CHOTUKOOL Case Study - Group 4

Managing Technology Assignment GODREJ CHOTUKOOL Case Analysis Submitted by Rohit Aru B-03 Seema Patil B-34 Bidyut Patowary B-35 Hardik Shah B-44 PTMBA 3rd Year (2011-2014)

Question 1: Review the characteristics of innovations. Answer: For something to function as an innovation, the consumer must perceive the newness or novelty of the proposed trend. Characteristics of innovations are 1. Relative Advantage 2. Compatibility 3. Complexity 4. Triability 5. Observability

Relative Advantage The perception that the innovation is more satisfactory than items that already exist in the same class of products.

Compatibility Is an estimate of harmony between the innovation and the values and norms of of potential adopters.

Complexity Is a gauge of the difficulty faced by a consumer in understanding and using the innovation.

Triability The relative ease of testing out the innovation before making a decision

Observability The degree of visibility afforded by the innovation

Question 2: What are the challenges (in general) of producing something for a mass market? Answer: The challenges in general of producing something for the mass market area as follows. 1. Heavy advertising cost, to establish brands & keep them in public eye. 2. High development cost of products. 3. Competition is often fierce. 4. Companies must be market – this brings high innovation & market research cost.

The advantages & challenges of mass marketing can be accessed from the following diagram.

Question 3: Discuss whether Chotukool is a sustaining or a disruptive innovation Answer: The innovation in the case of Chotukool is an example of disruptive innovation because the project was targeted for the bottom of pyramid people who were mostly non user of refrigerator & with the help of this innovation those section of the people got an opportunity to be upgraded to the next level of simple user. The idea of Chotukool was conceptualized based on the principles of Disruptive Innovation developed by Prof Clayton Christensen. Typically technology continues to improve to cater to the needs of the segment of most demanding customers by a series of incremental and radical innovations. Though the satisfaction of the customers on the average increases this pursuit of ‘sustaining innovations’ leaves several consumers at the level of basic needs overshot. For example a person who only wants to read emails hardly needs several GHz of processing capacity in the computer. Disruptive Innovations address the basic needs of the simple customers with easy, simple and affordable solutions. Disruptive innovations open up the untapped market of the non-users.

Question 4: Discuss the technological capabilities required to run such a service. Answer: A high level of technical capabilities are required to run such a service. The product development team has to be thoroughly dedicated for this new product & there should have the facility to firstly produce the prototype & the necessary testing facility for this prototype. Again since majority of the parts for this product are outsourced therefore it should have a very close network of suppliers. Finally facility for the manufacturing of the tools & lastly the production facility are required for the final product.

Question 5: Discuss how you would price this service to customers, how would you manage costs. Answer: Pricing a disruptive innovative product like Chotukool is quite a critical factor & we thing the current price that Godrej were asking for was quite competitive because It was providing the customers a value for money product. For managing cost the design & development team of this product were very much alert right from the product design stage to the production phase. In this way the customers can be provided a value for money product which they actually need by curbing out the other non essential portions.

Here in the case of Chotukool the entire compressor part was replaced with a thermoelectric or peltier cooling technique & thereby the cost of the product was drastically reduced. As the prospective market of Chotukool are mainly on the rural areas so aesthetic part of the product is not so important & thereby we can search for cheaper graded plastic granules which will reduce the cost of injection moulding of the casings & finally it will reduce the variable cost of the product.

Question 6: Assess the technology risk to the Chotukool model. Answer: Chotukool had the advantage of simplicity due to its technology as well as design structure. The entire assembly of 20 odd key parts was carried out with about 10 to 12 persons in a very small space. In a conventional refrigerator, the compressor used for cooling has more than 60 parts machined & matched to very close tolerances & for the final assembly operation more than 100 odd persons are needed. Though the entire manufacturing process was fairly simple in comparison to the manufacture of traditional refrigerator yet there always lies high technical risk for this type of product. The cost of an individual product depends upon many factors like cost of material, labour cost, and overheads like transportation cost, assembly cost & the other fixed cost like tooling cost, initial setting of assembly line cost etc. It may so happen in the near future that due to change in technology & availability of cheaper & effective material the variable cost of production may drastically come down & thereby the overall product cost may come down. Taking into consideration these factors there always lies a technological risk for an innovation like Chotukool.

Question 7: Discuss the risks to the Chotukool model from newer innovations. Answer: As per the case till the time Chotukool was launched there was no direct competition to it but there was a high risk that traditional refrigerator manufactures might bring out low cost model in the near future reducing the existing price gap to a considerable extent. Chotukool’s current price was just about 50% of the lowest cost refrigerator, unlike other classic disruptive innovations. Mitticool is one of such low cost alternatives which had a different functionality, customer value proposition & market segment, posing less of a direct immediate threat to chotukool. However such

innovations, along with prospective low-cost versions in the category of traditional refrigerators, posed the threat of potential substitutes eventually appearing in the market for cooling solutions. Being a player of Indian origin in the home appliances market that has global giants like LG and Samsung Godrej management thinks that it had an edge over others in decoding the rural folk. While all the major appliance makers in the country are taking the Indian consumer very seriously, finding alternate channels to expand distribution reach, and investing heavily on research and development to bring out India-specific innovations, not many are as yet looking at the hinterland. Another home grown name, Mirc Electronics, which sells the Onida brand of products across electronics and appliances though, has created rural-specific brand Igo, which sells LED and solar-based torches and lanterns in villages across states like Maharashtra, Gujarat, Madhya Pradesh, Uttar Pradesh and others. Lastly to mitigate the risk from other new innovations Godrej has to concentrate on continuous improvement.

Question 8: Explore the long term viability of such a service in India. Answer: Despite all the challenges Godrej management was optimistic that Chotukool would serve as an Indian benchmark from the developing world as the right combination of technology, product & business model. ChotuKool started off as a pilot to provide refrigeration solutions to rural India. Three years later, the approach taken to conceive the small refrigerator became a full-fledged business strategy at Godrej Appliances. The division of Godrej & Boyce Ltd now plans to add a few more low-cost innovations to its 'Chotu' family. On the cards are: a low-cost washing machine ChotuWash and a low-cost water-purifier. Godrej is now taking ChotuKool, priced at Rs3, 700 — half the price of the normal refrigerator made by the company — to newer states. While the washing machine will be adapted to needs to rural homes and will cost cheaper than an entry-level counterpart, the water purifier will look at addressing the challenge of clean drinking water by removing arsenic, fluoride, excessive iron along with bacteria and viruses, which will make it the first of its kind in the country. Taking into consideration the success of Chotukool & simultaneously the need of the current Indian market its can be said that the long term viability of such service in India is quite appropriate & it is beneficial for both the society & the service provider.