Indian cos on top with bottom-of-pyramid plan

M O N DAY S P EC I A L

Mumbai: When R K Krishna Kumar, vice-chairman of Indian Hotels Company which runs the Taj chain of hotels, brought on board management guru C K Prahalad in the early 2000s, he had little idea that a whole new category of budget hotels was in the works. 

    What Krishna Kumar, who was on first-name terms with Prahalad, was sure about was that the renowned corporate strategy thinker would come up with something novel for the group. Code-named 'Wildfire', the concept of the project was to provide a comfortable stay for guests at an affordable cost. The culmination of the idea was budget hotel Ginger, priced below Rs 1,000 for a double room, launched in Bangalore in 2004. 
    "With a large number of Indian managers travelling extensively, their choice of stay was restricted to either expensive hotels or lodges. We conducted a research to find out the basic expectation of most travellers. With the help of CK, we designed Ginger, which was born out of his bottom of the pyramid vision,'' said Krishna Kumar. 
    The Ginger chain has now expanded to 21 hotels. The Paul and Ruth McCracken Distinguished University Professor of Strategy at the Stephen M Ross School of Business, University of Michigan, CK Prahalad (CK) passed away on Saturday, after a brief illness. 
    Apart from his association with Ginger, CK also conducted management programmes for the Tata group's senior management. In fact, following the success of Ginger, and these programmes the Tatas brought on several products at the lower end of the market, such as the Nano, Tata Swach (water filter), Tata Housing (low-cost residential apartments), among others. 
    Ravi Kant, vice chairman of Tata Motors, who met CK for the first time nine years ago, said that CK knew which business model would work best for India. The Nano is a great example. "It (Nano) exemplifies and confirms his concept (business at the lower end of the market). CK's take has always been that corporates should design products around a certain price rather than the other way around,'' he said. 
    "His path-breaking work on value of goods and services at the lowest income level transformed corporate thinking and has resulted in some iconic products,'' said Jamshyd Godrej, chairman, Godrej & Boyce Manufacturing Co. 
    This was especially true for FMCG major H i n d u s t a n Unilever (HUL), where CK was an active independent director. He was also a member of the audit committee and remuneration committee of HUL. 
    For HUL, the lessons were immensely helpful. The company developed a soap bar with a coating on five sides to make it waterproof and ensure a longer life of the product and minimum wastage. This was meant to help the bottom of the pyramid (BOP) consumers in India in terms of savings on cost and water, which is an area of concern. 
    CK's BOP propagation induced HUL to go in for huge product sampling to generate volumes. "Given the nature of the Indian market, he always encouraged us to go for sampling targeted at the bottom-end of the market as one encounters fewer barriers as compared to the West. The sampling was done across personal care and food categories,'' MK Sharma, former vice chairman of HUL told TOI. 
    CK's BOP theory came as a revalidation for CavinKare too - the pioneers of low-unit price sachets in shampoos. "Although he (CK) was on the board of a rival company (Hindustan Unilever), we at CavinKare held him in the highest regard. In fact, I would often quote him in our internal strategy meetings,'' said C K Ranganathan, CMD of CavinKare. 
    "It was in the mid-80s that corporate strategy as a management subject emerged and new and great ideas about strategy started filtering in. One such was CK's BOP idea which is very effective for the Indian market,'' said Ramanuj Majumdar, professor, marketing, IIM Calcutta. "The cellphone revolution and the sachet revolution in India validates his theories,'' Majumdar added.