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