A case of ‘disruptive innovation’ that is transforming Rural India

As the brand name suggests, ChotuKool is a small cooling device that works almost like a refrigerator

The product has been recently developed by Godrej & Boyce Ltd

ChotuKool is currently being sold in villages of Maharashtra and Goa in India with some success

The company plans to make it available in other states before the festive season of 2011

*Source: Google Images

According to UN Commission on Sustainable Development, one third of all food in India is lost to spoilage

According to CEAMA, refrigerator penetration in India is only 18%

70% of India still lives in rural areas where electricity supply is limited and power cuts are frequent

No options available for BOP citizens

Space is a constraint in rural households

Trends Implications Opportunities for ChotuKool

Food Spoilage Need for refrigeration

Demand can be created

Low Penetration Limited access to refrigeration

Huge market available for growth

Rural Population - Power supply issues

- Low purchasing Power

-Alternate power options

- Create a low cost model

Space Constraint Lesser space available for a refrigerator

Create a small sized product, easy to transport

Godrej is the 4th ranking player in the Consumer Durables industry, after LG, Samsung and Whirlpool

Although the company has been a frontrunner in many sectors in an emerging economy like India, it has not been able to break the ceiling in the durables space.

With ChotuKool, there is a possibility of Godrej gaining ground on the following fronts:

Technology Leadership Cost Leadership Customer Responsive

Technology Leadership:

ChotuKool could be the first refrigerator that works on a chip like the one used to keep laptops and computers cool, instead of a conventional compressor

It has the option to run on 12V DC, battery, inverter or even solar power instead of gridpower

Although the fridge may not be used to make ice, it could cool stuff to unto 20˚ Celsius below ambient temperature.

Cost Leadership:

ChotuKool, had to be priced low as compared to other available regular refrigerators to gain a market share

Though Godrej was not expecting to make a killing on margins per unit, the company expected it to be a volume game owing to the magnitude of India’s rural population

Distribution costs were planned by involving village girls, MFIs and NGOs who agreed to sell ChotuKool. This could save the company 40% on distribution costs.

Customer Responsiveness:

The R&D of ChotuKool involved detailed studies of the target customers, since the need was more “rural” in nature

With inputs from Harvard University Professor, Clayton M Christensen , the Research team spent more than one year interacting with the target customers

The initial plans were altered several times before the product was released. Red and Blue colours were frozen upon after seeking recommendations from the TG

*More on Slide#18

The market for ChotuKool was primarily rural India

In CK Prahlad’s words, ChotuKool was targeted towards fulfilling the needs of those at the “bottom of the pyramid”

Making the product attractive for urban India was not ruled out

The management at Godrej was confident of a huge success

Although there is no information in the public domain about the product family, secondary research may be interpreted as follows:

There is a platform available for Godrej to produce portable laptop coolers using the existing technology

ChoyuKool could possibly be made to run on a car lighter socket, making it more attractive to urban customers

Godrej could, in time, use the distribution cycle it establishes for ChotuKool to sell its other FMCG products in rural markets

Dissatisfiers:

▪ No ice-making technology▪ Limited capacity

Satisfiers:

▪ Price Point▪ Cooling Capabilities

Delighters:

▪ Portability▪ Low Weight▪ Battery Operated

Delighters

SatisfiersDissatisfiers

Performance100%0%

Customer Satisfaction

-

+

No date available on the public domain, but the process is likely to take about a year and a half to develop and would involve significant investments from Godrej.

Shifting the factory to Pune could save some costs

Using lesser number of parts, cheaper material and perhaps importing some parts from cheaper markets could help keep the price low

Since “ChotuKool” was a new concept, targeted at BOP customers, applying QFD – House of Quality was perhaps not appropriate for Godrej

In the absence of primary data, the authors of this project tried to gather as much information as possible through different sources to create a House of Quality with respect to the following:

Prioritize spoken and unspoken customer needs Translate these into technical characteristics and

specifications Build and deliver quality products (customer

satisfaction) 

Godrej & Boyce’s strategy for inclusive growth was not to just offer its customer a product, but to include the rural consumer to co-create their own product along with its engineers

This helped the team come up with features that are a perfect fit for the rural customer

Working with the original prototypes and several others that had followed, rural customer collaborated with Godrej on every aspect of the product’s design. They helped plan the interior arrangements, made suggestions for the lid, and provided insights on color (eventually settling on candy red).

Requirements Technology/Design Detail

Portability Provided Handle

Power Back-up Use of high end insulation material which keeps the stuff cool for 2-3 hrs during power cut. The fridge can work on an inverter or battery as well.

