S. SIVAKUMAR
For a long time, penetrating the rural markets has been a much touted though hardly ever seriously tackled challenge for corporate India. But with the slowdown, a few companies have begun to really try. What’s the best corporate business model for rural India? Does it require a new breed of leaders ? What are the challenges that these leaders are facing? Will they have to work within new organisational structures? You may find some of the answers in ITC’s attempt to crack open rural India using the Internet.
It is axiomatic that growth in rural incomes is both a means as well as an end for India’s economic development. So, rural India offers companies the opportunity to increase their shareholder value and improve the stock of the rural poor. In the past, rural India was served mainly by the government. But now policies have been changed to encourage the private sector to chip in.
But are we – the industry, the professionals and the academic – prepared for this challenge ? Sadly, barring a few exceptions, no! The challenges of the rural markets must be tackled right from the universities. But B-schools today are more concerned with First World case studies – the Harvard Business School approach – instead of developing methodologies for the Third World. The faculty in most academic institutes is far removed from rural reality. There has to be a shift.
For most companies, involvement with villages has been an act of social responsibility outside their business operations and, hence, limited in scope. Some tried to tap the rural market opportunity, but met with little success mainly because they applied urban market concepts there.
The rural market is quite different in terms of the price-value equation, product usage pattern and service coordinates because the meaning of `convenience’ differs across market segments. Customising goods and services to rural markets is a fascinating job. Villages have an exceptionally sound commercial sense, continuously refined as it is by the risks they are forced to take in agriculture. They are also very open to change, to trying out new things, especially when these hold promise. The level of innovation, too, is quite amazing. Not only are rural folk ready to try out new products, but they are also eager to improvise and find new uses for them. A factor that adds an entirely new dimension to rural marketing is that trust plays a more important role in decision-making than does product merit.
One has to face a number of challenges while selling to rural India. First, the physical, social and institutional infrastructure is weak. Second, one has to be sensitive to the customers’ cultural and socio-economic environment. Finally, price-value equations and low affordability means low margins, though coupled with high volume potential.
Our organisations and academic institutions are built on a competitive culture in which withholding information is a powerful lever. But rural marketing needs collaboration. The traditional command/military structure of corporations operating in urban markets must change at strategic, executive and operational decision-making levels. Most important is the need for a shift from a competitive to a collaborative culture and, for that, several market participants have to take this approach. Any amount of resourcing at individual points will be in vain. New technological developments translate both the above insights into business models.
Insights from ITC’s long association with agriculture and the rural markets helped ITC’s e-Choupal surmount these challenges. ITC realised that while intermediaries in the value chain are needed to make up for the shortage of infrastructure, the flow of information and market signals needs to be disintermediated to make the chain competitive. Also, the Indian farmer is stuck in a vicious cycle (low risk-taking ability, low Investment, low output, weak market orientation, low value-addition, low margins, low risk-taking ability) because of his fragmented holdings, dependence on monsoons and weak infrastructure.
If leadership is split into two broad levels – operational and the macro – there is a distinction in the challenges that are emerging.
At the operational level, the leadership challenges for someone working in a rural area are radically different from someone working in the cities. Given the hardy lifestyle of those working in fields, a tough and energetic executive is required to handle the challenges of the job. He has to be action-oriented and capable of thinking on his feet. The executive must be able to motivate people by emphasising that they are making a major difference to someone else. This is a huge motivating factor.
He needs to take critical decisions without the help of the organisational core. If he is selecting a local representative, it is he who has to take that decision – one that cannot be reversed easily in a small, tightly-knit community. There is no template as in the cities, where there are clear criteria for, say, distributor selection. There is no emotional security of working in large teams and being among peers. He is connected only through technology. So he has to have a great deal of self-driven inner energy. Moreover, he should be able to work with various socio-economic groups, get ideas from them and work seamlessly.
As one goes higher, at a strategic level, the leadership challenges start with identifying this operational talent. How does one identify it? Operational talent requirements for rural India are different from that in urban markets and have to be nurtured for the long term. Then, the leader has to have the passionate vision that will take his people along with him; to convince them that they are making a difference is a challenging job.
