I grew up reading The Indian Express. But a few years back my parents started subscribing to The Times of India after my mother complained once too often that “Express main masala nahi hai!”
The fall of The Indian Express along with The Statesman which used to be two very good newspapers (Express still is. And I haven’t read Statesman in a while, though at a point of time it was regarded the best English newspaper in Asia) are nowhere in the reckoning now, as far as the number of readers is concerned.
What happened? To some extent the papers remained stuck to their past glory and did not see the rise of the new Indian middle class, which along with hardcore news also wanted a dash of masala every morning. They wanted to know how the Congress party was screwing up the country but they also wanted to know whether Amitabh and Rekha smiled when their eyes met at a film industry party.
The Times of India was the only newspaper which caught on to this trend (or should we say created it), raked in the moolah and got way ahead of almost all its competitors in the race.
So what is the point of I am trying to make? Incumbents who are firmly entrenched in their businesses more often than not fail to see the rise of a new category. The most recent example of the same is Nokia, which after being the top mobile phone brand in the world for a period of nearly 14 years has lost out to Samsung.
And the reason for this is very simple. Nokia did not see the smart phone. There are loads of other examples of existing companies that did not see the rise of a new category.
Sony invented the walkman but allowed Apple to walkway with the MP3 player market. RCA which was big radio manufacturer had earlier allowed Sony to walkaway with the pocket radio market. Southwest Airlines created an entirely new low cost airline market which gradually spread to all other parts of the world. Incumbents like Panam, Delta, Singapore Airlines and British Airways did not spot this opportunity.
In India Hindustan Lever Ltd did not spot the low cost detergent market, Nirma did that. Amabassador and Premier Padmini which were the only two car companies in India did not see the rise of the small car market which Maruti Suzuki captured. More recently Maruti did not spot the growing demand for diesel cars and continued to be primarily a company which manufactured petrol cars. It lost out in the process.
Bharti Beetel, revolutionised the landline phone market in India with the introduction of push button phones. But it got into the mobile phone market very late. And this was a huge business opportunity missed given that Bharti Airtel became the largest mobile phone company in India and could have easily bundled Beetel mobile phones along with Airtel mobile phone connections. An entire first generation of Indian mobile phone users could have ended up using Beetel mobile phones. Kodak a company which invented digital photography went bankrupt recently. And BBC, the most respected news organisation in the world did not see the rise of the concept of 24 hour news and left it to CNN to capture that market.
As marketing consultants Al and Laura Ries,write in War In the Boardroom, “The biggest mistake of logical management types is their failure to see the rise of a new category. They seem to believe that categories are firmly fixed and a new one seldom arises.”
And why is that? The answer lies in the fact that incumbent companies are too cued into what they are doing at that point of time. A brilliant example is Kodak. How could a company which invented digital photography go bankrupt because of it? Mark Johnson explains this phenomenon in Seizing the White Space – Business Model Innovation for Growth and Renewal. As he writes “In 1975, Kodak engineer, Steve Sasson invented the first camera, which captured low-resolution black-and-white images and transferred them to a TV. Perhaps fatally, he dubbed it “filmless photography” when he demonstrated the device for various leaders at the company.”
Sasson was asked to keep quiet about his invention. This was because Kodak was the biggest producer of photo films at that point of time. And any invention that did not use photo films would have hit the core business of the company. So Kodak ignored the segment. By the time it realised the importance of the segment other companies like Canon had already jumped in and become big players. Also by then brand Canon had come to be associated very strongly with the digital camera whereas Kodak continued to be associated with the old photo film.
The same would have stood true for Beetel in India. They would have been making good money on selling landline phones and wouldn’t have seen any sense in entering the nascent mobile phone market in India where calls were priced at Rs 16 per minute. And by the time the market took off brands like Nokia would have been firmly entrenched. Amabssador and Premier Padmini fell victim to the same thing.
Another excellent example of this is Xerox. “Just think of Xerox’s Palo Alto Research Center, which famously owned the technologies that helped catapult Apple (the graphical user interface, the mouse), Adobe (post script graphical technology) and 3Com (Ethernet technology) to success,” writes Johnson.
