Strategy, innovation and a $ 300 house

Friday, 31 January 2014 00:00 -     - {{hitsCtrl.values.hits}}

By Sarah Hannan Prof. Vijay Govindarajan is a sought-after speaker on innovation and this week he is set to deliver a lecture on ‘Strategy is Innovation’ for the employees of MAS Holdings. During his visit to Sri Lanka Prof. Govindarajan spared a moment to share his experiences with the Daily FT, where he channels his expertise to crack the code on poverty and build a $ 300 house. Inspired by the likes of John F. Kennedy and Mahatma Gandhi, Prof. Vijay Govindarajan believes in thinking something outrageous which leads to a big idea. Citing examples from the two iconic figures, Prof. Govindarajan stated that John F. Kennedy and Mahatma Gandhi were able to inspire people and create a deep impact on the lives of many people. “If you go to a remote village in India, the villager will have three photographs: Mahatma Gandhi, God – whatever the god they worship out of the 330 million gods – and the third photograph would be John F. Kennedy,” he added. John F. Kennedy managed to transform the lives of people in India through the Peace Corps that was established in 1961 and which is carried out to date where American graduates get the opportunity to visit a poor country and live there for two years participating in volunteer work. "Strategy is innovation; there is no difference between strategy and innovation. If you are not doing innovation you are not doing strategy. You are doing something else because for me strategy is not about what you have done in the past; it’s not about what you are doing today. Strategy is all about the leadership in the future. If you want to be a leader in the future you will have to adapt to change. Another word for adapting to change is innovation. Therefore strategy is innovation. I want to give companies a framework and a set of concepts as to how they can exactly excel in innovation. Your company may have done a very good job in the last 30 years. But that is not what strategy is, what you have done in the past is not strategy. The question is, what about the next 30 years? In the next 30 years one thing we know is that the world will change and we have to adapt and be relevant – Prof. Vijay Govindarajan " “Big ideas are about thinking something outrageous. Mahatma Gandhi had a big idea called Civil Disobedience at a time when the British were ruling both Sri Lanka and India and they had so many weapons; here’s a guy saying ‘let’s bring down the British by peaceful means’. People thought he was crazy and it was impossible but it moved people and it moved societies,” Prof. Govindarajan reiterated. Applying his academic knowledge, in 2011 Prof. Govindarajan came up with a concept of building a $ 300 house, where he allows interested people to take part in an online social forum to come up with strategies to build an innovation. The idea was formulated while Prof. Govindarajan was reading for his Accounting Degree in Chennai. He witnessed the state of the people who lived in slums where he had to pass every day to go to college. These people were caught up in the vicious cycle of poverty and were deprived of proper housing, education and health and were condemned by society due to their living standards. “We have to crack the code on poverty. I put my focus on the house and for me the house is the most basic need of a human being. Even insects have houses, even a spider has a house, so that was the basic unit we had to focus on which inspired me to come up with the $ 300 house. I wanted to put a number there which would shock people. We think that a house should have five bedrooms and three-and-a-half bathrooms and a living room and so on, which comes up to about $ 5,000. Why should it be like that? Why can’t we think of a house in a different way and come up with something that would ultimately give a person dignity? If you don’t have a house, you have lost your soul. A poor person has the same intelligence or the same capabilities as anyone else. So why don’t we install the sense of dignity? That’s where it all started,” Prof. Govindarajan explained. "Vijay Govindarajan, known as VG, is widely regarded as one of the world’s leading experts on strategy and innovation. He is the Earl C. Daum 1924 Professor of International Business at the Tuck School of Business at Dartmouth College and a Distinguished Fellow at The Dartmouth Center for Healthcare Delivery Science. He was the first Professor in Residence and Chief Innovation Consultant at General Electric. He worked with GE’s CEO Jeff Immelt to write “How GE is Disrupting Itself”, the Harvard Business Review (HBR) article that pioneered the concept of reverse innovation – any innovation that is adopted first in the developing world. HBR picked reverse innovation as one of the Great Moments in Management in the Last Century. In the latest Thinkers 50 Rankings, Govindarajan was ranked the #1 Indian Management Thinker." The father of Microfinance Mohamed Younus in one of his books documents the success of microfinance. He says people come out of poverty using microfinance. They are able to construct a house using $ 375. Prof. Govindarajan had rounded up this number to $ 300; a number which got people to suddenly stop and think. Quite to his surprise people were sharing their ideas on a social media platform that was set up – – which has gathered a lot of good ideas. “They have come up with a very innovative design for a house. We haven’t solved the problem, it is far from getting solved but what is giving me hope is that when the social media platform was created, I found people in different parts of the world who were concerned about this question.” Prof. Govindarajan admits that he is no expert on housing, but his naivety of housing is his biggest asset: “Someone who knows about housing may be constrained with what they know. So they could only see what they see. I