Traditional yet Trendy, Marketing and branding insights from Paper Boat

August 2013, Hector Beverages forayed into the Indian juices and beverage market, dominated largely by MNC’s Coke and Pepsi, but with difference. It introduced two common irresistible Indian flavors ~ Aamras and Jaljeera, under the brand name of Paper Boat.  From a starry-eyed start up, Hector beverages has gained lots of fans and market. By clever dip into childhood memories of most average Indians, positioning itself as a health alternative, Paper Boat as captured the young and young-has been alike. How did they achieve this?

For a start, the brand name is unique and easy to remember. The name evokes the nostalgic days when one cajoled paper boats to sail through the rivulets or rain pods, with the feet kissing the wet earth and head covered by nothing more than a piece of cloth. The name ‘Paper Boat’ automatically recalls Childhood memories that subconsciously lead the customer to a ‘happier place’ or a ‘happier time’. Even though the brand name does not synch with the product category or the beverages industry, Paper Boat manages to create a Pleasant Experience with its unique combination of ‘Drinks and Memories’.

Second the product itself. As most of the ingredients are naturally available spices and condiments. It helps differentiate itself from the crowded aerated soft drinks with loads of sugar.  By going to back to “desi” roots and sticking onto natural bandwagon, Paper boat could very effectively play the health card. As the products can be used as starter drinks or post-meal digestives, “time of the day” were not a challenge. The flavors one sweet and other slat helped it to reach out to diabetic capital of the world and others at same time. Contrasting flavors found the plate of people with various palates. By keeping the taste closer to mom’s recipe the product endeared itself to ipad and no-pad generations.

Packaging also played an important role in accelerating sales of Paper Boat. With a unique and extremely appealing Packaging with sophisticated ‘matt finish’, the pack had a dignified and yet interesting look. The dynamically vibrant colors, cute doodles at the bottom and the Call out at the back recreates the Magic moments associated with every flavor of the drink served.

Most traditional drinks have bitten dust not because they got their milieu wrong, but the pricing. In a market dominated by Big sumo’s capable of quashing out competition through cheap product supported by heavy marketing and distribution, Paper boat got two things right. Its pricing of less than 50 cents (US) for a 250ml, and $2 for 1000ml, Hector beverages has cleverly positioned Paper Boat as a high quality and healthy beverage by setting competitive pricing.

Paper boat adopted a new style when it comes to distribution. It not only got shelf space for itself in local kirana stores to push the product into the market but also was willing to go that extra mile, well in this case a thousand miles perhaps. Yes, Paper Boats were served at around 10000 feet above sea level to the IndiGo Airline Passengers. Paper Boat also realized the need to as an aspirational brand and present in aspirational platforms like Coffee Shops like Barista and Star hotels like Trident etc.

For a company short on dollars, Hector beverages, cleverly used facebook posts to drive the product. With theme around bringing back childhood memories, connecting Paper Boat was easy. As bloggers and reviewers relived their first experiences of the two flavors with Paper Boats, taste buds were on fire and word of mouth raging.

It is a great story so far for a one year old. What lies ahead for Hector beverages?. What next steps?  To address these questions, I looked at similar upstarts in other markets. While there are many examples of traditional beers (most recent being Utah based beer brands taking on Budweiser), Adam Pritchard “Pomegreat” serves as a good example, what happens to a health brand that spread itself thin.  Launched in 2004,  it managed to get shelf space in Sainsbury and that is when the sales kicked off. It quickly moved from a £600,000 turnover company in 2005, to £15m in 2007. But the economic turndown in 2009 affected the company’s sourcing and revenue was reduced by over 20%. Recently acquired by Simple Great Drinks Company it is being rebranded as Simply Great.

The best Hector beverages must do is to imitate, a very successful brand in beverage market. Red Bull has built itself as a beverage brand by being frugal and focusing on functionality. With no significant investment in mass-marketing campaigns and endorsements, Red Bull marketing is largely community and WOM led. It carefully build customers for life, by allowing them to creatively interact with the brand, build their own “wings”. With no major investment in print media, banners or bill boards, promotions are amusement oriented. Its branding is deliberately “underground”, so that it can appeal to young people.  One size and one packaging has done wonders for Red Bull. Paper boat can become Beverage Partners for Events like Marathons or Run For a Cause etc. or even sport tournaments like IPL or the Kabaddi League.

To be successful and go international, Hector must also do some things Red Bull has not done. Since the Jaljeeras and Amras are all “utility” drinks, unlike Red Bull, Hector must focus on campaigns to reach out to convenience stores, Modern trade outlets (petrol stations, Pizza chains, Food courts at SEZs and IT Parks), Goli Vada pav (and other complementing players).  Product expansion into several “limbo”, “aam”, “seethapal” extensions is a must. Of the $6 Billion Indian soft drink industry (fuzzy drinks, juices, packaged water, 660 million cases by volume, packaged juices is just about 87 million cases. Of the remaining million cases, lemon segment is about 50%. Hector can use its increasing fan base to its benefits and come up with crowd sourcing ideas where they can set up an online social media campaign of people sharing their ideas and thoughts for Paper Boat. They must pursue “What’s your paper Boat story?” or “Introduce us to a long lost Indian flavour” strategy.

