How to scale $1.25 to a billion dollar business – Essilor’s disruptive strategy in India

Eye-Mitra_Essilor_India

Emerging markets present a tremendous opportunity for enterprises to grow their business. At last week’s “Emerging Markets” class at the Nanyang MBA, we studied how the French ophthalmic lens manufacturer Essilor has successfully managed to penetrate the Indian market and provide spectacles to millions of under-served citizens. Most interestingly, their strategy to partner with local providers has turned out to be an amazing CSR story.

Spectacles have for many years been reserved for consumers with stable incomes, thus excluding millions of people living in extreme poverty to the possibility of owning a pair. According to the United Nation’s Millennium Development Goal (MGD) programme, in 2012, 270 million or 21.9% of 1.2billion Indians lived below the poverty line of $1.25 a day. The total market for vision correction in India is estimated to be 500 million people, which makes it a very attractive market.

Corrected vision may not seem so important on the surface. However, let’s look at it from a economic perspective. Blurred vison affects productivity, which has a negative impact on one’s ability to work themselves out of poverty. This makes vision correction extremely important. One of the challenges facing the demographics at the bottom of the pyramid is that they depend on working every day to sustain their living. Because opticians most often are located in towns far away from the villages, it is simply not an option to miss even a day’s worth of income to go get an eyesight examination. Furthermore, the consultation as well as the price of the spectacles would not be affordable for people of the villages.

If the customer won’t come to you, you must go to the customer

In 2003, Essilor together with local partner Sankara Nethralaya, launched the Mobile Refraction Van initiative that provides affordable eye care in rural India. In a matter of hours, a patient would have undergone a full eye examination and been provided with a brand new pair of spectacles starting at merely $1.

Another initiative is the Eye Mitra, which is a training program aimed to train unemployed rural youth to become opticians and set up local micro enterprises which provide door to door eye care services and sell locally manufactured spectacles embedded with Essilor technology.

Doing business in Emerging Markets

One of the main challenges of doing business in Emerging Markets is to deal with local governments and regulators. Volatile governments can with no warning nationalize your business and/or freeze your assets in the country. Seeking a strong relationship with the local authorities is therefore an essential strategy for foreign investors.

Essilor’s Eye Mitra initiative is a local jobs creator and helps strengthen Essilors relationship with the local authorities.

Why pursue the bottom of the pyramid?

There are several strategic reasons for pursuing the bottom of the social economic pyramid:

  • Creating future customers
    By serving the bottom of the pyramid, Essilor is establishing a whole new market of customers. Before the Mobile Refraction Van initiative, rural citizens didn’t know that they needed vision correction. What Essilor has realized is that the poorest citizens are leapfrogging the pyramid and improving their economic situation rapidly to move up the social economic ladder. The belief is that these future powerful consumers will remember Essilor and show brand loyalty when purchasing their first $50 Spectacles.
  • Blue Ocean: A large under-served market
    Serving the bottom of the pyramid means that you must pursue an “economies of scale” strategy. The 500 million people that are estimated to need vision correction represent a billion dollar market. Entry into this market can be considered a blue ocean strategy, since no existing lens manufacturer is servicing this market. In other words it is totally under-served and available for Essilor to grab.
  • Strong CSR
    Naturally Essilor’s cash cow is in the developed markets, where they are charging upwards of $1000 for a pair of lenses. A strong CSR profile helps attract customers and help justify the steep price points. Essilor is heavily using its initiatives in India for branding purposes and have succeeded in creating a very strong CSR profile.
  • Disruptive innovation
    Serving a low end segment requires new innovation. Not in terms of features, but in terms of price. Essilor has invested in new manufacturing methods that allow them to manufacture lenses at a cheaper price point. This technology can as well be applied for production in the developed markets  to improve profit margins in those markets.

Thought-Leader Series

Alexander Hold - Thought Leader Series

During my time at Aarhus University Institute of Business and Technology I founded and hosted a range of popular guest lectures under the name of the Thought Leader Series.

The concept of the guest lecture series was to invite CEO’s from the business community around the University to speak for the students about their way up the career latter, as well as giving a realistic image of how the theory taught at the university is practiced in the real market.

The guest lecture series was arranged next to my daily studies in my spare time, and I consider the Thought Leader Series as being my entrepreneurial hobby project. The project did not serve to earn money and was a total non-profit arrangement sponsored by Aarhus University.

Read about the CEO’s guest lecturing in the Thought Leader Series here.

The project was supported and sponsored by Aarhus University Institute of Business and Technology, and the Thought Leader Series was recognized by the management.

The Thought Leader Series had great success and experienced its largest audience with its last guest lecture held by Georg Soerensen CEO of MCH.

Georg Soerensen CEO of MCH

Georg Soerensen - Thought-Leader Series

Before I am beginning this article, I must admit that retelling the message and giving the energy of Georg Soerensen’s guest lecture at Aarhus University Institute of Business and Technology is close to mission impossible. However as Tom Cruise is making it in the movies, I will do my best to make it today.

