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The Disruptive Voice
The Disruptive Voice
- 30 Mar 2016
- The Disruptive Voice
6. BSSE Research Paper | Asian Paints — Aishwarya Ramakrishnan and Neha Rambhia (MBA 2016)
Tracy Kim Horn: Welcome to The Disruptive Voice. I'm Tracy Kim Horn and in the studio with me today are two students who collaborated on their final paper for BSSE, our second year elective course, Building and Sustaining a Successful Enterprise. Professor Derek van Bever, co-founder of the Advisory Board Company and former chief research officer at the Corporate Executive Board identified this group's paper or about the company, Asian Paints, as one of his favorites.
So I'm excited to have two of its three co-authors here with me today. Unfortunately, Zohair Mokarim lost his voice, so couldn't join us. But Aishwarya Ramakrishnan and Neha Rambhia, I'm so glad you could make it. Thanks for being here today.
Aishwarya Ramakrishnan: Our pleasure.
Neha Rambhia: Of course.
Tracy Kim Horn: So for your final paper, you were asked to look at a company at a critical juncture and take the perspective of a real person in a real organization facing a real question and recommend how they should respond.
Aish, could you tell us how you guys decided to write about Asian Paints for this paper?
Aishwarya Ramakrishnan: Absolutely. So I think from the beginning, when we started, studying BSSE the title really, struck a chord with us: Building and Sustaining Successful Enterprises. And if we could, think of one organization in India, which has truly built and sustained its success over half a decade almost, it was Asian Paints.
Tracy Kim Horn: Half a century.
Aishwarya Ramakrishnan: Half a century. That's right. Asian Paints was founded in 1942. And, I think starting in the sixties, 1966, I think it's been the market leader in the paint industry in India till date. And, today they are at a critical juncture, which we felt was a very interesting one to look at.
Initially, they were doing just paints in India and now they're looking to move to the entire home decor spectrum. And I think we thought this is a very interesting problem to solve in the Indian context and it's yet to play out. So we took the role of the current managing director and CEO of the company and looked at what this meant for Asian Paints going forward.
Tracy Kim Horn: Could you tell us a little bit, when you say home decor? Exactly. What are they getting into?
Aishwarya Ramakrishnan: Home decor includes all sorts of products that you need when you're building or renovating your home. So paints is just one product among the whole spectrum, but it could be furnishing. It could be plumbing. It could be bathroom products, kitchen products, you name it, and they want to sort of. Get into it.
Tracy Kim Horn: Wow. So we're not just talking about, the decorative pieces, even the functional pieces, like you were saying.
Aishwarya Ramakrishnan: Absolutely.
Tracy Kim Horn: That's a big, I think juncture. Neha, for our listeners unfamiliar with Asian paints. Could you tell us a little bit about their history?
Neha Rambhia: Of course. Asian Paints has been founded in 1942. Currently has a turnover of over USD, $2 billion and a market cap of over USD, $12 billion. It has over 36% of the market share. And like Aish mentioned since 1960s, it's been the number one leader.
Going back to the history, and when it was founded. Earlier, the paint industry in India was very simple. It was people white washing that walls with tuna or lime wash. And Asian paints came into this market, started with the rural industry where there were no other alternatives with functional products that help people color their walls with something that will not come off on their clothes.
And last for much longer and protect the brick walls and houses. It was a man's decision to choose to have something more sustainable in his house. Over time, Asian Paints has led the change wherein it has transitioned from this functional product to a decorative product with the brand campaign of saying every house has a story, or as we say it, "Ghar Kuch Kehta" it has transitioned into a beautiful product where -- which is now a woman's decision -- saying "my house is beautiful and has the story around it."
We see this transition at various junctures across its journey that has helped it maintain market leadership. And we've seen at this interesting juncture that Aishwarya spoke about how it's going to go forward into the decorative space.
