Godrej chotukool - challenges in disruptive innovation

At the recent CII Cost Congress held at Bangalore, Sanjay Lonial, General Manager, Disruptive Innovation, Godrej Appliances gave a fascinating presentation on Godrej’s Chotukool as an example of a disruptive innovation.

What’s a disruptive innovation? Companies often take existing products developed for mature markets and pull out features in an effort to reduce costs and re-design the product for use by consumers in cost-sensitive markets. Sanjay pointed out that such de-featuring tends to over-address needs. Instead, disruptive innovation provides no advanced features, but meets unmet needs. It provides superior performance along a different set of dimensions.

The objective of Godrej’s disruptive innovation s group is to do a “meaningful job….addressed through simple solutions….implemented with a winning business model.”

One objective of disruptive innovation is to remove barriers to consumption. Chotukool, a cooling product is one such low-cost solution for non-users. The focus of development of chotukool has been on the job / context – it is designed for people living in a one-room house, with no big need for ice; instead, it seeks to provide “just right” features and adequate functions.

Chotukool is quite different from a conventional refrigerator. It seeks to cool in the range of 5 to 15 degrees centigrade rather than the much colder temperatures achieved by a refrigerator. Cooling time of chotukool is longer at about 220 minutes compared to 90 minutes for a refrigerator. Chotukool weights only 9kg and is therefore easy to move around and transport. It’s capacity is considerably smaller than a typical refrigerator (43 litres vs 170 litres) and power consumption is also much less (15 to 65 W against 90 – 100W).

The chotukool offers several advantages – it has no moving components, is almost service free. Compared to the 200 components of a refrigerator, it has only 20 components. It is easy to use, easy to clean, easy to move, and can work on an inverter.

Godrej experimented with several cooling technologies, and finally solid state cooling chip was chosen. In fact the development of chotukool has involved a series of low cost experiments, and the product strategy has been “emergent,” based on learning and adjustment. Co-creation was an integral part of the chotukool story – several inputs came from a co-creation workshop held with women members of self-help groups on 7.2.2009 at Osmanabad.

A big challenge Godrej faced was how to reach consumers? – this needed business model innovation. For maximum reach, Godrej decided to partner with India Post. Chotukool requires demonstration and education which doesn’t happen in the trade, so Godrej was reluctant to use traditional trade channels.

Godrej decided to pilot the product in 4 districts to avoid competition, and slowly build up. Kiosks have been set up in post offices (in the 3 states where chotukool has been launched) for demonstrations. Orders are booked through the Post Office – the PO’s epayment system is integrated with Godrej’s ERP system. The postal van delivers in a week’s time and most customers don’t seem to mind the wait.

Godrej also sells chotukool B2B. For this, Godrej uses a separate “direct to shop” model – for a shop keeper, using chotukool translates into extra earnings of Rs. 50 / 100 per day.

To control costs, Godrej has been careful with tooling investments, supply chain costs (they don’t want to create a “poverty penalty” of adding on costs for delivery to distant places – hence they use the Post Office). There has been no advertising so far.

Chotukool sells at a retail price of Rs. 3790 – currently the full price has to be paid upfront and there is no EMI-based selling. Sanjay was non-committal about whether this would change. Chotukool is currently available only in 3 states; Godrej believes there is a need to maintain a long term relationship with customers.

Chotukool is a great story, but a recent report in DNA newspaper (December 5, 2011) quotes George Menezes, COO, Godrej Appliances, to say that 15,000 chotukools have been sold in Maharashtra so far. Given the size of the state and the potential market, that doesn’t seem to be a huge number. This raises some interesting questions. How do consumers see the price-performance equation of chotukool vis-à-vis that of a refrigerator? Are the barriers to the commercial success of chotukool distribution and logistics as Godrej seems to believe, or the acceptance of the product itself? And what are the implications for disruptive innovations for the Indian market?

Stanford India Biodesign Program's Medtech Conference

The Stanford India Biodesign Program (SIBP) http://biodesign.stanford.edu/bdn/india/ organised a one-day Medtech Conference at Delhi on December 5, 2011. The conference performed two tasks – it underlined the challenges in developing appropriate medical technologies for the huge health challenges faced in India, and gave an update on what the SIBP has achieved so far in addressing these challenges.

 

I thought the conference did a great job on both fronts.

 

What’s the problem SIBP is trying to solve?

 

In his presentation, SIBP director, Dr Balaram Bhargava of AIIMS drew attention to the huge health inequity we see in India. Expenditures on healthcare put a heavy burden on poor patients. While most countries in the developed world have either a strong public health infrastructure or an insurance-based system for reimbursements, in India 78 per cent of health expenditure is from the patient’s pocket. One third of patients borrow money to pay medical bills. Public expenditure on health is low by any standard.

