Dawgen Global Insights - January 2022 Edition

VOLUME 3 | I SSUE 1 |

D AW G E N G L O B A L I N S I G H T S I

JANUARY 2022 |

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DAWGEN GLOBAL INSIGHTS

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DAWGEN GLOBAL INSIGHTS I JANUARY 2022

INTRODUCTION TO OUR MONTHLY NEWSLETTER DAWGEN GLOBAL INSIGHTS Welcome to Dawgen Global and our January

2022 edition of our Monthly Newsletter-Dawgen Global Insights.

This Newsletter has been produced to provide

you with an overview of our firm and the wide

range of services offered by Dawgen Global entities; whether audit, accounting, tax or advisory services.

Over the past 19 years, I can proudly say that Dawgen has significant experience and expertise

Globalization of commerce by members of the political and economic arenas.

Multi-national companies on the other hand saw opportunity; with emerging markets such as

China and India shifting to consumer economies, the multi-nationals had the infrastructure to serve them. Problem was the contrast between

the corporate Operating Model of the time and the structural changes that had taken place in the global economy.

that we draw upon, day after day, helping our

This incongruence was addressed by a new

demonstrate the strength of our firm and the

the trade-offs companies perceived they had to

clients to progress. Our Monthly Newsletter will unique and innovative approach we engender.

Business Model for Globalization that avoided make for succeeding in various markets.

This is communicated through client case

Innovation will be a key survival strategy in a post

help our clients succeed.

Innovation Sandbox. The Innovation Sandbox

studies on how our team have collaborated to

This issue of Dawgen Global Insights focuses on Strategy and Innovation. We explore the 10 Hidden Strategic Opportunities. Potential

opportunities always surround leaders. It is up

to them to pounce on them or regret overlooking

them when someone else takes advantage of them.

Psychologists call this trait “confirmation bias”

where individuals pick the data that supports their existing opinions and approaches and

doubt information which defies their mindsets.

Leaders need to train themselves to consider the slight hints of the opportunities surrounding

them—in the form of incongruities to their

pandemic world. In this edition we also explore is an approach to Innovation that promotes

exploration and experimentation, while under extreme constraints. industries

and

Through this approach,

organizations

breakthrough Innovation.

can

achieve

Every Innovation Sandbox is different. Therefore,

to better understand this framework, in this

article, we breakdown a specific industry where

the Innovation Sandbox is applied—the India Healthcare industry. We take a look at 7 specific Innovations within this industry.

I hope that you will find the information we provide in this Newsletter helpful.

personal beliefs and ideas. This article expands on each of these 10 strategic opportunities..

We also examine 3 Pillars of Globalization. Early

2000s saw a change of mind regarding the

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Dawkins Brown

Executive Chairman Dawgen Global

DAWGEN GLOBAL INSIGHTS I JANUARY 2022

table of

04

contents

3 PILLARS OF GLOBALIZATION

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10 HIDDEN STRATEGIC OPPORTUNITIES

INNOVATION SANDBOX

3 Pillars of Globalization

SUPPOSED TRADE-OFFS THAT COMPANIES FACE IN GLOBALIZATION OF THEIR BUSINESS IS ADDRESSED BY THE 3-PILLAR BUSINESS MODEL FOR GLOBALIZATION Overview Early 2000s saw a change of mind regarding the Globalization of commerce by members of the political and economic arenas.

Multi-national companies on the other hand saw opportunity; with emerging markets such as China and India shifting to consumer economies, the multi-nationals had the infrastructure to serve them. Problem was the contrast between the corporate Operating Model of the time and the structural changes that had taken place in the global economy.

This incongruence was addressed by a new Business Model for Globalization that avoided the trade-offs companies perceived they had to make for succeeding in various markets. The mainstay of this model were 3 pillars:

Customization

Unity

Arbitrage

For the model to show its full advantages all 3 pillars had to be applied concurrently.

A few pioneer companies have applied the 3-pillar Globalization Business Model in totality to reap rewards of Globalization.

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DAWGEN GLOBAL INSIGHTS I JANUARY 2022

COMPANIES THINK THEY WILL HAVE TO MAKE THE FOLLOWING APPARENT COMPROMISES WHEN GOING GLOBAL

Globalization - Myths Post-financial-crisis era saw myths perpetuated against commerce Globalization, because of the dichotomy that appeared between existing Operating Models of companies and needs of the emerging markets.

These perceived trade-offs that are myths include the following: Compromising between centrally-controlled Operating Model and local responsiveness model: • A view that intellectual power and innovation capability had to be centralized, all products and services brought in line everywhere, foregoing catering to diverse needs and demands of customers in every emerging market.

• Converse view; that in order to have locally applicable distribution systems, quick reacting supply chains, and reduced costs of emerging-market management, it was necessary to devolve the company and operation as a loose federation.

• Introducing strict cost controls wherein the Operating Model was decentralized while keeping some central supervision.

• Having to choose between catering to current customers in their home countries or new consumers in emerging countries.

• Floundering between meeting stringent quality standards wanted in developed countries and offering product features that emerging market consumers could afford.

Companies that persist in forming their global strategies around trade-offs and confines that are no longer true or applicable are bound for extinction.

Source: How to Be a Truly Global Company, Prahalad, 2011, Booz & Company

• Deciding whether to follow a strategy of premium or discount pricing.

Tug between applying western orientation or the vision from emerging markets: • Western orientation focuses on reducing labor and collecting wealth.

• Emerging market vision believes in investing in building large workforce because labor is inexpensive and capital hard to accumulate.