Yesterday the 23 of March 2011, Georg Soerensen the CEO of MCH in Herning visited me in the Thought-Leader Series at Aarhus University Institute of Business and Technology. I had been really excited up to this event, and especially excited about the outcome. Would the students show interest? Would I be able to fulfil my promises? And in total would the event be a success?

I have until today managed quite a few guest lectures, and in general quite successful once. However there was something about this event that made me a little more nervous than usual.

Georg Soerensen is perceived as one of the greatest business icons in the area around the university, and is a highly respected CEO, Board member, and public speaker. Therefor were the expectations for the lecture also high and everyone wanted the lecture to go well.

Georg opened his lecture by drawing a large clock on the blackboard, symbolizing “time”. Time is one of the greatest factors of need, in the modern society, and more or less everyone is hungering for more time. At least this was the perception and the opening of the lecture, leading to the conclusion that life must be lived in the moment.

Next drawing on the blackboard was a great heart capsuling one of the main messages on the lecture. The letters MMS, was listed on the blackboard, translated to English CGC, standing for Courage, Goal, and Cooperation. These tree words are essential for the rest of the articles, as well as they was essential for the guest lecture.

The heart is symbolizing the actual heart of you as human being. Only by following your heart, can you be truly honest, truly yourself and really good at what you are doing. Georg Soerensen said: “you will only become good at the things you like to do.” An acknowledged philosopher stated; “if you have made a mistake once, you have already made the next, until you have learned the lesson form the first.” This is not stating that it is wrong to make mistakes, but that making the same mistake twice is stupid. From hear we get the first C, Courage. Because you need courage to end up in the situation where you have made a mistake that you will have to learn a lesson from, and then move on. All this is only possible if you have the courage to take the first step, and jump into it.

Georg Soerensen is setting demands for his 230 full time + 1000 part time employees, but he is also aware that he must set demands for himself, and often take the lead to make people follow. As he said: “Make your own agenda, then you will not become a part of others. “

Georg was really good a visualizing his message and he showed how the referee in a football match is always deciding who gets to start. When the referee flips the coin, he either show the coin as he catches it, or he will smack it on to his other arm, to turn the coin in favour of the other team. This can also be related to doing business and it is important always to turn negative situations, into positive.

Even though Georg in the public sphere seems like a tough businessman, he convinced the audience that he actually was a really sensitive person. The audience was asked if it was strength to show weakness? Usually we don’t perceive weakness as strength, but Georg argued that weakness shows truly honesty and that there exist a real person underneath the surface of toughness.

Already at the beginning of the lecture Georg Soerensen stated that his teaching all was based on real life experience. It was not based on theory developed by some writer, but it was real life experience.

Georg Soerensen is known as the man behind the Vision 2025, which is the vision for MCH in Herning presented the 1 of November 2000. The Vision is a 6 step plan stating the wanted future development of MCH as a business. The first 4 steps have already been completed, and only two more are yet to be broad to life. Georg sees vision as the dream you see when you close your eyes. However on thing is dreaming it, another is living it. Here comes the G, of the CGC model. Goals are important to realize that vision, and without, there will be no clear defined way, which will result in confusion and frustration.

The reason why MCH has experienced success is because of its ability to connect four important elements. We all know that a four-leaved clover is seen as the symbol of luck. Georg Soerensen drew one on the blackboard, and filled each leave with a letter. Four letters symbolizing four important factors that had made MCH successful: P for politicians, C for citizens, B for business, and I for important people. These four elements are the key aspect that is combined under the last C in the CGC model, Cooperation. If you can make the four-leaved clover cooperate in the pursuit on the same vision, you have the foundation for a successful corporation.

The lecture started with the drawing of a heart capsuling the four letters CGC, and this was also where the lecture ended, with the heart of people and with the heart of you. Because what it takes are the passion and the will power to actually do it. It takes Courage, Goals, and Cooperation to become successful. What is important to understand is that the line between success and failure is paper thin. It can be great symbolized by a fire burning through a paper. It might burn through, but it is so very close to burn out.

Georg Soerensen CEO of MCH and Alexander Hold
Georg Soerensen CEO of MCH and Alexander Hold

 

Lotte Littau CEO of Creativ Company

Lotte Littau - CEO of Creativ Company

Wednesday  9. of march, Lotte Littau the CEO of the successful Danish company: Creativ Company visited me in the Though-Leader Series. Creativ Company is a 125 employee’s large company producing and selling hobby items for use in public institutions, as well as private companies with focus on creativity. Creativ Company has been rewarded the honour of being the second best place to work in Denmark, and on a European scale the 9th best place to work. These rewards are what define Creativ Company as an organization.

Creativ Company was founded out of a failed fusion from a former partnership, and the motive for establishing the company was pure revenge. As Lotte said, there are a lot of great different motives for starting a company, but one of the greatest is revenge. Usually revenge is considered an evil thing, but what revenge did for Creativ Company was to give the necessary drive to keep working hard for achieving the goal.