But Xerox executives were busy selling the photocopier. They did not have time for these small tinkerings that seemed to have been happening in their company labs. The photocopiers brought in all the money and their attention was firmly focussed on them.
Sony is a really interesting example in this trend. Sony had created the Walkman and the entire market of listening to music anywhere and everywhere. But they somehow failed to latch onto the MP3 player market which was captured by the likes of Apple iPod. An MP3 player was just an extension of the Walkman.
Other than being an electronics company Sony had also morphed into a music company owning the rights to the music of some of the biggest pop and rockstars. Hence Sony supporting MP3 technology would mean one of the biggest music companies in the world supporting the free copying and distribution of music because that was what MP3 was all about.
And with this logic which might have seemed perfectly fine at that point of time Sony lost out to Apple in the MP3 space. Also, over the years music became free anyway.
Getting back to where we started, Nokia made the same mistake. It did not see the rise of the smart phone category as other players like Samsung and Apple did. And the reason was simple. Even though smart phones have been around for a while only now have they really taken over the market because they are robust enough. Hence, as long as the basic phones of Nokia were selling well, as they were till a couple of years back, it had no real interest in thinking about the smart phone market.
By the time the company caught on with the launch of Lumia other international players like Samsung and Apple already had a major presence in the market. In India the smart phone space has loads of local players like Micromax battling for the market as well.
And so Nokia lost the race!
The interesting thing is that Samsung will also will lose the race when the next evolution in the mobile phone space happens. It will be too focused on the smart phone.
The article originally appeared on www.firstpost.com on December 20, 2012
(Vivek Kaul is a writer. He can be reached at [email protected])
The decision by Team Anna to form a political party has become the butt of jokes on the internet. A Facebook friend suggested that they name their party, the Char Anna Party and someone else suggested the name Kejriwal Liberal Party for Democracy (KLPD).
The jokes are clearly in a bad taste and reflect the level of cynicism that has seeped into us. Let me paraphrase lines written by my favourite economist John Kenneth Galbraith (borrowed from his book The Affluent Society) to capture this cynicism. “When Indians see someone agitating for change they enquire almost automatically: “What is there for him?” They suspect that the moral crusades of reformers, do-gooders, liberal politicians, and public servants, all their noble protestations notwithstanding are based ultimately on self interest. “What,” they enquire, “is their gimmick?””
The cynicism comes largely from the way things have evolved in the sixty five years of independence where the political parties have taken us for a royal ride. Given this the skepticism that prevails at the decision of Team Anna to form a political party isn’t surprising. Take the case of Justice Markandey Katju, who asked CNN-IBN “Which caste will this political party represent? Because unless you represent one caste, you won’t get votes…Whether you are honest or meritorious nobody bothers. People see your caste or religion. You may thump your chest and say you are very honest but you will get no votes.”
Former Supreme Court justice N. Santosh Hegde said “Personally, am not in favour of Annaji floating a political party and contesting elections, which is an expensive affair and requires huge resources in terms of funds and cadres.”
Some other experts and observers have expressed their pessimism at the chances of success of the political party being launched by Team Anna. Questions are being raised. Where will they get the money to fight elections from? How will they choose their candidates? What if Team Anna candidates win elections and start behaving like other politicians?
All valid questions. But I remain optimistic despite the fact that things look bleak at this moment for Team Anna’s political party.
I look at Team Anna’s political party as a disruptive innovation. Clayton Christensen, a professor of strategy at the Harvard Business School is the man who coined this phrase. He defines it as “These are innovations that transform an existing market or create a new one by introducing simplicity, convenience, accessibility and affordability. It is initially formed in a narrow foothold market that appears unattractive or inconsequential to industry incumbents.”
An excellent example of a home grown disruptive innovation is Nirma detergent. Karsanbhai Patel, who used to work as a chemist in the Geology & Mining Department of the Gujarat government, introduced Nirma detergent in 1969.