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DAWGEN GLOBAL INSIGHTS I JANUARY 2022

HUB STRATEGY TURNS THE SUPPOSED COMPROMISE BETWEEN FACTORS INTO HARMONIZING ELEMENTS FOR GLOBALIZATION Globalization – Hub Strategy This trade-off incompatibility was addressed by the Hub Strategy where, in place of a single center, companies set up principal office “hubs” in as many of the 20 gateway countries of the world as required—a global corporate structure with no headquarters.

• These 20 gateway countries represent 70% of the world population and generate 80% of the world income.

• Australia, Canada, France, Germany, Italy, Japan, the Netherlands, Spain, the United Kingdom, and the United States are 10 countries from the developed economies.

• Rest of the 10 are emerging markets of Brazil, China, India, Indonesia, Mexico, Russia, South Africa, South Korea, Thailand, and Turkey.

• This new Business Model covers both the recognized advantages of developed markets and the possibilities of emerging economies.

• A model that handles decentralization, centralization, existing practices, and possible disruptions not as trade-offs, but as complements.

• Hub Strategy permits a company to deliver products and services far and wide.

Companies can achieve a deeper reach with this wide-ranging Business Model that: • Tailors their products and services offerings in hubs all over the world.

• Uses proprietary knowledge platform and developing of competencies as

A Hub Strategy permits a company to deliver products and services universally but resolution of trade-offs of Globalization are not possible through Hub Strategy itself.

connecting point for business units.

• Achieves cost-effectiveness, productivity, and efficiency by arbitraging Operating Models.

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DAWGEN GLOBAL INSIGHTS I JANUARY 2022

THE 3-PILLAR BUSINESS MODEL FOR GLOBALIZATION HAS TO BE APPLIED IN ITS ENTIRETY IN ORDER TO OBTAIN ITS FULL BENEFITS Customized offerings across global hubs; uniting units over a knowledge platform; and arbitraging Operating Models help achieve cost-effectiveness and throughput.

Globalization – 3 Pillars With this Business Model, organizations no longer need to choose between centralized and a decentralized structure; current and future customers; and Strategy founded in developed economies and one based on developing economies.

It is, however, important to understand that for the model to have its full impact, 3 core pillars have to be integrated and pursued simultaneously. The 3 pillars are:

Customization

Unity

Arbitrage

Source: How to Be a Truly Global Company, Prahalad, 2011, Booz & Company

Only business leaders who have taught themselves and their teams to be very careful about where to customize, how to develop capabilities, and what to arbitrage are the ones reaping benefits from this model.

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DAWGEN GLOBAL INSIGHTS I JANUARY 2022

THE 1ST PILLAR OF GLOBALIZATION RELATES TO PROVIDING COMPANY OFFERINGS IN A WAY THAT IS VIABLE IN THE RELEVANT MARKET Pillars of Globalization – Customization OVERVIEW : Providing products and services in a locally competitive manner is central to become a global enterprise.

• Customization entails fulfilling the requirements and wants of varied consumers, in areas such as product or service features, affordability, and cultural alignment.

• Variation in needs, wants, and cultures of consumers makes it impossible to customize centrally. Therefore, taking advantage of the decentralized structure is practical.

• Hub Strategy provides the leverage to fulfill this demand by

enabling companies to customize

reliable quality standards, and

only in the 20 gateway countries.

necessary innovation and R&D facilities.

• Investment required for such an endeavor is limited with the

• Mature logistical and institutional

benefit of catering to customers

infrastructure connected into

in all markets including all

international regulations and

income levels.

trade is another advantage of these 20 countries.

• Sufficient scale is offered by these 20 countries to provide the

• Each of the 20 countries can

needed economies and growth

autonomously accomplish nearly

possibilities.

all crucial business activities; when combined, they form an

• Gateway countries also possess

impressive network.

the required skills such as suppliers and employees to meet

Certain companies appreciate the advantages of Customization; they are redeploying into new geographies via gateway countries.

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DAWGEN GLOBAL INSIGHTS I JANUARY 2022

GE HEALTHCARE’S EXAMPLE SHOWS HOW CUSTOMIZATION ENABLED IT TO COMPETE IN EMERGING MARKETS Pillars of Globalization – Customization (Case Example)

• GE Healthcare’s example demonstrates how spreading out via a handful of gateway countries allowed it to flourish in many locations.

• Company’s main products relate to high-end medical imaging where, the company became a market leader starting from the late 1980s through 1990s.

• GE’s products were proprietary and quite expensive which prevented penetration in markets like China and India, even though these were markets with enormous possibilities.

• These markets required low-priced portable machines with basic features. GE started concerted efforts to tackle this issue starting 2002.

• This was accomplished by restructuring certain emerging-market businesses into semi-autonomous local development teams having own P&Ls. • Local business was created that focused on specific needs and advantages of the gateway market— China; leveraging local talent and joining product development, sourcing, manufacturing, and marketing in a single business unit.

• Sales accelerated in China followed by a few additional

GE Healthcare

emerging-market gateway countries.

• Customization also worked conversely when use of these devices were found in developed countries as

GE Healthcare brought price of its ultrasound machines down greater than 90 percent for acceptance in emerging markets.

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well; on accident sites and in clinics and emergency rooms.

• GE sales went from zero to $300 million in 5 years with GE pledging $3 billion for 100 healthcare innovations over next 6 years that would significantly reduce product cost, escalate access and increase quality.

