Value for Money and for Many

India has demonstrated that impossible challenges can be successfully converted into possible solutions.

Industrial enterprises continuously strive to create products and services which provide higher performance and higher functionality through lower input costs, thus providing “value for money.”

While “value for money” is the professed strategy, “value for many” is not something that most industrial enterprises strive for. Value for many has to mean value for many more, and not just “for a few more.” If value for many means value for those four billion people in the world whose income levels are less than $2 a day, then there are special innovation challenges. Then we cannot be just satisfied with low costs, we must strive for ultra low costs. Then we cannot just seek affordability, but we must go for extreme affordability. This also means our not stopping at “incremental innovation” but striving for “disruptive innovation.”

Can we really get value for money and at the same time, value for many? Can we make a laptop costing $2,000 available at $200? Can we make a Hepatitis-B vaccine costing $20 per dose available at 40 cents per dose? Can we make a psoriasis treatment costing $20,000 available at $100? Can we make an artificial foot costing $10,000 made available at $30? Or a high quality cataract eye surgery made available not at $3,000 but for $30? Can we make a comfortable, safe and fuel efficient car available at $2,000 instead of $20,000?

All these look impossible. But all the above challenges have been met, and all of them in India!

Let us begin by illustrating the last example in the above list, namely that of a $2,000 car. The launch of the people’s car, the Nano, the cheapest car in the world in 2008, which is on the Indian roads now is an inspiring story. The car was created by an inspiring leader, Ratan Tata and therefore we will refer to it as Tata Nano.

Tata Nano is a true example of value for money as well as value for many. Tata Nano delivers comfort, safety, aesthetics, and fuel efficiency at a very affordable price, so affordable that millions of lower middle class customers in India can buy it. Tata Nano has a rear mounted 624 cc, 35 bhp engine, a maximum speed of 125 kilometers per hour with a fuel consumption of 23 km per liter while meeting the Euro IV emission standards.

The idea of Tata Nano was conceptualized by Ratan Tata. He gave a challenge of designing and developing a very low cost four wheeler to young engineers in Tata Motors. The tight price-performance envelope was such that the price of $2,000 was emphasized with all departments, design and development to production and from logistics to marketing.

The Tata Nano team synthesized by drawing ideas from different sources from helicopters to two wheelers. There was an innovative partnership with component manufacturers as well as an innovative business model for automobile dealerships.

It is interesting to note that when adjusted to the value of $2,007, Model T (Ford Motors) was made for $19,700 in 1908. Exactly 100 years later, Tata Nano was made for $2,000, providing a brilliant example of achieving value for money as well as value for many!

Similarly, the telecom industry revolution in India, specifically in wireless communication, is another such example. This industry added around 16 million subscribers last month. The cost of a minute of a cell phone time is less than one cent, the lowest in the world. A mobile handset is available for as little as $20. The cost of one SMS text message has dropped down to as little as two by thousandth of a dollar!

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This brilliant journey of delivering value for money as well as value for many began with a visionary leader Dhirubhai Ambani, founder chairman of Reliance, who had an audacious dream of bringing the benefits of telephony and communication to the common man in India. He challenged his team to innovate and bring down the cost of a phone call to that of a post card in India.

To achieve this dream of value for many, a series of innovations emerged. Most notable was the birth of the “refining model of telecom.” Reliance drew inspiration from their experience in building a world class refinery in India. The refinery integrated complex processes in isolation from the number of customers using the end product. So, rather than following the traditional model of purchasing telecom equipment on a cost per subscriber basis, Reliance invented its own model. Rather than paying a massive upfront cost per subscriber fee to vendors, Reliance paid them for the volume of traffic that flowed through the equipment.