He first started selling it at Rs 3.50 per kg. At that point of time Hindustan Lever Ltd’s (now Hindustan Unilever) Surf retailed for Rs 15 per kg. The lowest-priced detergent used to sell at Rs 13.50 per kg. The price point at which Nirma sold made it accessible to consumers, who till then really couldn’t afford the luxury of washing their clothes using a detergent and had to use soap instead.
If Karsanbhai Patel had thought at the very beginning that Hindustan Lever would crush his small detergent, he would have never gotten around launching it. The same applies to Team Anna’s political party as well. They will never know what lies in store for them unless they get around launching the party and running it for the next few years.
Getting back to Nirma, the logical question to ask is who should have introduced a product like Nirma? The answer is Hindustan Lever, the company which through the launch of Surf detergent, pioneered the concept of bucket wash in India. But they did not. Even after the launch of Nirma, for a very long time they continued to ignore Nirma, primarily because the price point at which Nirma sold was too low for Hindustan Lever to even think about. And by the time the MBAs at Hindustan Lever woke up, Nirma had already established itself as a pan-India brand. But, to their credit they were able to launch the ‘Wheel’ brand, which competed with Nirma directly.
At times the biggest players in the market are immune to the opportunity that is waiting to be exploited. A great example is that of Kodak which invented the digital camera but did not commercialize it for a very long time thinking that the digital camera would eat into its photo film business. The company recently filed for bankruptcy.
Ted Turner’s CNN was the first 24-hour news channel. Who should have really seen the opportunity? The BBC. But they remained blind to the opportunity and handed over a big market to CNN on a platter.
Along similar lines, maybe there is an opportunity for a political party in India which fields honest candidates who work towards eradicating corruption and does not work along narrow caste or regional lines. Maybe the Indian voter now wants to go beyond voting along the lines of caste or region. Maybe he did not have an option until now. And now that he has an option he might just want to exercise it.
While there is a huge maybe but the thing is we will never know the answers unless Team Anna’s political party gets around to fighting a few elections.
The other thing that works to the advantage of disruptive innovators is the fact that the major players in the market ignore them initially and do not take them as a big enough force that deserves attention.
A great example is the Apple personal computer. As Clayton Christensen told me in an interview I carried out for the Daily News and Analysis (DNA) a few years back “Apple made a wise decision and first sold the personal computer as a toy for children. Children had been non-consumers of computers and did not care that the product was not as good as the existing mainframe and minicomputers. Over time Apple and the other PC companies improved the PC so it could handle more complicated tasks. And ultimately the PC has transformed the market by allowing many people to benefit from its simplicity, affordability, and convenience relative to the minicomputer.”
Before the personal computer was introduced, the biggest computer available was called the minicomputer. “But minicomputers cost well over $200,000, and required an engineering degree to operate. The leading minicomputer company was Digital Equipment Corporation (DEC), which during the 1970s and 1980s, was one of the most admired companies in the world economy,” write Clayton Christensen, Michael B Horn and Curtis W Johnson in Disrupting Class —How Disruptive Innovation Will Change the Way the World Learns.
But even then DEC did not realise the importance of the personal computer. “None of DEC’s customers could even use a personal computer for the first 10 years it was on the market because it wasn’t good enough for the problems they needed to solve. That meant that more carefully DEC listened to its best customers, the less signal they got that the personal computer mattered — because in fact it didn’t — to those customers,” the authors explain.
That DEC could generate a gross profit of $112,500 when selling a minicomputer and $300,000 while selling the much bigger ‘mainframe’ also didn’t help. In comparison, the $800 margin on the personal computer looked quite pale.
Another example is Sony. “In 1955, Sony introduced the first battery-powered, pocket transistor radio. In comparison with the big RCA tabletop radios, the Sony pocket radio was tiny and static laced. But Sony chose to sell to its transistor radio to non-consumers – teenagers who could not afford big tabletop radio. It allowed teenagers to listen to music out of earshot of their parents because it was portable. And although the reception and fidelity weren’t great, it was far better than their alternative, which was no radio at all,” write Christensen, Horn and Johnson. Sony went onto to come up with other great disruptive innovations like the Walkman and the CDMan. But did not see the rise of MP3 players.