 

 

 

Dr. Bhargava pointed out that poor quality, high cost devices are a burden on the healthcare system. 80 per cent of devices are imported, and alien to users. Training people to use them correctly is a difficult task. Designing the right devices is a great opportunity. India has highly qualified people, a genetically endowed intuitive sense, and the business and clinical expertise required to commercialise these devices. India can be a laboratory to develop and test innovations for large local markets. New programs like NRHM, RSBY, state level insurance, health sector innovation council, and universal health coverage are proposed that promise to change the health landscape in India. Dr. Rajiv Doshi mentioned that other positive signs are that a medtech regulatory system is being created, and that 65 per cent of Indian manufacturers are focused on low end devices.

 

Other speakers referred to a projected 15 – 20% growth for the Indian medical equipment market. India is slated to be the cardio vascular and diabetic capital of the world. With all these burgeoning health needs, Astra Zeneca expects India and China to become the top global innovation centres by 2020.

 

Other speakers mentioned the importance of lower complexity of new medical devices to break through skill level barriers, reduce costs and facilitate volume expansion. Another important trend is to move towards devices that can be used by the consumer or at home rather than in a formal hospital setting. Adoption of new medical devices can be a problem though - hospitals don't want innovation, but just ask for reduction in the cost of existing products. Where purchase through tender by the government is involved, the process of changing specifications to help the purchase of low-cost medical equipment is challenging.

 

Speakers also mentioned the lack of adequate investment outside the area of ICT. The challenge is to step up R&D: Indian device manufacturers spend only 1% of their sales on R&D compared to 11% in the US!

 

What is SIBP?

 

SIBP is a novel initiative of Stanford University, working with the All India Institute of Medical Sciences (AIIMS) and IIT Delhi with support from the Indian government’s Department of Biotechnology (DBT) to create the a biodesign ecosystem in India. Every year, SIBP chooses 4-5 SIBP fellows – typically doctors and engineers – who form teams to work on the design of new medical devices appropriate for India. These fellows get trained in the design methodology at Stanford, and then put it into practice working at the SIBP lab at AIIMS in New Delhi. SIBP fellows are expected to take their product innovations all the way to the market.

 

Another director of the program, Stanford-based Dr Rajiv Doshi mentioned that the SIBP was started within 4 months of the first workshop in 2007. The objective is to go beyond well known and much touted examples of innovation such as the Jaipur foot and Aravind eye care. India has the potential to be a hub of low-cost medical devices.

 

Why is SIBP important?

 

In my perspective, the main strengths of SIBP are: (1) the observation-based needs identification approach; (2) the user-centric approach to device design; (3) the creation of cross-disciplinary teams; (4) the seeding of an innovation capability for tomorrow – whether these devices or enterprises work or not, I am sure the SIBP fellows will play a significant role in innovation in India over the long run.

 

What has SIBP learnt so far?

 

Dr. Doshi argued that the Biodesign process developed in the US is relevant to India, particularly the elaborate needs identification process. But there are differences too such as different criteria in needs filtering, and how intellectual property is treated. He summarised some of the lessons learnt so far: (1) identify needs through direct clinical observations; (2) do not assume that the Indian market is like western markets; (3) devices need to be Inexpensive, with a low upfront cost; (4) Devices are better off if they are manufactured locally and use simple materials; (5) but they need to be more rugged because of the tougher local environment.

 

Dr. Joshi mentioned that the support of the government has been very helpful. Some of the things that have taken time are creation of infrastructure, clinical access, and the drawing up technology transfer guidelines. “Training the trainer” programs will help scale up. A new center at IIT Madras promises to expand the SIBP beyond AIIMS and IIT Delhi.

 

What has SIBP achieved?

 

17 SIBP fellows have filed about 20 patent applications so far. Some of the SIBP highlights:

 

• Avijit, a SIBP fellow and his colleagues used the SIBP mantra of “Identify, invent, implement” to come up with 600 device needs. They finally narrowed down their efforts to the important problem of neonatal resuscitation. Birth asphyxia results in 210,000 deaths/year in India. Existing methods to combat this asphyxia such as bag mask ventilation exist but requires skills that the average healthworker often lacks. A low cost, easy-to-use alternative is the goal and "Neobreathe" is the product Avijit and his colleagues are working on to solve this problem.

• Nitin Sisodia, another SIBP fellow and colleagues are focusing on identifying early hearing defects. They have developed “Sohum”, a novel hearing screening device. This device based on brainstem evoked response audiometry and advanced signal processing eliminates the need for sedation and reduces the need for skill.

• Pulin, a 2009 SIBP fellow and his colleagues are working on a limb immobilisation device. Many accident victims are mishandled in the critical time soon after their accident leading to complications and loss of limbs. Existing protocols require that the patient is immobilized because the exact nature of the injury is rarely known immediately after an accident. But existing products are not effective. Pulin and his colleagues are developing Relligo, a low-cost, easy-to-use solution for this problem.

What can we learn from experiences elsewhere?

 

 

I resonated with the call given by Youseph Yazdi of the Center for Bioengineering Innovation and Design (CBID) at Johns Hopkins to focus on "Innovative partnerships" rather than "technology transfer." Given India’s poor record in technology transfer, I really think that innovative partnerships are the way to go.

