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An article of faith

india Updated: Aug 21, 2012 23:07 IST
Rajiv Sinha
Rajiv Sinha
Hindustan Times
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In today's inter-connected economy, where managerial actions have global implications, firms have a moral imperative to enhance societal welfare. Organisations must re-cast their business goals and objectives from a primary focus on enhancing shareholder value to enhanced corporate citizenship. In this environment, managers must learn to preserve the human and natural resources that nurture entrepreneurial opportunities. This requires them to disavow the market mantra of privatising profits while socialising losses, and instead, embrace the notion that they need to maximise societal welfare. At the same time, business schools in India must recognise their role in engendering such change and re-design existing curricula to accomplish this goal.

First, these modified products, initially developed for affluent consumers, are well suited for satisfying the needs of the poor and enhance their welfare. Second, people who are poor in material resources are also poor in know-how.

Consider the first assumption. A constant refrain from certain quarters in India is that the poor also deserve the same products that are available to the more affluent sections of society. Lost in these arguments are the pernicious effects of such marketing strategies. For example, selling shampoos in small, disposable sachets has become part of the marketing folklore in India. But, what of the environmental impact of these empty sachets which are discarded in huge numbers and add to the ubiquitous mountains of litter in India? Besides, while the individual sachets may be more affordable in the short run, they are typically priced higher in terms of per unit cost, so that these less well-to-do consumers actually end up paying more in the long run. These unintended consequences of "doing good" must be carefully evaluated alongside the rhetoric.

Of course, this is not to say that these consumers must be ignored. Rather, instead of "featuring down" products developed for affluent consumers, firms need to better harness the talent and know-how that is available at the base of the pyramid and create indigenously developed solutions. This strategy is not without its own problems, as exemplified by the skin whitening creams that are a rage in India. This is a classic case of how difficult it is to empower people who are undermined by their own culture, but this example notwithstanding, attempts at exploiting indigenous know-how has the potential to transform society in meaningful ways.

This leads us to the second assumption highlighted earlier. Numerous NGOs and firms in India have demonstrated the richness of solutions that have been developed by consumers who are not well off materially, but have a deep understanding of nature and the problems that face them in daily life. For example, economic deprivation does not change one's need for refrigeration and air conditioning. However, such products are either not affordable or simply not feasible for a large group of Indian consumers (due to lack of electricity). More importantly, a cheaper refrigerator or air-conditioner with fewer features, the traditional method for penetrating markets in underdeveloped and developing countries, is not an option for this segment. However, consider the Mitti Cool, a product made out of terracotta and based on the ancient practice of using clay pots to cool water ( Developed by a traditional clay potter, this product utilises the earthen pot-cooling effect to produce a refrigerator that keeps food fresh for days, thereby addressing and solving a critical need for this segment. These cost-effective and sustainable innovations may not have the marketing reach of the "featured down" products from large multinationals, but are far better suited for addressing the needs of the mass market consumer. This is so because the product was developed based on a deep understanding of the true needs of this consumer segment. In other words, it followed the best principles of market research instead of attempting to modify existing products that were developed for the purpose of fulfilling very different needs.

Thanks to the dedication of countless volunteers and workers in NGOs, numerous such examples of local ingenuity and talent can be found in Indian villages. Future attempts at product development can benefit by harnessing such talent and this responsibility must also be shouldered by business schools in India. They need to provide managers with the necessary opportunities and market research tools in order to help create original solutions that are customised for the diverse and very different needs of consumers at the base of the pyramid. Indian educators take on the responsibility to help managers to understand that the "featuring down" of upmarket products, developed for a very different segment, cannot address the needs of consumers at the base of the pyramid. This must become an article of faith among future managers, even those who seek to make their fortunes in the world of management consulting and investment banking.

Rajiv Sinha is dean, MYRA School of Business, Mysore. The views expressed by the author are personal.