The point is that incumbents are so clued in to their business that it is very difficult for them to see the rise of a new category.
So what is the learning here for Team Anna? The learning is that their political party may not take the nation by storm all at once. They might appeal only to a section of the voters initially, probably the urban middle class, like Apple PCs had appealed to children and Sony radios to teenagers. So the Team Anna political party is likely to start off with a limited appeal and if that is the case the bigger political parties will not give them much weight initially. Chances are if they stay true to their cause their popularity might gradually go up over the years, as has been the case with disruptive innovators in business. The fact that political parties might ignore them might turn out to be their biggest strength in the years to come.
Any disruption does not come as an immediate shift. As the authors write, “Disruption rarely arrives as an abrupt shift in reality; for a decade, the personal computer did not affect DEC’s growth or profits.” Similarly, the Team Anna political party isn’t going to take India by storm overnight. It will need time.
Business is littered with examples of companies that did not spot a new opportunity that they should have and allowed smaller entrepreneurial starts up to grow big. The only minicomputer company that successfully made the transition to being a personal computer company was IBM. “They set up a separate organisation in Florida, the mission of which was to create and sell a personal computer as successfully as possible. This organisation had to figure out its own sales channel, it had its own engineers, and it was unencumbered by the existing organization,” said Christensen.
But even IBM wasn’t convinced about the personal computer and that is why it handed over the rights of the operating system to Microsoft on a platter. Even disruptive innovators get disrupted. Microsoft did not see the rise of email and it’s still trying to correct that mistake through the launch of Outlook.com. It didn’t see the rise of search engines either. Nokia did not see the rise of smart phones. Google did not see the rise of social media. And Facebook will not see the rise of something else.
Team Anna is a disruptive innovation which can disrupt the model of the existing political parties in India. There are three things that can happen with this disruptive innovation. The Team Anna political party tries for a few years and doesn’t go anywhere. That doesn’t harm us in anyway. The Team Anna political party fights elections and is able to build a major presence in the country and stays true to its cause. That benefits all of us. The Team Anna political party fights elections and its candidates win. But these candidates and the party turn out to be as corrupt as the other political parties that are already there. While this will be disappointing but then one more corrupt political party is not going to make things more difficult for the citizens of this country in anyway. We are used to it by now.
Given these reasons the Team Anna political party deserves a chance and should not be viewed with the cynicism and skepticism which seems to be cropping up.
(The article originally appeared on www.firstpost.com on August 4,2012. http://www.firstpost.com/politics/what-team-anna-can-learn-from-nirma-sony-apple-and-ford-404843.html)
(Vivek Kaul is a writer and can be reached at [email protected])
Vidhu Vinod Chopra the producer of the superhit 3 Idiots made a movie called 1942:A Love Story which was released in 1994. The movie had soulful songs and could have been a big comeback for the great R D Burman. But alas that never happened. Pancham da died of a heart attack before the movie was released.
The movie set during the days of the British Raj starts as a love story between the hero Anil Kapoor and the heroine Manisha Koirala, who keep singing all the beautiful songs composed by Burman in the first half of the movie. But throughout the first half all the characters other than the hero and the heroine keep saying this one line “shubhankar da aa rahe hain”, building the expectations of the audience for his arrival.
Shubhankar da (played by Jackie Shoff) finally arrives around 30 seconds before the interval. Until that moment the movie was a love story. Then on it becomes a movie on the freedom struggle, which in this day and age would have been called a political thriller.
As was the case in the movie, there comes a time in life of individuals as well businesses when the story has to change. The past has to be dumped and made insignificant and a new story needs to emerge.
This is something that Mamata Banerjee, rabble rouser par excellence and the only angry young man in the country with the days of Bachchan long gone, needs to realize. She built her career and life around trying to throw out the Left Parties out of West Bengal and finally after more than two decades of hard work and sheer persistence she succeeded.