The first step of the start-up was a trip to the USA, attending trade-fairs to find interesting product and solutions for the foundation of the company. Lotte Littau’s husband is a farmer and one of the barns was cleaned out to make room for the first stock of Creativ Company. It took one month from idea to reality and in year 2000 the company was in business.  Since then the Company has grown out of the barn and is today in 6,500 m2 large building located in Holstebro.

One of the first success stories Lotte Littau remembers from being an entrepreneur was a record sale of DKK 6,500 on one single day. DKK 6,500 does might not seem like a lot of money, and Lotte could also admit that 6,500 is not quite enough for running the business today; however the experience had made an impact on her.

Since 2000 the company has grown to a 125 employee’s large body and the values of being a start-up has developed into organizational values. This is a challenge for every growing organization, but Creativ Company has done quite well due to great focus on the work environment. One of the reasons why Creativ Company has been rewarded honourable prices for their work environment is due to Creativ Company’s effort in creating a diverse work environment with employees of many different qualifications. At Creativ Company they have created a workshop, where 15 employees that would usually not be able to carry out a job are being helped to have a meaningful work day, while they create value for the company. Because as Lotte Littau believes; it is every company’s duty to take responsibility in the local community.

Lotto Littau presented and interesting aspect on the perception of rules: “If a rule is stupid, break it”. This statement seems to be quite representative for the way Creativ Company is doing business. The company is focused on doing things as smooth as possible and the organizational structure is very flat. The way Lotte is managing the company is with care but with demands. She expects each of her employees to take responsibility in the common wellbeing of the company. And only if the company is doing well Lotte has the opportunity to pay back the employees with social benefits. “It is short term thinking not investing socially in the employees,” that might be the greatest definition of the organizational believe that is held by Creativ Company. Not just is Lotte and Creativ Company challenging the statuesque, they do also do what others say cannot be done, and is criticised for being an unhealthy way of doing business. However Creativ Company has been steady growing since it foundation back in 2000 and is not ready to change, but ready to do better.

The students have given a lot of positive feedback on the presentation carried out by Lotte Littau, and even though Lotte explained that she is not the usual public speaker of the company, she did a very inspiring job. As Creativ Company is growing they will experience challenges, and one of them is how to remain and spread the organizational values of the company to new departments at new locations.

Lotte Littau CEO of Creativ Company and Alexander Hold
Lotte Littau CEO of Creativ Company and Alexander Hold

Mayor, Lars Krarup

Lars Krarup, Mayor of Herning

Monday the 22nd of November Mayor, Lars Krarup spoke as the last guest lecturer in the Thought-Leader Series second season. It was an exciting day for me personally, since it is not every day you get to meet the mayor.

Lars Krarup has been mayor for 9 years, and was when he was elected, among the youngest mayors ever elected in Denmark. Lars is daily responsible for 9000 employees which he only can describe as a mouthful. However he finds his job very interesting and assured the audience and I, that there was never a day looking like the day before. One of the problems you are facing when you have 9000 employees is that you don’t know every single one of them, and therefor does Lars also put an honor in personally welcoming new employees working at the city hall.

Even though Lars Krarup today is a well-respected and popular mayor, the story of how he ended up at the city hall is far from usual.

Lars carries around a scare on his hand from the time he was a trainee to become a butcher. That was where his career started, at the local butcher, where he was taught a lot about sales and service. The important aspect was to treat the costumers with respect and please them, so they would come back.

At some time Lars looked at himself and realized that it was time to try something new and he became a sales man for the Danish Beer Brand Tuborg. Within Tuborg, Lars advanced and grew to become a key account manager for Tuborg, and was later selected for the team, which mission was to merge the two sales departments of Tuborg and Carlsberg. This was where Lars got the interest for strategy and leadership and when offered the position as CEO of the Blue Fox (Herning Ice Hockey), the answer was yes.

At Herning Blue Fox Lars learned about the difference between black and white. In the word of sport there is only one thing that counts: “TO WIN”

It was very much a coincidence that Lars was elected the mayor of Herning. And looking back at Lars’s career, everything has seemed to be randomly coming to him. This was also one of the messages he wanted the students to understand. Lars does not really believe in career planning but he has been really successful with the things he has accomplished. Why this is so is according to Lars himself, that when he is confronted with a task, he goes all in. As he said: “There are no easy ways to continuous success.” By this should be understood that you might be lucky to be elected the mayor, without any particular efforts. But to remain successful as mayor for 9 years, it takes hard work and effort.

“There are no easy ways to continuous success.”

As Mayor, Lars Krarup is today using one of the first lessons he was taught as a butcher trainee: To sell a good service so people will come back. Because even though Lars is working for a public institution, he prefers to see it as business that needs to make a profit to survive. Therefore is Lars also putting a great honor in employing the greatest people to do the job, even though they might be smarter and brighter than himself. This approach is also what have lead Herning to be one of the most successful regions in Denmark, where the distance from though to action is very short.

The meeting with Lars Krarup was a great experience and both the students and I learned more about the system and the man who makes Herning a great place to live.

Alexander Hold and Lars Krarup, Mayor of Herning
Alexander Hold and Lars Krarup, Mayor of Herning