DAWGEN GLOBAL INSIGHTS I JANUARY 2022

THE 2ND PILLAR IS ALL ABOUT ALIGNING THE DISTINGUISHING PROFICIENCIES OF A COMPANY ON A GLOBAL SCALE Pillars of Globalization – Unity OVERVIEW : Unity entails worldwide alignment of the company with, a unified central purpose, a body of exclusive first-rate knowledge, and capabilities that differentiate the company from all others.

An expanding list of companies are uniting over platforms of competencies.

• Core purpose must be understood in the same

• Essential to this pillar are core competencies

manner by all functions of the company, in every

which include exclusive technology and intellectual

geographical location.

property—the inimitable chunks of knowledge and

• Strategic principles of business—identical across the world but adapted according to the locale—must be understood by every individual of the company.

proficiency that differentiate a company.

• Operations everywhere in the world have access to the core competencies, using which offerings are customized and procurement and costs arbitraged.

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DAWGEN GLOBAL INSIGHTS I JANUARY 2022

MCDONALD’S CORP. IS A CASE-IN-POINT IN APPLICABILITY OF THE 3-PILLAR GLOBALIZATION MODEL, PARTICULARLY THE UNITY APPROACH COMPANY IN CASE EXAMPLE

• Mid-2000s saw McDonald’s Corp. noticeably move from its conventional centralized model to the Unity approach, away from the rigid hierarchies, brands, financial performance indicators, and reporting relationships.

• This move by McDonald’s was prompted by a shift in consumer

McDonald’s also took advantage of the power of Customization by offering meals suited to the local tastes of its markets.

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preferences to more healthful and nutritious foods particularly in the U.S.; worldwide, McDonald’s was being perceived as out of sync with non-U.S. consumer preferences.

• Company leadership found a point to rally on and unite the company; a shared drive to deliver fresh food, healthful menu choices,

and tailored offerings for various cultures.

• Uniting factors remain the sam—i.e., brand logo, branding, color schemes, store layouts, the business processes that distinguish the company, technology, cost bases, and productivity.

• McDonald’s kept the procurement and distribution systems centralized to safeguard on-time deliveries to individual restaurants.

• Training to store associates is imparted from a common playbook in every location.

• Company’s proprietary knowledge continues to be central and strictly controlled.

DAWGEN GLOBAL INSIGHTS I JANUARY 2022

THE FINAL PILLAR IS ABOUT SELLING THE SAME PRODUCT IN A DIFFERENT MARKET USING ALTERNATIVE METHODS THAT ARE LOW-COST, BUT WITH IMPROVED EFFICIENCY Pillars of Globalization – Arbitrage

OVERVIEW : Arbitrage is a methodical initiative that consists of increasing effectiveness and decreasing cost by discovering materials, manufacturing methods, logistics practices, funds sourcing, or infrastructure that are less expensive.

• Some companies try to reduce costs, for example, by outsourcing back-office work or manufacturing to locales with lower labor cost; this remains a reactive action rather than a thought-out strategic move.

• Companies intending to settle the trade-offs of Globalization need to arbitrage their Operating Models to improve throughput, efficiency, and effectiveness in relation to cost.

• Arbitrage approach looks at production flow and

GE Healthcare took advantage of arbitrage by using a regular commercially available hardware in place of proprietary hardware.

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breakdown of cost chain in their entirety with a view to look for improved sourcing, sales conversion, and go-tomarket possibilities.

• Arbitrage plan treats materials, factory sites, and people as components of a single arrangement, encompassing processes and procedures within the most significant hubs, even in between hubs as well.

DAWGEN GLOBAL INSIGHTS I JANUARY 2022

OPERATING MODEL OF TELCOS IN THE EMERGING MARKETS ILLUSTRATES THE POWER OF ARBITRAGE Pillars of Globalization – Arbitrage (Case Example)

• Landline networks in emerging markets were scant even till early 2000s even with a huge population (2 billion plus only in China and India).

• Providing access to an abundant number of people was the only way to make telephony feel indispensable thus making a profitable phone system.

• This meant making telephone accessible to millions of potential consumers who: • Had not owned a phone at all.

• Earned $2 a day.

• Could not afford to buy a phone outright.

• Could not sign a service contract with the cellular company because of absence of bank accounts and credit cards.

• An Indian cellular carrier came up with a fantastically innovative model that converted the fixed infrastructure cost into variable cost, raising company’s ability to provide low prices to consumers.

• The company convinced its vendors to change their conventional fee structure and be paid based on usage and revenue.

Operating Model (in emerging markets) Customization by Telcos included a unified approach that saw use of proprietary knowledge by vendors involved to seamlessly integrate into global telco networks.

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• A further method of arbitrage was going into partnership with little grocery shops in neighborhoods and stock them with prepaid phone cards.

• Instead of creating a new distribution channel this partnership enabled Telcos to penetrate far flung villages, enabled consumers to afford and control their phone budgets.

DAWGEN GLOBAL INSIGHTS I JANUARY 2022

10 Hidden

Strategic

Opportunities

THIS ARTICLE DISCUSSES 10 STRATEGIC OPPORTUNITIES THAT SURROUND LEADERS, BUT ARE OFTEN OVERLOOKED DUE TO THEIR PERSONAL BIASES Overview Potential opportunities always surround leaders. It is up to them to pounce on them or regret overlooking them when someone else takes advantage of them.

Psychologists call this trait “confirmation bias” where individuals pick the data that supports their existing opinions and approaches and doubt information which defies their mindsets. Leaders need to train themselves to consider the slight hints of the opportunities surrounding them—in the form of incongruities to their personal beliefs and ideas.

