed for frugal ideas and low-cost innovations. Ask the experts and they will tell you that it is particularly tricky for MNCs to come up with low-cost innovations for India given the challenges that it poses more components and parts are invariably added to most products to make them sturdy and robust, thanks to the infrastructure, weather and market conditions. The winning strategy, however, lies in keeping the costs low for the value-conscious consumers, keeping volumes high and taking an emotional pitch to build a long-term relationship in the market. And if the low-cost innovation clicks here, it is bound to open up many new markets.
Little wonder, MNCs in almost all sectors, from FMCG to healthcare to consumer durables, are putting the whole product development process under the scanner, looking not just at product design, but also at processing, packaging and marketing to offer products that suit both the needs and the budgets of Indian consumers. As Raja Krishnamurthy, head, R&D, India and Sri Lanka, 3M, explains, Low cost innovation will continue being critical. However, companies will increasingly look at value offerings and not just the low-cost offerings.
A case in point is the LED bulb by Philips, the worlds largest maker of lights, that was reworked for the Indian market after its success in more evolved markets. Though the company could have imported the product from the US, it realised that India needed a product that would be both more evolved and low-cost at once. Shipping it from the US would have doubled the final price, which would have made it difficult for the company to gain critical mass.
Almost a year of intensive research led the company to conclude it needed to work on a new product from scratch a product that could withstand extreme conditions such as fluctuating voltage and wide temperature variations. The requirement was that the products performance needed to be higher compared to some developed markets, explains Sumit Joshi, senior director (marketing), Philips Lighting India. Adding components to address the typical Indian market challenges was essential but we couldnt increase the costs. Thats where our low-cost innovation kicked in, he adds.
The company wouldnt compromise on the LED chip, a critical component for the product and that continues being imported from the US and parts of Europe. But instead of importing the glass shell, base, cap, heat sink and holders from abroad, local manufacturers were identified. Finally, the company was able to save a staggering 60 per cent on the component cost. So the final price is 40 per cent lower that what it is available at in some markets abroad.
Philips Healthcares growth story in India has followed a similar trajectory. In less than a year since it was developed, the low-cost cath lab that we spoke of earlier has already found its way into many other global markets. In this case, the challenge for the company was no different than GE: it was about keeping the price low without compromising on quality.
The company realised that manufacturing the X-Ray detectors in India, for instance, would mean a huge compromise on quality. So, while the detector continues to be imported, the company no longer imports the transformers, the cabinets, the power supplies etc (as was the norm earlier). It has thus been able to cut production costs by roughly 30 per cent. Hammering in Indian components has meant the price of the final product has come down from Rs 2.5 crore to Rs 1.5 crore. Many other countries have evinced interest in the product now. Jitesh Mathur, senior director, patient care, clinical informatics & ultrasound, Philips Healthcare India, says that the trend in low-cost innovation in healthcare in India continues unabated. In the next two-three years, you will see a lot of innovation coming out with the aim of keeping costs lower and quality higher, particularly for the smaller towns and cities of India, he says.
A favourite example in low-cost innovation in India is that of GE Healthcares ECG machine, which drastically reduced costs (one-sixth of the usual cost) by stripping down unnecessary parts and modifying a bus ticket printer to keep printing costs down. So, with the aim of reaching out to the masses (remember, India is a ticking bomb with the rate of heart-attacks being among the worlds highest and the ECG machine is the first basic tool to test the heart rate etc), GE Healthcare devised an ECG machine that was high on battery life and could do a whole range of tests at low cost. The machine produces ECG reports at just Rs 9, slashing the price by almost 70 per cent. Its success in India has opened up many other markets like China, Brazil, Africa.
| Companies and cost innovation Expert Take Three examples illustrate how multiple innovative strategies have helped companies grow: * Suzlon was in the textile industry. When the company was plagued by soaring power costs and constant power cuts, it came up with an innovative, cost effective solution to use wind energy as an alternative. What began as a small 3 MW wind farm project in Gujarat in 1995 is now an MNC operating in 33 countries. Instead of looking at just cheap Indian labour as the primary cost reduction strategy, Suzlon leveraged technology extensively to reduce costs. Through low-cost innovations, Suzlon aspired to reduce the total cost of ownership for their customers. * BASF, a multinational in the fertiliser business, realised that Indian farmers could do with more education in the sector of agriculture, fertilisers and crops. The company innovated by packaging some of its products that gave basic ‘product knowledge’ to farmers on the product packs. In addition to product knowledge, information related on how best to use their fertilisers was printed on the product packs to help farmers maximise yields and lower per unit costs but also to run their farms more professionally and improve margins. * Siemens made a conscious decision to make SMART (Simple, Maintenance-friendly, Affordable, Reliable and Timely-to-market) products for emerging economies like India. The goals for such products were ambitious — to be 40-60 per cent cheaper, achieve not just by stripping down the bells and whistles in developed world products but designing products from the ground up while taking unique Indian conditions into account. Some of the SMART products introduced by Siemens include X-Ray machines and fetal heart rate monitors. Vijay Govindarajan |
GE Healthcare is gung-ho about driving low cost innovations in India. Our aim is to produce 100 new disruptive innovations by 2020 that address Indias critical healthcare needs lowering infant deaths, lowering cardiac deaths, detecting cancer at Stage 1 itself when treatment is effective, says the companys spokesperson.
Call it jugaad, systematic innovation, low-cost or frugal innovation, in their relentless drive to keep costs under control, MNCs continue to pump big sums into R&D efforts in India and some other emerging markets. A study conducted last year by US-based Roland Berger Strategic Consultants noted that between 2007 and 2012, global R&D spending had doubled from $21 billion to $40 billion in India. Nearly China and India account for almost 20 per cent of global R&D spending. The figure is critical especially given that R&D centres main aim is to design economical, sustainable products and draw blueprints for global rollout.
Whichever way you look at it, the consumer is the ultimate winner with several quality products reaching out to her as companies redesign, tweak or build from scratch innovations that are especially and in most cases solely for Indians.