Light Weight Only 20 (rather than 200 in usual refrigerator) parts used

Low Running Cost Consumes only 55W power (60-70 Rs per month)

Servicing Ease Every part of the ChotuKool’s components sits in one of the lids’ two detachable parts, which can be toted even by a child to the nearest service centre.

Cooling Capacity Chotukool keeps the food stuff 20o C below the ambient temperature. It opens on top to conserve cold air; in fact, the lid hinges out and comes away entirely, in two detachable parts. A power socket sits embedded in the lid, next to two axial fans that dispel heat.

Cooling methodology Thermoelectric cooling, via a phenomenon called the Peltier Effect

Since ChotuKool’s market was BOP, costs had to be kept low so that the product could easily be afforded. To achieve this, development and manufacturing costs needed to be kept under control. Some of the steps taken by Godrej are mentioned below:

Based on community feedback, irrelevant functions such as deep chilling were removed, making it cheap and light

During the iterative development phase, Godrej made sure that its team was small and investments low

Expensive thermoelectric modules have been replaced with Chinese version of thermoelectric module to keep the price low

Main technology used is Thermoelectric cooling, via a phenomenon called the Peltier Effect.

In the sense that thermoelectric cooling has been around for decades, designing the ChotuKool isn’t “rocket science*”.

A classic case of repurposing of existing technology. So Probability of technical success was high.

Iterative development and meeting the low cost target ensured that NPV (Reward) is high. So Chotukool had been “Pearls” in Risk-Reward bubble diagram.

*As quoted by G Sundaram

At this stage, product solution is derived for all intended features and functional tasks that the target product is supposed to achieve.

Various aspects of the product like ‘amalgamation of components’ with an objective to bring down cost as well as weight are carried out. Here, non standard components are either dropped from the design or modified to simplify the overall manufacturing

In relation to ‘Chotukool’, product development team simplified the product design to such an extent that this product has become fairly a similar to normal refrigerator. A typical refrigerator works on ‘Vapor Compression Cycle’ (Rreverse Rankine Cycle) shown on the next slide:

In order to achieve cooling, few critical components (eg, compressor, condenser etc) are required. However, each of these components has specific electrical ratings and weight associated with them. This makes the conventional refrigeration cycle heavy and expensive thereby ruling out from the ‘chotukool’ concept

Instead of following the regular refrigeration cycle, product development team freezed on another phenomenon called ‘Thermoelectric concept’ discovered some 150 years ago. In this system semiconductor pellets, ceramic plates and electrical conductors are used to achieve refrigerator effect

Although thermoelectric refrigerators are not as efficient as vapor compression cycle (efficiency of around 5-10% compared with conventional system), product development team found value in this concept due to: Simplicity of design: ideal for mass production at lower turn

around time Absence of moving parts: lower requirement of periodic

servicing Relative ease of assembling: highly skilled manpower not

required Low Cost: ideal for the mass market segment (BOP discussed

earlier) Low Weight: gives rise to portability Wide availability of Raw Material: keep the production cost

lower operational flexibility Lower consumption of energy: fairly insulted from frequent

power cuts Bio degradable components: critical for a mass product

Product designers at this stage finalized this concept not withstanding the relative lower efficiency of this system

Product development is the process of creating a new product to be sold by a business or enterprise to its customers. Design refers to those activities involved in creating the styling, look and feel of the product, deciding on the product's mechanical architecture, selecting materials and processes, and engineering the various components necessary to make the product work. Development refers collectively to the entire process of identifying a market opportunity, creating a product to appeal to the identified market, and finally, testing, modifying and refining the product until it is ready for production.

  Concept  Development

System-LevelDesign

DetailDesign

Testing andRefinement

ProductionRamp-Up

Marketing

Define market segmentsIdentify Lead usersIdentify competitive products

Develop plan for product options and extended product family

Develop marketing plan Dev. Promotion and launch materialsFacilitate field tests

Place early production with key customers

Design

Study feasibility of product conceptsDevelop industrial design conceptsBuild and test experimental prototypes

Generate alternative architecturesDefine systems and interfacesRefine industrial design

Define part geometrySpec materialsSpec tolerancesIndustrial design control documentation

Reliability, performance and life tests Get regulatory approvalsImplement design changes

Evaluate early production output

Manufacturing

Estimate manufacturing costAssess production feasibility

Identify suppliersMake/buy studyDefine final assembly scheme

Define processesDesign toolingBegin tooling procurement

Begin supplier ramp-upRefine mfg. processes

Begin operation of production system

Godrej was into the Refrigerator business over 3 decades thus Chotukool was an addition to its product line.

Since the project was aimed for villages it was required to keep it cost effective & simple. The part B.O.M (Bill of material) reflected only 20 parts against 200 parts in the conventional refrigerators, thus reducing the complexity and making it compact.