There are 10 “hidden” strategic opportunities that exist in all businesses, geographies and industries. It’s up to the leaders to notice these. This article expands on each of these 10 strategic opportunities.

The ability to control personal bias and explore anomalies results in uncovering opportunities that competition may not recognize.

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DAWGEN GLOBAL INSIGHTS I JANUARY 2022

OVERCOMING CONFIRMATION BIAS TO IDENTIFY HIDDEN STRATEGIC OPPORTUNITIES IS HARD BUT NOT UNATTAINABLE 10 Hidden Strategic Opportunities Leaders continually see potential opportunities here and there. It is up to them to pounce on them or regret overlooking them when someone else takes advantage of them.

Psychologists call this trait “confirmation

There are 10 “hidden” strategic opportunities that exist in all

bias” where individuals pick the data

businesses, geographies and industries. It’s up to the leaders

that supports their existing opinions and

to notice these:

approaches and doubt information which defies their mindsets.

Leaders need to train themselves

1

Assuming a product already exists, but actually it doesn’t.

2

An item is often priced low only because not many people

3

A promising product or service that deserves widespread

4

Market Research informs the executives that the customers

5

A high-turnover business in a certain geography is

6

Customer Experience should be anything but

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Often a promising discovery is made without knowing its

8

Innovative usage of a product by the customers should be

9

Sometimes customers can be a source of product

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People make false assumptions about a new product or

to consider the slight hints of the opportunities surrounding them—in the form of incongruities to their personal beliefs and ideas.

Opportunities are often disguised in the form of anomalies and contradictions to leaders’ existing beliefs and assumptions of the future scenarios.

Source: 10 Clues to Opportunity, Sull, strategy+business, 2011

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know about it.

take up does not quite get the required attention.

wouldn’t like a product (but surprisingly they love it).

nonexistent here.

strenuous,costly, or irritating (but most of the time it is).

most suitable utilization. encouraged and improved upon. discovery rather than researchers or manufacturers. service to fail, but it becomes profitable.

DAWGEN GLOBAL INSIGHTS I JANUARY 2022

THERE ARE GAPS IN ALMOST ALL INDUSTRIES WHICH ARE SPOTTED AND CAPITALIZED ON

BY VISIONARY INNOVATORS Hidden Strategic Opportunities – Opportunity 1 OPPORTUNITY Assuming a product already exists, but actually it doesn’t.

OVERVIEW : People feel that some products already exist but in reality they don’t. Its only when an organization ventures into that segment—with a new offering—that others realize that there was a void there.

Not everyone can recognize openings in the market for new offerings—those who do set the trend.

• A number of well-known inventions—e.g., tablet

for stylish yet economical functional handbags. The

computer and mobile phone—were thought to have

market at the time was replete with expensive but

already existed, but actually they didn’t.

impractical bags from top designers and functional

• These gaps are recognized by crafty innovators who make use of the opportunity and create tremendously useful and innovative products.

• For instance, Kate Brosnahan, accessories editor for a magazine called Mademoiselle, realized in the 1990s that there was enough room in the handbag market

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bags deficient in style. Kate left her job and founded Kate Spade LLC, with her partner Andy Spade.

Together they began creating fabric handbags which were practical as well as trendy. Soon, their products started getting appreciation from customers of every walk of life, including celebrities.

DAWGEN GLOBAL INSIGHTS I JANUARY 2022

FRAGMENTED AND DELAYED CUSTOMER EXPERIENCE RESULTS IN CUSTOMER CHURN Hidden Strategic Opportunities – Opportunity 2 OPPORTUNITY

OVERVIEW

Customer Experience should be

Annoyance caused by poor Customer Experience presents potential

anything but strenuous, costly, or

strategic opportunity to win customers by fixing it.

irritating (but most of the time it is).

Leading companies offer better products or services and provide their customers seamless, quick, and pleasing experiences.

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• Frustration caused to customers

having to pay a fine of $40 as late

through pathetic Customer

fee for a rented video cassette he

Experience offers opportunities for

had lost.

forward-thinking individuals and organizations.

• They are able to see the bigger

• Likewise, Quicken, a personal finance management tool developed by Quicken Inc., was

picture and strive hard to relieve

created by Scott Cook to ease the

customers’ aggravation and offer

hassle caused to his wife tracking

exemplary customer experiences.

their finances manually.

• For instance, creation of Netflix Inc. was the result of Reed Hastings

DAWGEN GLOBAL INSIGHTS I JANUARY 2022

HIDDEN MERITS OF A LOCATION OFFERS AN OPPORTUNITY FOR SHARP PEOPLE TO INVEST IN FOR FUTURE APPRECIATION Hidden Strategic Opportunities – Opportunity 3

• Lack of awareness of the true potential of a property or resource can be a major factor in it being low priced.

• When people recognize the potential of a property or resource, its price rises steeply.

• For instance, when a budget airline announces its plan to start travel operations from a new destination, the prices of vacation property and resorts in the locale skyrocket as investors jump to invest in real estate there, anticipating (rightfully) it to gain value in the near future.

• Likewise, Infosys Technologies Ltd., India’s leading outsourced IT services provider, recognized and grabbed very early the opportunity of earning huge profits by making Indian engineers serve global enterprises at a fraction of what they charge their clients.

OPPORTUNITY An item is often priced low only because not many people know about it.

OVERVIEW

The more awareness people have of the value of an item, the pricy it is.

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One of the reasons for Inexpensive resources or items is the lack of their awareness among people.