see something is possible if we put our minds to it. There are lots of people working on this and my hope is that in the next couple of decades we will actually find the solution which will give a sense of possibility for these communities.” Plans and potential India, Ethiopia and Haiti are the three countries where much stronger experiments are going on in this ultra-low-cost housing. In this whole process three very important things need to be looked into – Dignity, Durability and Delight: Dignity: Poor people don’t want you to give them something rich people have thrown away. Poor people don’t want junky, they don’t want you to give them something you didn’t use when you built your house. Poor people want a sense of dignity, therefore you got to use very good technology, very good materials and not use junk. Durability: When a solution for housing is found, the house shouldn’t break down after five years. Because people have very limited resources and we have to give them a durable business model. Delight: Poor people also want to experience some enjoyment in their lives. In slums I have seen in India I have noticed that even if they don’t have anything to eat, they have a mobile phone, they have a TV set with cable connection. Because poor people would forego a meal and watch the TV; they too need to have some enjoyment in life. “It is not about the $ 300 house alone, we need to build the whole infrastructure for them. We have to have proper sanitation, we have to have proper water, we have to have a hospital there, we have to have schools there, and we have to build a little entertainment there. The $ 300 house may be a metaphor for talking about building a vibrant community where there are jobs and schools so they would feel that they have something to live for. It is not just a question of survival; it is about surviving and to live. Once we put focus on something, we will get it done,” Prof. Govnidarajan elaborated. Prof. Govindarajan hopes that in the next decade significant progress can be achieved. “Poverty is a huge problem and we need to approach it so we would find a sustainable solution which requires breakthrough innovation on materials. Once again we are constrained by the materials that we use today to construct a house, so we need to fundamentally go back to the drawing boards and say ‘can we do some research in materials and come up with some radically superior materials at a very low price?’ Somehow we need to come up with radically superior construction material and technology.” Embedding technology While brainstorming on the $ 300 house Prof. Govindarajan had also allocated a $ 10 budget to provide a nano iPhone for each household and he is planning to write a letter to the CEO of Apple to come up with a low cost nano iPhone which would be affordable. “There are seven billion people in the world today, of which only two billion have decent homes. Five billion people who do not have access to basic facilities such as homes cannot afford to buy an Apple iPhone as it is too expensive for them. If you create a nano iPhone for $10 then you have a $ 50 billion revenue opportunity. In fact when I wrote the original article on the $ 300 house I actually allocated a $ 10 budget for a nano iPhone in that house. The reason to allocate that budget was to give digital connectivity in the $ 300 house; you can deliver more health to the poor through telemedicine, you can deliver more education to the poor through e-learning, and you can deliver more banking to the poor through mobile banking.” Prof. Govindarajan questions: “Why can’t the poor have more health, education and jobs within a $ 300 house? Health is not only delivered from the hospitals, health can be delivered in the way you design and construct a house. Today on planet earth millions of poor people are dying because of three diseases – tuberculosis, cholera and malaria.” Tuberculosis is an air borne disease – imagine a hut in a slum which has no sunlight, no ventilation and 10 people are sleeping in that hut. If one of them has tuberculosis, it will infect the other nine. My challenge to the designers is, ‘Why can’t you design a $300 house with proper sunlight and proper ventilation?’ It doesn’t cost a single dollar more, it just requires some thinking and thereby you can dramatically reduce the risks of tuberculosis. Cholera is a waterborne disease – why can’t you design a $ 300 house and find a secure source to supply drinking water, thereby dramatically decreasing the risks of cholera? Malaria is carried by mosquitoes – why can’t the $ 300 house be covered in the opened-up parts with mosquito nets, thereby dramatically decreasing the incidents of malaria? “Education is not just delivered in schools, education is also delivered in the way you design a house. Haiti does not have electricity like in US, which means once the sun sets the country goes dark. We cannot even imagine living like that in the US, 50% of our lives in pitch darkness. That means a kid in Haiti cannot do homework once the sun sets. Is that the fault of that kid? Is that the kid is less intelligent than a kid in the US? So I say, why can’t we design a $ 300 house and find a low cost energy source and deliver more education in that house? “Why can’t we give more banking to the poor? Ultimately as I said the $ 300 house for me is a metaphor which says that poor people are poor not because they want to be poor, not because they bring poverty on themselves. In fact they ask this question, ‘Who caused poverty in this world?’ Is poverty caused by poor people? Or is poverty caused by people like us who deny access to education to the poor? We deny access to banking to the poor; we deny access to health to the poor. Therefore they are marred with poverty; therefore I say ultimately it is our job to help them. They are not asking for money, they are not asking for jobs, they are just asking for an opportunity.”