As far as organisations are concerned, the key change to support business models servicing rural India have to do with the way they are structured. This is very well articulated by professor Mohan Sawhney. He draws parallels from the way networks changed the power of IT by facilitating decoupling (storage, processing and display) and reconfiguring (by quickly mobilising them when and where they are needed), unlike in the past, when there was a compromise because of co-location.
The enterprise architecture, through its core of specialised and scaleable knowledge in areas such as customer segmentation, distribution logistics, etc. must support the front-end customer service teams that are highly contextual and manage relationships. Another important organisational intervention lies in how the knowledge is managed. People and the databases must be networked to address customer needs effectively. Why should a manager dealing with the shrimp farmer in West Bengal reinvent the wheel if a similar problem has already been solved by another manager in Andhra Pradesh?
The leader must be able to network with other organisations like NGOs, for instance, that may be non-profit but could be tackling cultural issues that result in an appropriate value exchange. A big challenge is getting and retaining recruits at this level, especially the IIM graduates, who obviously have career aspirations linked to urban jobs. We have found that further and intensive training of these recruits in rural environments helps imbibe in them the same sense of mission that we have.
To reach across a wide range in rural India, the leaders have to understand and unleash the power of the small-scale entrepreneur in village communities. Make use of the individual’s entrepreneurial ability and get him to be an active part of the business model, rather than build a full-scale wholly-owned network. The latter can’t be done. The leaders need to work with existing reality. When people look at the rural market, they speak of eliminating middle-men – disintermediation. But I believe that you cannot do that in an economy with weak infrastructure. Instead, we are trying to leverage intermediaries in terms of aggregation, but disintermediate them from the information flow and market signals.
And the leader cannot walk in with a `I know everything’ approach. The truth is that even with all the technology, knowledge and expertise, one really doesn’t know. As everywhere else, solutions emerge from the ground. However, in the rural context, one has to be extra careful that he remembers that fact.
Thus, if a leader is appointing one key distribution figure in a village, he can’t sign a contract with him to ensure compliance as he does in the cities. There are no written contracts. That our choupal sanchalaks function effectively because of a public oath they take (affirming that they will deliver the choupal services to villagers without discrimination) instead of a six-page legal contract with us highlights the need for original thinking and sensitivity to the context of rural markets.
To be able to succeed, rural leaders have to be micro replicas of the macro organisation. One must also be able to blend seamlessly into the socio-cultural fabric of the local people to build relationships and trust, and be open to innovative ideas from routine interactions.
As mentioned earlier, a leader needs to network with other organisations. It’s good to tie up with NGOs because they are adept at tackling cultural issues. Besides, such organisations know and understand the people better, especially at the grassroots level. However, the charms of the rural environment are few and may not appeal to recruits from premier institutions.
Yet, despite this, many management trainees, at the end of their one-year induction programme with ITC eChoupal, are ready to give their right arm to work in the rural project rather than opt for traditional marketing and international trading jobs they were aspiring for at the time of joining.
Even otherwise, the business schools, in general, have to increase the share of cases written in rural contexts in their curriculum. Willy nilly, the academia also has to increase its own exposure to rural India. Greater emphasi on team projects in place of individual projects could improve collaborative skills over a period of time.
Coming finally to the leadership challenges at a more macro level. Foremost is the need for leaders who can inspire the operating teams with a transformative vision and convince the team that every one can make a difference. When Net connectivity was a problem in eChoupals and we complained, the first response from the BSNL engineer was that we take our money back and get lost. However, when we took him around the villages and showed him how the initiative improves the lives of the poor, he saw for himself the difference he could make. Later, he actually brought his other colleagues along to these villages and all of them did what they could to improve connectivity. The service orientation we see from the BSNL staff today is a lot greater than what we see even in many of the MNCs across product categories! Another key task of the leadership is to identify the right talent and nurture them for the rural management jobs. In fact, this is a good opportunity for corporates to create challenging jobs for competent people.
(S Sivakumar, 40 is CEO of ITC’s Rs1,500-crore Agribusiness Group. He is spear heading ITC’s eChoupal project which is the largest Internet-based intervention in rural India by any company. A topper from the Institute of Rural Management, Anand, he served a farmers’ co-operative in Gujarat for six years before joining ITC.)