Tracy Kim Horn: What I love, what about your paper and the company, is how you've just said, the world has changed and so often in BSSE, unfortunately the case studies that we study is the world has changed and the company doesn't realize it. But Asian paints was able to do -- able to follow that -- and able to adapt that. And that's such a unique story. Aish, maybe you could tell us, what do you think theory's opinion is then of Asian Paints future? They've been able to change so far with the world, will they be able to keep going?
Aishwarya Ramakrishnan: When we thought about from the theories lens, what would a theory predict about Asian Paints going forward two of the big pieces of theory we used where the business model itself. So currently they're a value-added business. And they're moving to a solution shop. This requires fundamental transformation and change within the company.
And the other big piece of theory was "tools of cooperation". So how do you drive this change in a company that's, you know, 60, 70 years old, which has a legacy of culture, a history, and how do you make them nimble? And literally going to start up mode when they're trying to target a different segment they've never been in.
So if I look at the first one, which is, the transition from value added, business to a solution shop. They've made a lot of strategic decisions, knowing that their strengths lie in the value added business piece of it. And in order to transition into a solution shop, they can't just overhaul everything and move on.
So they've done two, three really special things. So they've had a lot of little pieces within their current business where they've tried to put a bait out there for the customer and test the waters. So for example, they set up a color ideas stores, where customers could walk in and they were purchasing paint in a way they've never purchased before, where they could see the colors where there was technology being used.
They could visualize how their house looked. There was a color consultant in the store who would advise them on, you know, based on the decor of their house, this is the paint color go well and also started advising them on the other one pieces of the decor. So what ended up happening was they realized what the customer really wanted and they understood the fact that it's no longer, like Neha said a middle aged man, but actually a woman who wants to express herself and they needed to make it an environment that she's comfortable shopping in and she enjoys taking that decision.
Having tested that they're now looking to roll it out through partners. So they're not becoming a retailer because that's not their value proposition. That's not their core strength. And they're actually partnering with their own distributors who have been distributing paint paints for them over several years and transforming them, giving them the tools to be able to create this touch point with the customer and transform the way they purchase. Not just paint, but slowly adding products. So they've actually purchased two companies or taken a majority stake in one and purchase the other in the kitchen products and bathroom products space so that they can give their distributors more products to sell through that channel.
And I'll let Neha talk about the tools of cooperation piece, because this requires a lot of transformation within the company to execute something like this.
Tracy Kim Horn: I just have to say, as someone who recently redid her basement and was sent to the paint store to pick out a color, I wish Asian Paints had been there because I was just standing in the paint store, looking at these small square samples, trying to figure out what I was supposed to do. I would have loved to speak to a color consultant and I probably would have then been upsold on whatever home decor options she might have suggested. But Neha, I'd love to hear what you, what you think about tools of cooperation?
Neha Rambhia: Well, of course there are two different views of the world that exists in the company, Asian Paints. There is the old school thought that we're doing really well in the paint industry. And we've got to defend that. And the implication of that is going to be thinking through growth options around the standard growth options that are non-disruptive. So talk about international expansion or just going deeper into the country, having more range, having more products,
Tracy Kim Horn: That's what makes them -- that's what's made them so great, right? Because people think like that.
Neha Rambhia: Absolutely. And they're all sustainable innovations. The other school of thought with Asian Paints is aligned around this whole idea of creating a one stop solution and doing something completely disruptive in the home decor industry. Like you said, you had to go to a paint store in order to buy paints.
You can't walk into just one shop and get it all anymore. In order to get this implementation through in the company itself, we believed, or theory suggest that tools of cooperation and balancing out the leadership tools, which are going to be around results, orientation, setting, very tactical targets for a lot of teams that are not completely sold on the vision is going to be very important in order to get them on board.
And the second tool is around the management tools, where in showing them the grand vision, one of the future of Asian Paints being the leader, though one stop solution for him, home decor. In India and in other markets, it exists in those are going to be the two levers that we believe the leadership is going to adopt in order to drive the solution successfully through the organization.