 

What’s the potential of lowcost medical innovation? The sky’s the limit if you go by the powerful example of the Day of Birth Alliance in Africa. This alliance of Jhpiego’s Innovation Development Program, CBID and the non-profit arm of Laerdal Medical is pushing the boundaries in a critical public health area. Cervical cancer screening through the pap smear test can't be replicated easily in the developing world because it involves multiple visits and is expensive. Instead the Day of Birth Alliance has developed a single visit approach for screening cervical cancer through direct visualisation of pre cencerous lesions using cooking vinegar. A cryoblation equipment that requires USD 2000 and industrial grade gases has been replaced by a USD 75 cryoblation gun that can be used with non medical grade CO2!

 

 

 

CII Decade of Innovation Event: Innovation with Social Impact

CII organised a 2-day event titled “Decade of Innovation: Year 1” to take stock of where we stand at the end of year 1 in the Decade of Innovation.


I participated in a panel on “Innovations for Improving Quality of Social & Environmental Life.” The session chair, Professor Anil Gupta, focused on the importance of grassroots innovation and strengthening the innovation culture across the country. He gave several examples of youngsters across the country who have come up with exciting new ideas. He explained how Techpedia http://techpedia.in/index.php has evolved as a digital repository of students doing engineering projects across the country. He lauded the Gujarat Technological University for getting students to do meaningful projects as a part of their engineering curriculum. Anilji also raised some provocative questions on innovating in a poor country like India: Should we be willing to sacrifice some accuracy for affordability? Some desires to help the deserving? Some design for durability?

I was impressed by the efforts of Dr VK Gupta of CSIR, Traditional Knowledge Guru, who is the leader of efforts to bust foreign patents on our traditional knowledge. Basically, to prevent foreigners (and even Indians!) from patenting our traditional knowledge, the government has done an extensive documentation of our traditional knowledge systems and, more importantly, formally linked up with patent offices worldwide. It’s good to see their success in inking formal access agreements with international patent offices – we often don’t take things to closure through the last mile… for details of the Traditional Knowledge Digital Library, check out http://www.tkdl.res.in/tkdl/langdefault/common/Home.asp?GL=Eng

Dr. Radhakrishnan Kodakkal of Philips spoke about PHILIPS R&D CENTRE & PRODUCTION FACILITY AT PUNE. The unit is called the Healthcare Development and Manufacturing Centre(DMC) which consists of an R&D Centre and a Manufacturing centre in MIDC Chakan which is being built. There are also a few small factories that came from the 2008 acquisition of Alpha Xray technologies and Meditronics Healthcare). Healthcare DMC India is organized like a Business Unit with P&L responsibilities with the scope for global value segment market for X-Ray imaging products (Analog Radiography, Digital Radiography, Surgery Imaging, Cardio Vascular systems etc). Currently Philips has around 6 product lines sold in Indian market and one globally. Looks like Philips has an integrated perspective of how to target the value segment in India – in this, it seems to be ahead of its main MNC rivals. The focus is on value and quality. Radhakrishnan gave an interesting example of how low cost doesn’t mean low quality – an individual can have a bath in a Jacuzzi or a shower enclosure or with a bucket and a mug. Whatever the technology, no one likes a cracked, dirty or leaky product. Quality means similar things to everyone….

Neelam Chibber is one of our most passionate social entrepreneurs. The retail chain that she founded, Mother Earth, works with 10,000 artisans in 8 states. Neelam’s effort has been to apply design thinking to bridge the silos that exist in the produce of artisans reaching the market and their getting an appropriate return for their efforts. India has the world’s largest creative industry workforce, but 2% of production! The government is not correctly structured to deal with the needs of the artisans – the Ministry of Textiles is the nodal ministry but it has to deal with a variety of handicrafts as well. Mother Earth’s important contribution has been to the design of the ecosystem for artisans. Artisans have 10% share in the brand holding company. A social investor and the IFC have investment in the supply chain company. A joint venture with the Future Group manages the retail end. The objective is to create an equitable model, and a social connect for the business. More power to Neelam and others like her for adapting capitalism to, as Porter and Kramer call it, “create shared value (see Harvard Business Review January-February 2011).”

Professor Ove Granstrand of Chalmers University, Sweden, explained how national innovation systems are being replaced by Global Innovation Systems, and talked about some of the implications of this phenomenon for the world.

In a presentation titled Breakthrough Innovation for Social Impact, I gave some examples of how companies across India are pursuing innovation for improvement of environment and the quality of life. Based on case studies such as the Tata Swach, Husk Power Systems, Biocon and Revolo, I drew some implications for what it takes to make such innovations work: problem identification is the first important step, as identifying the right problem motivates the team, provides a sense of purpose, and, of course, is related to what impact the innovation has. Affordability is a key driver of such innovation, and finding the right business model is key to the innovation’s effectiveness. I emphasized the importance of experimentation in two loops – from idea to proof of concept, and from proof of concept to market acceptance. Patience and perseverance are key to these innovations, as they take many years and several experiments to reach fruition. Visionaries who can make connections and forge partnerships play an important role in making these innovations successful.