DAWGEN GLOBAL INSIGHTS I JANUARY 2022

OFTEN A PRODUCT IS FIRST DISCOVERED AND THEN THE INNOVATORS BEGIN TO THINK ABOUT ITS POSSIBLE APPLICATIONS Hidden Strategic Opportunities – Opportunity 4 • At times, researchers hit on a technology that they think could be of immense value, but are not certain about its utility right away.

• They then start finding the problem that could be solved by the discovery.

• For instance, ArthroCare Corporation, a maker of medical devices, was created based on the Coblation process—using radiofrequency energy to disintegrate impaired tissue without affecting the surrounding body areas. Hira Thapliyal, the co-researchers who discovered the Coblation process established the company and offered the research for possible use in cardiac surgery. However, since this market was too small and competitive, Hira searched for other possible utilizations for the discovery. He eventually found the right utility for the

Once the innovators crack what the discovery is good for, it results in high profitability for the developers.

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discovery, arthroscope-guided orthopedic surgeries—a market of around 2 million operations annually.

DAWGEN GLOBAL INSIGHTS I JANUARY 2022

AT TIMES A PROMISING VALUE PROPOSITION DOES NOT GET THE ATTENTION IT DESERVES Hidden Strategic Opportunities – Opportunity 5 OPPORTUNITY

OVERVIEW

A promising product / service that deserves

There are times when somebody takes a chance at a

widespread take up does not quite get the

promising product or service offering—which hasn’t yet

required attention presents an opportunity to

gained popularity and acceptance—and achieves success.

gain market share, revenue and growth.

• Every so often we hear stories of people venturing into a promising Business Model that has not yet been embraced by too many companies and it becomes a sensation within no time.

• For instance, in 1954 Ray Kroc, a restaurant equipment salesman, met McDonald brothers in southern California and persuaded them to give him a contract to grow the business through a franchise network. The idea helped expand McDonald’s from a local chain to the world’s most profitable restaurant franchise operation.

• Similarly, Howard Schultz, a coffee machine manufacturing executive, in 1982, met Starbucks (a coffee bean producer and a retail store then) in Seattle to discuss the idea of creating a restaurant chain similar to European coffee bars.

He wanted to persuade Starbucks management to convert their retail store to a coffee bar chain. When he was declined, he created his own coffee bar and grew it into a chain, which eventually bought Starbucks retail store afterwards.

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Not many people believe in the authenticity and viability of an idea— those who do and possess the capabilities, resources, and the will to implement it triumph.

DAWGEN GLOBAL INSIGHTS I JANUARY 2022

CUSTOMER / MARKET TREND ANALYSIS IS NOT DEFINITIVE IN DISCERNING HOW A PRODUCT WOULD DO IN A MARKET

Hidden Strategic Opportunities – Opportunity 7 OPPORTUNITY Market Research informs the executives that the customers wouldn’t like a product (but surprisingly they love it).

OVERVIEW At times, management of a manufacturer assume a secondary product would not sell in a particular market, but it does far better than its primary products.

• Assuming that only certain stereotypic products can sell in a particular market isn’t rational thinking.

• Customers can adore an innovative product or a newer segment that isn’t common in the specific market.

• For instance, in 1950s, Honda made entry into the U.S. motorcycle market with large motorcycles.

Even with aggressive marketing, it managed to sell roughly around 60 of these bikes across the U.S. each month, way lower than the initial target of 1000 bikes. Just out of curiosity, Honda launched the Cub, a 50 cc motorcycle, which the company thought would not be well received

Customers approval of a product cannot be accurately predictable.

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by the U.S. market. On the contrary, the Cub did very well and opened an untapped market segment for Honda.

DAWGEN GLOBAL INSIGHTS I JANUARY 2022

AT TIMES, IT’S THE CUSTOMERS WHO PROVIDE AN OPPORTUNITY TO TRIAL AND LAUNCH A NEW PRODUCT Hidden Strategic Opportunities – Opportunity 8 OPPORTUNITY

OVERVIEW

Sometimes customers can be a source

Just as manufacturing companies are a source of knowledge and

of product discovery rather than

innovative products for the customers, customers based on their

researchers or manufacturers.

traditional knowledge and practices can be a source of new ideas and great products.

• Researchers and companies are not the only source of creating innovative ideas and products.

• Customers can share valuable experiences, knowledge, and perceptions that are helpful in working out solutions to pressing issues.

• For instance, Kevin Stone, an orthopedic surgeon based in San Francisco, founded Joint Juice, a company that produces digest-able glucosamine.

supplement. Kevin found out about the supplement from his patients who were using it on their own to allay joint pains instead of painkillers he had prescribed them. Upon research he came to know that it was the leading nutritional supplement in Europe. He jumped on the opportunity to create a company producing glucosamine supplement, which is now valued at around $2 million.

Customers can transfer vital knowledge, ideas, and remedies to solve real-life problems.

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DAWGEN GLOBAL INSIGHTS I JANUARY 2022

ANOTHER HIDDEN STRATEGIC OPPORTUNITY IS A PRODUCT OR SERVICE ALREADY MAKING ITS MARK IN A REGION, BUT UNKNOWN IN ANOTHER MARKET Hidden Strategic Opportunities – Opportunity 9 OPPORTUNITY A high-turnover business in a certain geography offers an opportunity to introduce it to other regions.

OVERVIEW There are cases where a business is successful in a part of the world, but has yet to be introduced in other markets.

• It isn’t surprising to see some well-known products or services—in a certain market—nonexistent in a given area.

• This offers a huge untapped opportunity for organizations to introduce the product or service offering in that market.

Some executives constantly evaluate promising startups to understand their Business Model and Strategy and try to replicate them in new territories.