If ever there was an example of an individual not giving up and finally succeeding she was it. But after becoming the Chief Minister of West Bengal what is her story? She still seems to be working on the same story of rabble rousing against the Left everywhere all the time, and holding them responsible for everything that is happening in the state of West Bengal. From rapes of women to lack of governance!
The irony of course is that she is the government now. Her level of paranoia against the Left is reaching extreme proportions now. Most recently she called the students of Jadhavpur University CPI-M cadres. As she said “They are the CPI-M cadres. I am not going to reply. I will give reply to questions from common people. I am sorry to say you belong to CPI-M. You are SFI (Student Federation of India, the student wing of CPI-M) cadres. We know all of you.”
While Bengal may be full of CPI-M cadres this is like stretching it a little too much. It is time that Mamata Banerjee changed her anti-left story.
There are a few things that Banerjee can learn from businesses from around the world which experience this phenomenon time and again. Some learn and adapt, others don’t and for some others by the time they realise that things have changed, it’s already too late.
Take the case of Nokia, the largest mobile phone manufacturer in the world. The company started in 1865 as a groundwood pulp mill. It gradually became an industrial conglomerate and among other things produced paper products, tyres, footwear, communication cables and consumer electronics.
In the early 1990s the company realised that its story had to change. It decided to concentrate on the telecommunication business. It gradually sold out a host of its other businesses. The change of story helped the company become the largest mobile phone manufacturer in the world.
But the company missed out on the smart phone revolution completely. By the time it changed its story and started concentrating on smart phones, other companies had already moved in and captured the market. A host of smaller companies from Micromax to Karbon Mobiles and many more are giving Nokia a run for its money in the Indian market.
Why did this happen? For the simple reason, like Mamata, the company remained attached to its earlier story.
There are other such examples as well. When it came to reliable trustworthy news there wasn’t a bigger brand than the British Broadcasting Corporation(BBC). The company did not see the story changing and the rise of 24hour news channels. CNN grabbed the opportunity and broadcast the Gulf War live into homes. Sony is another great example. The company changed the entire music business with the launch of the Walkman. But failed to see the story changing and handed over the mp 3 player market to the likes of Apple, on a platter.
Bharti Beetel which revolutionised land line phones in India by launching push button phones failed to see the story changing and remained stuck to selling push button phones, when more and more consumers were moving to mobile phones. Ironically, its sister company Airtel became the biggest mobile phone company in India.
The company has recently started selling mobile phones. Now imagine, during the days when Airtel was a growing company, Bharti could have sold its own mobile phones (under the Beetel brand) to consumers who bought an Airtel connection and thus could have been one of the biggest mobile phone companies in India.
Those who do see the story changing and change their stories accordingly benefit from it. An oft quoted example is that of Nirma and Wheel. The Nirma detergent started selling at Rs 3.50 per kg at a time when Hindustan Lever’s (now Hindustan Unilever) Surf used to sell for around Rs 15 per kg. The low price of Nirma made it accessible to consumers, who till then really couldn’t afford the luxury of washing clothes using a detergent and had to use soap instead.
To Hindustan Lever’s credit they did not remain stuck in their past, realised that the story had to change, and thus went ahead and launched their Nirma killer “Wheel” detergent, which eventually beat the sales of Nirma.
The moral of the story from all these examples from Surf to Nokia to Sony to Bharti is simple. At times in lives of individuals as well as companies the story that had worked previously needs to be dumped. It is time for Mamata to come up with a new story. She is no longer in the opposition when blaming the Left for every problem in the state of West Bengal was her story. Now she is where the Left was earlier.
If she doesn’t change her story and come up with a new one, her innings as a Chief Minister is going to be a short lived on. The people of West Bengal need to know what does the new Mamata stand for?
(The article originally appeared on www.firstpost.com on May 19,2012. http://www.firstpost.com/politics/what-mamata-can-learn-from-surf-bbc-sony-and-nokia-314738.html)
(Vivek Kaul is a writer and can be reached at [email protected])