Tracy Kim Horn: Or at least we hope they adopt since we want all one to see them continue their success through the next half century, I would say. Aish, so something we'd like to talk about in class is there's theories opinion. And then there's whether you agree with theories opinion, I'm curious as someone who's very personally connected to this company and to the brand, what do you think?
Aishwarya Ramakrishnan: I think we are completely rooting for Asian Paints. No doubt about that. But we do recognize and understand that there are several risks in this process. One of the biggest risks that we see for them is that customer behavior doesn't change as quickly as they expected it to change. So even though the woman is now buying paints, is she taking that decision in a singular manner? Does she consult her husband? Does she even go to the store alone? Does she buy into this new process of buying paint along with other products? If that doesn't move as fast, you know, and we spoke about, I think the forces of progress, I think will we believe that. It should move at a certain pace, but if Asian Paints, invests, too soon, too quickly transformed his distribution, it could be at risk.
I think then the second piece that's at risk is, the fact that they are doing this through partners. They are doing this through third parties. So if implementation is not impeccable, if there is no standardization across the different geographies and so on, it could fall flat. So I think it's important that they recognize these risks and execute on it while they've shown track record of doing that.
Let's hope they do it in this situation as well.
Tracy Kim Horn: Absolutely. Well, if we could send them maybe some theory readings, we can send them "good money, bad money" and "interdependence/modularity". There's definitely more from the Canon that we can pull from. The last question I have for you about, about the paper and about the paper writing process actually is, as you were learning more about the company, or really, as you were learning more about theory, did you change your mind at all over the course of writing the paper?
Aishwarya Ramakrishnan: Absolutely, I hope and assume it's happened to everyone as they kept digging deeper. We studied the Asian Paints and their success seemed to us like an emergent strategy. There were a lot of initiatives around marketing on the ground when they came up with paint swatches, where people could take live samples based on the color they picked, or they came up with ideas around packaging, where they had 50 ML and 10 ML packages instead of the standard 500 ML packages in the industry. All of those were very organic ideas from the field up from the ground up. And we thought it could be an example of a stellar company that's built a product, build a strategy and sustains itself, bottoms up.
However, as we went through and got to know the company a lot more, we realized in this context, it was visionary leadership that led the company to success. There was a lot of deliberate planning across various junctures that we spoke about. From when the company went from a functional product to a decorative product, when it launched premium brands across certain job segment for tractors or four houses or automobiles, all of these industry entires and creating different and sub brands were very deliberate decisions by its leadership. It was extremely interesting for us to have discovered this entire shift from what we are assumed the company was doing, versus what we eventually learned it was.
Tracy Kim Horn: And it sounds like a company that really invests in the people and the time to do its work upfront, rather than just relying on the magic bullet to just suddenly hit you. Wonderful. Thank you so much for joining me today. The last question I have for both of you is I'd be curious where you're headed after business school.
Neha Rambhia: I will be going back to McKinsey and Company in the New York office after school.
Tracy Kim Horn: So you're staying close to us. That's good. And Aish, do you have plans yet for when you graduate?
Aishwarya Ramakrishnan: I'm actually moving back to India and I'm in the process of figuring out opportunities with, you know, in general management. So BSSE is something that's influenced a lot of my time at HBS. So I hope to apply those theories in a company in India going forward.
Tracy Kim Horn: Well, we hope to have you back in a couple of years telling us not about your research paper, but actually about the work that you've done. Thank you both so much for joining me today.
Aishwarya Ramakrishnan: Thank you.
Neha Rambhia: Thank you.
Tracy Kim Horn: The Disruptive Voice is a production of the Forum for Growth and Innovation, a research project at the Harvard Business School guided by Professor Clay Christensen, the Kim B. Clark Professor of Business Administration. Follow us on medium at HBS FGI.