• For instance, Carl August Svensen-Ameln, a Swedish business student, while studying in the U.S. wanted storage space to put his stuff in Sweden, but none of the facilities in his home country had any space at the time. A thorough analysis of the storage industry in the U.S. revealed to him that self-storage Business Model did not exist across Europe. He partnered with

Source: 10 Clues to Opportunity, Sull,

a U.S. firm, Shurgard Storage Centers Inc., to enter

strategy+business, 2011

the Swedish market, and founded a number of other companies after its success.

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DAWGEN GLOBAL INSIGHTS I JANUARY 2022

EXECUTIVES CAN BE WRONG IN THEIR ASSESSMENT OF THE VIABILITY OF A PARTICULAR BUSINESS MODEL Hidden Strategic Opportunities – Opportunity 10 OPPORTUNITY People make false assumptions about a new product or service to fail, but it becomes profitable.

OVERVIEW : Startups are, nowadays, consistently disrupting established industries and businesses. Their agility, nimbleness, small team, and dedication afford them significant share in the markets they venture.

Often the success of a startup in launching a new product or service offering persuades other established players to venture into the segment.

• Every now and then we hear stories of startups

partners of Goldman Sachs shirked away from

shocking established enterprises with their

venturing into investment management for decades

performance, market capitalization, and growth.

on the assumption that it didn’t fetch fees better

• Not every established player assesses the startup rival unmistakably. Most assume the startup to not do well, but actually it does thrive.

• Charles D. Ellis, who worked as a strategy consultant to Goldman Sachs for years, narrates that the

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than trading or investment banking. It was only after a competitor published its financial report that they realized how profitable the business was and launched their own investment management operations soon afterwards.

DAWGEN GLOBAL INSIGHTS I JANUARY 2022

Innovation

Sandbox

SUPPOSED TRADE-OFFS THAT COMPANIES FACE IN GLOBALIZATION OF THEIR BUSINESS IS ADDRESSED BY THE 3-PILLAR BUSINESS MODEL FOR GLOBALIZATION

Article Overview The Innovation Sandbox is an approach to Innovation that promotes exploration and experimentation, while under extreme constraints. Through this approach, industries and organizations can achieve breakthrough

Every Innovation Sandbox is different. Therefore, to better understand this framework, in this article, we breakdown a specific industry where the Innovation Sandbox is applied—the India Healthcare industry. We take a look at 7 specific Innovations within this industry.

Innovation.

Organizations in any industry, in any country, can adopt the Sandbox Innovation approach to breakthrough Innovation. This article also discusses 5 guiding principles to follow if your organization wants to apply the Innovation Sandbox: 1

Radically rethink the entire business model.

4

Do not innovate in isolation.

2

Immerse themselves in the lives of the

5

Be fully committed to a strategic intent.

target consumers.

Accept constraints.

3

The core constraints are industry or market requirements that are extremely fixed.

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DAWGEN GLOBAL INSIGHTS I JANUARY 2022

USING THE INNOVATION SANDBOX APPROACH, WE PROMOTE EXPLORATION AND EXPERIMENTATION, WHILE UNDER EXTREME CONSTRAINTS Innovation Sandbox – Overview The Innovation Sandbox is an approach to Innovation that promotes exploration and experimentation, while under extreme constraints.

There are 4 core conditions for the Innovation Sandbox approach: 1

The innovation must result in an offering of world-class quality.

2

The innovation must achieve a

3

The innovation must be scalable.

4

The innovation must be affordable at

significant price reduction.

the bottom of the economic pyramid.

• Price reduction should exceed 90% off the cost of a comparable offering in a “Western” country.

• The resultant product or service must be produced, marketed, and used in a diverse set of locales and situations.

We call this the Innovation Sandbox, because exploration and experimentation must be creative and free-flowing, like sand—whereas, being “boxed” in by rigid constraints.

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WE CAN VISUALIZE THE INNOVATION SANDBOX USING A SANDBOX— WHERE CONSTRAINTS ARE THE WALLS AND INNOVATIONS, THE SAND

Innovation Sandbox – Framework We use an actual sandbox diagram to depict the “sandbox” of constraints and experimentation in Innovation.

Constraints •

The core constraints are industry or market requirements that are extremely fixed.

• A concerted effort is required to identify these constraints.

• There can be more or less than 4 constraints. However, 4 is typically and there shouldn’t be many more

There is no generic, one-sizefits-all sandbox design—as each industry, market, and business is different.

or less.

Innovations • With the constraints clearly defined, this then forces unconventional,

Source: The Innovation Sandbox, Prahalad,

creative thinking to drive

Booz & Company, 2006

innovations.

• There can be any number of innovations that exist in the sandbox.

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LET’S SEE HOW THE INNOVATION SANDBOX FRAMEWORK APPLIES TO THE INDIA HEALTHCARE INDUSTRY Case Study – Overview Let’s put this framework to action. To do this, we will need to look at a specific case, as every Innovation Sandbox is different.

These successful innovators innovate within a set of self-imposed constraints, derived from consumer insights that others have ignored.

INDUSTRY

OVERVIEW

India Healthcare Industry

India, the second largest country in the world with a population of 1.38B people, is notorious for poor public health with numerous ailments at epidemic proportions

INDUSTRY KEY INNOVATORS • Narayana Hrudayalaya (NH) Cardiac Care

and a scarcity of healthcare professionals.