The fan for dispelling heat was similar to the ones used in the laptops for discharging heat (standardisation).

So every one of the ChotuKool's essential components sits in one of the lid's two detachable parts

Godrej abandoned the regular method of cooling by compressor found in every domestic fridge and even in the Eco-Design team's prototype and opted for a technique known as thermoelectric cooling (using the Chinese version of thermoelectric components which are less expensive).

Most part of the design work was conducted at its Research and development centre at Mumbai, while the manufacturing was done from its plant in Pune.

Next stage was Computer Aided Design (C.A.D). It was required to give a 3-D / realistic form to the ideas generated. Various shapes and sizes were proposed by the Research and Development team and 3-d models were made. 2-D drawings were made for all 20 components paying attention to the design constraints, Geometrical tolerance, Bill of material (Specifying the quantity, material & remarks etc) & any special note if required. Proe was the Cad software used for 3-D modelling, Assembly & detailing.

Since the product is a plastic component extensive use of CAE software (Mould Flow) was used. Mould flow software helps in optimising design; improve the pit falls of design & aids in manufacturing.

Alpha Prototypes of Chotukool was developed to simulate the actual world problems that it may encounter when placed in the market, aesthetic of the product, whether it meets the specified specification & to further analyse the product for improvement.

In September 2009 Godrej dispatched Chotukool to villages in Maharashtra to be stress-tested in ground conditions and to elicit feedback from their users. Various iterations were done and were promptly dispatched to villages for further improvement.

It was thru this process that candy-red colour scheme emerged from a straw poll of 600 women in the village of Osmanabad against the blue-grey as proposed by Godrej.The final shape that emerged from the iteration was squat cube.

Beta Prototype: After the final iteration go ahead was given to the manufacturing and the first tooled up parts ( Beta prototype) that came out of production was then put to durability test and further refinement of Chotukool took place.

Production Tooling & Vendor part development: Majority of parts were plastic parts , where most of the tooling were developed by the suppliers it required an extensive work by the companies Part development team to work and develop part with vendors.

After T1 ( first samples from injection moulding , to be checked for moulding defects) , T2 samples ( samples to be checked for minor defects ) were approved & the testing was successfully completed go ahead was given for etching to be incorporated in the tooling.

Before launching the product, several rounds of iterations were done. Following were the main requirements:

Cool 5 to 6 bottles of water Stock 3-4 Kgs of vegetable Portable and light Work on battery for long hours without power supply

ChotuKool is able to cool stuff 20 degrees lower than the ambient temperature

Marketing and distribution costs were lowered by involving village folk, NGOs and SHGs to sell the product @ Rs 150 as commission for every piece sold

1. Cheapest fridge available (Rs 3790/-)2. Portable and light3. Occupies less space4. Runs on battery5. Developed with village folk, keeping their

requirements in mind6. Local, accepted selling practice (for villages)7. Environment friendly (for urban market)

In addition to village folk, NGOs, Microfinance Institutions and Self Help Groups, Godrej has tied up with the postal department in Pune to sell ChotuKool in rural areas across the country

Postmen in the region double up as marketing professionals

The product will be shown and promoted by the postmen on their visits to the villages and in rural schools.

It will be displayed at post offices, where the staff will brief visitors about the product.

Chotukool is a new category Godrej is engaged in educating the consumer through demonstration of the product. This also necessitates a phased launch in different states over a period of time

Educating the new end users, training the intermediaries and building the distribution infrastructure are in progress

Communicating a distinct value proposition to the emerging consumers is a challenge.

Process selection is based on the following considerations:

Type of process; range from intermittent to continuous based on volume and variety

Degree of vertical integration Flexibility of resources Mix between capital & human resources Order to delivery strategy

The process design that must have been chosen for Chotukool must have been Repetitive focus- produce few major products with high volumes.

Characteristics of Repetitive Focus:1.Moderately Skilled labor: Chotukool involves assembly of nearly 20

parts , which are less complex than existing refrigerator parts , hence moderately skilled labor was required.

2.Product flow time: The process flow structure that must have been followed Assembly Line flow. Hence process flow time / assembly time was low.

3.Raw material inventory: as it follows assembly line flow the inventory would be low .

4.Cost: initial cost for setting of line would have been high as the product was different for existing refrigerators produced by Godrej.

Vertical Integration: The degree to which a firm owns its upstream and its downstream supplier.

Expansion of activity downstream is referred to as forward integration & expansion upstream is referred to as backward integration.

Chotukool is a product where most of the parts were outsourced (company chose to Buy).

As the margin on the product was quite low the company decided not to involve distributors in the process ( company chose forward integration into its distribution) .