The not so common sense

By: |
December 27, 2020 7:30 AM

A book on innovation in business illustrates how simple application of mind is often missed in business models and strategies

Pedestrians pass in front of the New York Stock Exchange (NYSE) during Uber Inc.'s initial public offering (IPO) in New York, U.S., on Friday, May 10, 2019. The No. 1 ride-hailing company's shares will start trading on the New York Stock Exchange after it raised $8.1 billion in the biggest U.S. IPO since 2014, pricing shares at $45 each. Photographer: Michael Nagle/Bloomberg

When we talk of innovation, the reference normally is to technology which leads to the creation of a new product or some new features in an existing product. This can be in the service sector too, where a new offering is provided to customers in, say, banking or insurance or e-commerce. Dhargalkar, in this rather interesting book It’s Logical, talks about business models that have innovation at their core which need not necessarily put something physical on the table. Innovation in doing business is a very powerful tool to further the top line and can be done by deep thinking and need not necessarily involve creating a new product or service. As the reader peruses the pages and absorbs the examples given by the author, one can get an idea of what strategies should be included. In fact, what appear to be rudimentary thoughts are actually deep-rooted and the reader would agree that it is just too simple that they are powerful.

Let us see how this works. Conventional economics talks of everything being a zero-sum game where any gain for one person has to be a payment made by another. But can we think of a win-win situation where everyone ends up gaining? This is manifested in the now famous Uber model which started off with Uber asking fleet operators to use their cars for ferrying passengers, which later got extended to the cab drivers owning vehicles and running them based on the Uber principles on pricing and rules on accepting fares. Everyone gained and Uber runs a company with no inventory and commuters pay a lower cost, while the drivers own an asset and make money and work as long as they want to. This is an innovative business model which works and we can think of several such cases where a win-win situation is created.

The author also gives an example of how a competitor of a client was able to export goods of an identical make at a much lower price, which looked like a loss that cannot be sustained. But the innovative part of the business plan was that the competitor leveraged the duty drawback scheme provided by the government and used the benefit to sell other imports at three times the price in the domestic market, unlike the client who bought expensive machinery for the product that was being produced. In a way, this is lateral thinking and while formulating strategies, companies can explore such options which help in growing the business without the normal strait-jacketed approach.

Dhargalkar uses these kind of examples to showcase the power of innovation, which goes beyond technology. Besides, he argues that technology comes in only after the end user is understood. Here, he shows how Ford made the mistake of reducing some luxury features like automatic windows for rear seats in India to keep costs down, knowing how price-sensitive the market is. This was a miscalculation, as in India, such cars are driven by chauffeurs, while the owner sat behind and missed this facility. The model, hence, did not work. In western countries, people drive their own vehicle and, hence, rear auto widows are not required. Therefore, understanding the user or the last-mile user connect is required to run a business successfully. Also, when plasma screen TVs came in, some did not succeed as they have to adjust the size and look with the walls in the houses and the space occupied.

This is a book which is filled with stories and sounds practical and really makes entrepreneurs think. Usually, books on strategy and innovation tend to become pedagogical and the reader may lose interest. This one is different and hence makes easy reading. The question answered is whether one can do better by working around the business models which may not involve a new technology. Working smarter through crafting cutting strategies can work better. The author talks of how a road anywhere has to deal with myriads of stakeholders, which means that a lot of thought has to go into how it should be structured to take care of public transport, parking, two-wheelers, beggars, vendors, garbage collection, sweepers and so on and this is something which is missed by public authorities. Careful application of the mind can actually make commonplace things like roads superior to others.

He does put before the reader his own experiences as a consultant-cum-teacher, which are quite interesting and throw some useful insights. Investment advisors need to do a deep-dive analysis of their clients and while most consultants look at demographics, Dhargalkar argues that finer sub-classification of community can add delta to the understanding, as India is heterogenous and age and income are just preliminaries, while region and community have their own traits. To hit the nail on the head, one can do such analysis which clicks with clients.

At another level, he also shows how corporate strategies can be drawn from movies and cricket and gives illustrations which illustrate how non-urban India is growing and has its demands that need to be satiated. This has to be leveraged by business as it is a large opportunity and hence customising products for this section is an important part of strategy.

It’s Logical is a book that all CEOs should read so that they can introspect their business and then ask questions on whether they can do better for themselves by thinking differently. Very often, the answer will be a yes. He also has an example of why customers shunned one bank branch while others did well. It was a simple thing like access to forms that had to be given, for which one had to keep going to different counters. Even deciding on which drink does a vada pav eater likes was found through a game where tea was preferred rather than a cold drink! This is amazing though simple advice based on the author’s techniques.

Madan Sabnavis is chief economist, CARE Ratings

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