Among India’s healthcare issues include: • High spread of HIV/AIDS • High rates of infant mortality

• Jaipur Foot (JF)

• Over 6 million blind people

• Aravind Eye Care

• Over 50 million malnourished children • Over 100 million patients with type 2 diabetes

• Over 80% of the population cannot afford the costs of healthcare • Health insurance unavailable to most people • Ratio of physicians to total population less than 1 per 100,000 people

Furthermore, about 70% of the population live in rural and semi-urban areas that can be difficult to reach.

Therefore, the India Healthcare Industry is an ideal example to see how the Innovation Sandbox can be applied to generate breakthrough innovations. In this case study, we specifically take a look at 3 innovators in this industry.

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HERE IS OUR “SANDBOX”—WE HAVE IDENTIFIED 7 PRIMARY INNOVATIONS IN THIS SPACE Case Study – Innovation Sandbox We have created the Innovation Sandbox for the India Healthcare Industry.

Constraints 7

1

3

2

6

1

Scalability

4

2

Universal Access

5

3

World-class Quality

4

New Price Performance Levels

Innovations 1

Specialization

2

Pricing

3

Capital Intensity

4

Talent Leverage

5

Workflow

6

Customer Acquisition

7

Values and Organization

Significant creativity can be achieved through these 7 interrelated Business Model Innovations.

Source: The Innovation Sandbox, Prahalad, Booz & Company, 2006

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DAWGEN GLOBAL INSIGHTS I JANUARY 2022

THERE ARE 3 INNOVATORS IN THIS INDUSTRY THAT WE WILL BE ANALYZING—NARAYANA HRUDAYALAYA (NH), JAIPUR FOOT (JF), AND ARAVIND EYE CARE

Case Study – Innovators In this case study, we will examine the breakthrough Innovation successes of 3 companies in this industry.

Narayana Hrudayalaya (NH) Cardiac Care

Aravind Eye Care

NH Cardiac Care is one of the world’s largest providers

surgery.

of heart surgery and other forms of cardiac care,

In a year, the company performs 240,000 surgeries and

including care for children.

treats 1.6MM outpatients.

Three years after its founding (in 2004), the company

Aravind treats over 60% of its patients free of charge—

performed 7,5000 cardiac surgeries and treated 60,000

and the company still operates profitably.

Aravind is the world largest provider of cataract

outpatients.

Jaipur Foot (JF) JF produces a prosthetic foot made form rubber, intended for below-the-knee amputees, such as people injured by accidents and land mines.

A foot costs about $30. Compare this to the $8,000 to $10,000 price of a similar Western prosthesis.

In a year, the company performs about 16,000

These Innovators continuously innovate within the Innovation Sandbox—and continuously transform these innovations into disciplines and protocols within the organization.

Source: Data from 2004 from Jaipur Foot, Aravind, Narayana Hrudayalaya

procedures.

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DAWGEN GLOBAL INSIGHTS I JANUARY 2022

LET’S DIVE INTO EACH OF THE 7 INNOVATIONS, BEGINNING WITH SPECIALIZATION AND PRICING Case Study – Innovations (1 of 4) 1 Specialization • Successful innovators in India have all specialized—e.g., NH ins cardiac card, JF in prosthetics, Aravind in eye care.

• Specialization allows companies to make the most effective use of their limited resources (e.g. people, training, business process designs, capital equipment, etc.).

• Specialization also allows the organizations to build their own unique brand identities 1 2

to attract targeted patients, motivated healthcare professionals, and donor.

• Specialization further allows each organization to focus on a specific category of service to build extreme expertise that a more general organization (e.g. hospital) would not be able to match.

2

Values and Organization • We cannot achieve breakthrough Innovation

accomplishments can organize themselves

without deeply held values. These values are part

to collaborate without necessitating costly

of the foundation to the organization.

supervision.

• For example, everyone who works at NH shares

• The goals of the organization must be clear,

the same purpose: to provide all people, rich and

motivating, and easy to share with a wide range

poor, with world-class care.

of people.

• Because everyone shares the same aspirations, teams of people with diverse backgrounds and

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DAWGEN GLOBAL INSIGHTS I JANUARY 2022

NEXT, LET’S LOOK AT CAPITAL INTENSITY—COST REDUCTION IS OF COURSE CRITICAL WHEN SERVING THE LOWEST INCOME GROUP IN INDIA Case Study – Innovations (2 of 4)

• To attain breakthrough Cost Reductions, innovators must focus on reducing capital intensity.

• One tactic used by NH has been to use equipment around the clock—typically in 3 shifts.

• Off-peak use is incentivized by charging patients less to come in for tests during odd hours.

• Innovators must also continuously search for creative ways to reduced fixed and variable cost structure of their offerings.

• JF uses commercially available, inexpensive ovens to shape plastic pipes. The raw materials for each prosthetic total only about $12.50.

• Innovators are willing to pay for more in fixed costs if it results in lowered ongoing variable costs.

• NH purchases more expensive digital X-ray 35

3

machines, so they can store x-ray images in computer files. This results in the elimination of the cost of x-ray film, storage of old images, and transport of images to remote storage locations.

• Innovators also find local suppliers and manufacturers that can produce custom parts for cheaper than having them imported from more expensive locations. Sometimes, an Innovator may produce parts in-house if it can done so cheaper.

• NH has a local manufacturer produce sutures at $90 each. A mass-produced imported suture costs $200 by comparison.

• Aravind products its own intraocular lenses for $3 each. An imported one costs $60-$100 each by comparison.

