From Non-Customer to Customer: The Blue Ocean Logic for Indian Business

W. Chan Kim and Renee Mauborgne in their Blue Ocean Strategy, amongst others, advised the business organizations, if they wish to create blue oceans for themselves, to reach beyond existing demand. The authors spoke about three tiers of ‘non-customers’, who differ in their relative distance from the market for a business organization. Of three tiers of ‘non-customers’, the third category is such that their needs and associated business opportunities are never thought of as potential customers as firms believe that they belong to some ‘other markets’. In the absence of any serious investigation, as to what these ‘other markets’ are and their possible location, these ‘non-customers’ always remain so with little or no chance of turning into real customers.

To illustrate their point, Kim and Renee gave a business example of tooth whitening. ‘Tooth whitening’ was never looked as a market to oral care consumer product companies as they believed it to belong to dentists. There could be more such examples. However, in India, there always  existed a sizeable community of ‘non-customers’ whom Indian business incorporation never targeted as a class of customers, not because this class was assumed to belong to other markets but because they were never taken as someone whom Indian business firms ever believed to quality as ‘customers’ in business sense: their ability to pay for was a constant suspect and hence they were treated as ‘non-customers ever’. The needs of these ‘non-customers ever’ were left to the Govt. to consider and provide for.

New Awakening

The attitude of Indian business, of late, is clearly moving from the traditional concept of ‘customers’ to a more flat concept. More and more ‘non-customers’ are being added as ‘targets’. Following caselets would explain and validate such a trend on the part of Indian business organizations.

Case I: Health Care in India

Health care services in India, due to historical reasons, were largely responsibility of the Govt. The Govt. in India (Both Federal and States) set up ‘hospitals’ as instruments to provide health care services at subsidised prices. District Hospitals are common in all Districts in India. Sub-divisions and even Municipal/Panchayat areas have govt. health centres. Growth of private health care services is not very ancient. Metropolitan cities of Indian witnessed, limited though, growth of health care services as business vertical in private sector and the trend soon percolated down to urban/semi-urban cities and towns which saw the rise and flourish of private nursing homes/centres. The Government has decided to increase health expenditure to 2.5 per cent of the gross domestic product (GDP) by the end of the 12th Five Year Plan (2012-17), from the current 1.4 per cent.  Currently it accounts to close to 16-20% of the total Healthcare spend. Governments spend on schemes like ‘National Rural Health Mission ‘(NHRM) is suppose to increase from US $ 3.6 Billion in 2011-12 to US $ 4.13 Billion. Government is also launching ‘Urban Health Mission’ and ‘Pradhan Mantri Swasthya Suraksha Yojana’ is being expanded.

In accordance to per capita income Indian government spends $43 per head, counterparts in Sri Lanka invest double that amount at $87, China over three times at $155 and Thailand over six times at $261.(Source : Financial Express).

Notwithstanding above developments, bed to population ratio is still short in India, with an additional requirement of 1.1 million hospital beds. The country has an additional requirement of 0.8 million doctors and 1.7 million nurses, apart from facing a significant shortage of paramedics. 45 per cent of the population travels more than 100 km to access tertiary level of medical care. Poor accessibility, accountability, affordability, and availability of healthcare services are key constraints that make the idea of ‘Health for all’ a seemingly impossible accomplishment.

Apollo: the Trend Setter

Dr. Pratap Reddy, a pioneer in corporatisation of health care services set up his chain of hospitals, known as Apollo Hospitals, in 1979. With 43 hospitals, the chain, operates 7,000 beds². Apollo was also pioneer in conceiving a chain of national pharmacy.

Local health care is now seeking to target a large number of hitherto ‘non-customers’. Dr. Pratap Reddy is now spearheading a chain of clinics in a bid to take health-care from hospital to clinics. Apollo is already running clinics for dental and diabets –more as up-market niche (approximately 73 clinics as on date). Although Dr. Pratap Reddy encapsulates the Group’s strategy as a “vision to take health care services from hospitals to clinics and then to doorsteps of people,” in hindsight it is an astitute move to embrace a retail format to tap a vast segment of underserved market (non-customers) Retail format by hospitals is a much celebrated business model globally. It is observed that these clinics gradually operate more as ‘downstreams’ which slowly turns into reliable ‘sources’ for ‘upstreams’ hospitals by way of dispatching ‘referrals’ to them

Whether not this clinic model of Apollo will finally sail through would depend on its ability to gain access to vantage locations for its clinics and qualified doctors, one thing is certain: Apollo is certainly following BOS logic: Looking Beyond Existing Demand.

Case II: Solar Energy

Around 400 million people across India still do not have access to reliable electricity and an estimated 100,000 villages in the country are yet to be connected to the national power grid, according to a World Bank report. Millions of rural Indians use tin lamps fuelled by kerosene to provide light after it gets dark.

Selco (Solar Electric Light Company): A Little More Energy

Selco (Solar Electric Light Company) a social entrepreneur start up is trying to redefine energy solutions for a vast multitude of population. It develops sustainable energy solutions and services to underserved households and businesses.

The solar lamp, which is one such solution, can last for nine hours after charging. It is sponsored by the schools, donors or government as part of Selco's light for education project. "The beauty of this project is the use of technology to promote education," said Arjun Menda. Menda, an alumnus of IIT Kharagpur and the Chairman of RMZ Corp, a real estate developer, is one of the advocates of Selco's light for education project.

Selco roped in US-based Applied Materials, the world's largest producer of chip making equipment, to electrify about 1000 village households and several rural schools across Karnataka using solar energy.

The Applied Materials Foundation, an arm of the $10.5-billion global semiconductor firm, will provide $170,000 towards the upfront cost of photovoltaic cells, solar panels and allied equipment for the pilot project. Selco will install the solar lighting systems and maintain them through its 28 branch offices. “It is a massive opportunity," said Aninda Moitra, president of Applied Materials India. Moitra which hopes to do more such engagements with entrepreneurs and replicate the model in other countries based on the outcome.

On completion of the project, the solar lighting system will generate energy to provide four to eight hours of electricity to about 10,000 people dwelling in 1,000 rural homes.

Selco’s endeavour is yet an example how business in India is increasingly engaging itself in redefining their customers.

Advantage: India

One often hears the Chief Executive Officers (CEOs) of multi-national companies describing India has emerging market. The obvious reference is to the vast market of India. Many multi-national companies have committed investment to cater to India’s emerging market. However, between a multi-national and an Indian company, the balance of competition tilts towards Indian companies as being Indian, Indian companies understand the domestic market and its constituent customers’ requirement very well. Besides, Indian companies enjoy certain resource advantage in terms of superior knowledge of all segments of Indian customers and their market behaviour, their choices and preference, price sensitivity, distribution nuances etc. and hence Indian companies can leverage this advantages to create Blue Ocean better and faster than the multi-national companies so far as India is concerned. All that is required is to re-write the definition of ‘customer’ in their business lexicon. One way to do this is what Paul Nuns and Tim Breene have described as edge-centric strategy: to focus on the edge of the market and bring ‘the edge’ at the centre of their strategy.

References

1.                  Blue Ocean Strategy, W. Chan Kim and Renee Mauborgne, HBS Press (ISBN: 1-59139-619-0)

2.                  Apollo’s mission to serve the masses, TE Narasimhan and Girish Batra, Business Staward, 4^th April, 2012 (New Delhi)

3.                  Solar Entrepreneurs Taps Rural Schools and Homes, Peerzada Abrar, Economic Times, 16^th December, 2011.

4.                  Paul Nuns and Tim Breene, What is Clearly Broken in a Company, HBR, Jan-Feb., 2011