DAWGEN GLOBAL INSIGHTS I JANUARY 2022

THE NEXT 2 INNOVATIONS INCLUDE TALENT LEVERAGE AND WORKFLOW Case Study – Innovations (3 of 4) 5 Talent Leverage • Talent Leverage • Due to a deep scarcity of medical practitioners

5 Workflow • For Innovators, Process Design is critical.

The equality of the outcome depends on the sophistication with which the full task has

in India, Innovators must focus on the skills they

been disaggregated. Specific credentials and

need, instead of the credentials of their staff.

skills are then applied to each sub-task of the

• These Innovators realized the more involved they become in building the skills of their talent,

process.

• By contract, at a typical hospital, a cardiac

the more effective they can be in at providing

surgeon admits the patient, orders tests,

world-class service, while minimizing costs.

synthesizes the resultant information, plans

• For example, surgical skills are improved by

surgery, coordinates the team, and monitors

frequency of procedures.

postop care.

• NH broke up the heart operations into many

• At NH and Aravind, surgeons specialize in

tasks. Each task is managed by a group of

operations only. They just move from one

professionals who solely perform a specific

operating table to the next.

procedure over and over again.

• The full team is responsible for outcomes.

• NH also recruits women in high school educations and trains them as echocardiographers. They purely focus on reading images, as many as 200/day, and thus produce excellent results—even better than cardiologists (in other institutions).

4 5

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DAWGEN GLOBAL INSIGHTS I JANUARY 2022

LASTLY, WE WILL EXAMINE CUSTOMER ACQUISITION AND FINALLY VALUES AND ORGANIZATION Case Study – Innovations (4 of 4) 7 Values and Organization

6 Customer Acquisition

• We cannot achieve breakthrough Innovation

• For the Innovators, it’s a volume game to achieve proper economies scale that can

without deeply held values. These values are

support their business models.

part of the foundation to the organization.

• For example, everyone who works at NH

• Aravind, JH, and NH must all continuously attractive patients to travel to them.

shares the same purpose: to provide all

• Aravind organizes 1,400 one-day “eye

people, rich and poor, with world-class care.

• Because everyone shares the same

camps” each year in villages across India. Teams of doctors, paramedics,

aspirations, teams of people with diverse

and additional staff visit these camps to

backgrounds and accomplishments can

identify patients who require surgery.

organize themselves to collaborate without necessitating costly supervision.

• Through this process, Aravind screens

• The goals of the organization must be clear,

over 1.6MM people each year, resulting in

motivating, and easy to share with a wide

over 240,000 surgeries.

range of people.

7 6

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DAWGEN GLOBAL INSIGHTS I JANUARY 2022

TO EFFECTIVELY DEPLOY SANDBOX INNOVATION, WE SHOULD FOLLOW 5 CORE GUIDING PRINCIPLES

Guiding Principles – Overview Organizations in any industry, in any country, can adopt the Sandbox Innovation approach to breakthrough Innovation.

To do so requires 5 core guiding principles that management must follow.

5 Do not innovate in isolation.

4 3

Immerse themselves in the lives of the target consumers.

Serving bottom-of-the-pyramid customer base forces Innovation due to the extreme limitations intrinsic to serving this market.

Be fully committed to a strategic intent.

Accept constraints.

2 1

Radically rethink the entire business model.

Source: The Innovation Sandbox, Prahalad, Booz & Company, 2006

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DAWGEN GLOBAL INSIGHTS I JANUARY 2022

FOREMOST, WE NEED TO UPEND THE ENTIRE BUSINESS MODEL PREVALENT IN OUR INDUSTRY Guiding Principles – Details (1 of 2)

1

Radically rethink the entire business model.

• For breakthrough Innovation, we can’t just finetune the existing business model.

• It requires radical change to the entire

3

Accept constraints.

• Our organization cannot do all things—we must do a few things very well.

• Contrary to some beliefs, breakthrough creativity requires

business model—including technology

an explicit acknowledgment of the

choices, distribution, pricing, scale,

constraints and limits.

workflow, and organization.

2

Immerse in the lives of the target consumers.

• Rather than researching markets, we must fully immerse ourselves in the lives of the target consumers.

• At the bottom of the social pyramid, there are extreme challenges in access, awareness, affordability, education, and availability. We can only understand the priorities of these consumers if we are grounded in their reality.

The bottom-of-the-pyramid consumers may not articulate their needs—that is why we need to immerse ourselves to understand those needs.

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DAWGEN GLOBAL INSIGHTS I JANUARY 2022

WE ALSO CANNOT BE INNOVATING IN ISOLATION—IN FACT, WE SHOULD FOSTER AN ECOSYSTEM OF COLLABORATORS AND PARTNERS Guiding Principles – Details (2 of 2)

4

Do not innovate in isolation.

• Breakthroughs typically happen when

Accept constraints.

• Changes cannot be possible with a

there are clusters of innovations,

clear and unflagging commitment to a

occurring continuously over time—

strategic intent.

in small experiments from which

• In the case of Indian healthcare,

organizations learn rapidly.

• To increase success, create an ecosystem of many collaborators and partners.

• For instance, the Aravind ecosystem

that intent is to serve all people (rich and poor) with world-class quality as affordable prices.

• Guide by this value, the process of breakthrough Innovation becomes

includes 5 hospitals, a medical

a market development challenge.

research foundation, 2 research

This is different from the challenge

institutes, Aurolab (a lens and

of serving an existing market more

suture manufacturer), dozens of

effectively.

community outreach programs, and relationships with universities (local and abroad), governments (at various levels), and technology providers.

40

5

The zone of comfort drives away the zone of opportunity—with extreme constraints, we are forced out of the zone of comfort.

DAWGEN GLOBAL INSIGHTS I JANUARY 2022

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