Hector beverage can also play a strategy that is more by accident than design. Paper Boats have found themselves into the shelves and kitchens of restaurants to be used for making Mocktails. Paper Boat Golgappe Mojto and Jaljeera Ice Tea are served in many restaurants. Can Hector exploit partners to increase revenue, popularity and visibility if the drinks are named after PaperBoat, just like McDonald’s Oreo Shake. That is worth pursuing.

Sai Gopika Ranganathan

Junior Consultant – Marketing

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Start-up success: whom not to hire

One of the common characteristic of most successful companies is the existence of a strong well knitted core team. The core team is the fulcrum around which the organizational learning, experience and knowledge gets ingrained. It is the team that ensures how ownership, initiative, overall organizational culture of the unit is defined and sustained over period. There are many articles written about what kinds of people to spot and recruit for core team. Some generic characteristics that must be avoided are:

Expiry date “selfie”.
They join a start-up not with the interest of gaining experience and be valuable, but join for gaining those stars that are missing on their jackets. Their primary objective of joining a start-up is to gain relevant experience required for completing a professional certification or gain employability in a newer field. Many of them have a definitive expiry date to work with, often coinciding with the professional bodies requirement. While they continue to hold their tasks and deliver results, they would abhor “ownership” and “leadership”. Once the expiry dates near, these associates may find issues with basic infrastructure or working culture and seek newer pastures.

Low integrity “partner”
Many a start-up break because the partners had their own agenda’s. Some would siphon off the revenues, overbill for expenses or spend on booze in Irish Pubs when their official commitments show they are at Down 0. Inflated travel bills, and oversized Pizza parties are early indicators of where the wind is tailing.

Dough only “Scamper”
While salary and perks are important, core team members like to take the challenge of building and sustaining a dream. Scampers may impress at interviews with their middle-class fire in the belly talk, but would dash for a few green ducks.

Sapping “Digger”
Most start-up trust their associates to contribute their might and may not have any formal review and monitor mechanisms. That is where some associates discover opportunities to run errands and businesses on side. Some join start-up to engage and formalize their life events like marriage and divorce. It is not uncommon to see an associate availing leaves for a one month marriage and on return promptly exiting the start-up.

Entrepreneurs building a successful start-up must consider what Dr Kurian, Father of Milk revolution in India, said of spotting long term associates. His mantra was simple, he would walk with them in the corridors of Amul Factory at Anand. He would spot who had picked up the trash he has wantonly thrown into a dust bin. Otherwise, he would accidently take the associate to an employee who has come with crumpled hair and attire and watch how the employee is addressed and motivated to come with better dress sense. His reasoning, love for a place, dignity of labour, sense of ownership and belongingness were all there to witness in that simple act.

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Jack at home but king abroad: How economy brands position as premium on international markets!!!!

From shy to outspoken, gloomy to vibrant, precocious to spontaneous, personality change is not only adopted by humans, brands also morph to a new environment. Be it Peroni’s success story in UK, Skoda Fabia’s repositioning in UK or Netflix in USA, companies have successfully pursued a strategy of premium positioning to command better margins and higher image from home markets. How do companies exploit this strategy?.

For Skoda, originally a Czech company and later acquired by Volkswagen what really worked was their promotional mix of TV and print campaign backed by direct mailings to the existing Skoda customers in UK. By imbibing the Volkswagen model, they were able to change the customer’s perception about Skoda from a “cheap” car to “value for money” car. Skoda’s desperation for rebranding was so extreme that they went as far as using “The Fabia is a car so good that you won’t believe it’s a Skoda”slogan in their ad campaign.Well, the desperation finally paid off because the campaign increased sales of Fabia as well as another model named Octavia by 29% when compared to previous year.

Peroni’s story is little different than that of Skoda’s. Peroni’s aid of “Golden Italian Days” in UK was the real spark behind the success. It gave the UK customers a feel of Italy by depicting the images of Italy of sixties. By invoking nostalgic feelings, Peroni was able to charge premium price for its beer.Netflix, has used “Playful Kiss” drama to attract viewers globally. Burberry of London, for Spanish markets created a premium positioning by adopting a strong classic element and improved fabric and other materials.

The strategy works when the customers are richer, but not well informed. Cultures which associate higher value to tradition, and heritage are the market where the strategy works more effectively, especially for hedonic products. Markets with colonial connections work best for some home brands and can actually lead to international success. British Dyson Vacuum cleaner exploited its British inventor origin and Britain connection to make an entry into Malaysian market and successfully compete with Electrolux and other brands. A grand old strategy perfected by many economy brands like Vichy, Thalion, Lancome in most part of Africa and Asian markets. 

The strategy also works when there is a culture wave. Take for example, Korean beauty brands which have discovered great internationalization opportunity in the wake of Gangnam Style shakes and hallyu. Korean companies with French sounding names like Mamonde, Laxara, Laneige have found a niche in China’s market by targeting people who like Korean Soap Opera or younger hipsters who croon to K-pop numbers.  What is common for all these brands is they have successfully used a local positioning global brand strategy, there by their marketing communication can reflect the local hues and required flavor. 

Ajita Poudel, Young Dolphin Fellow

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The relevance of B2B branding

Is branding required in the B2B context? In the B2C context companies like Coca-cola and Pepsi persuaded consumers that sugar water with some acids and coloring was better than water, and the in-thing to keep sipping all the time. If branding worked for them, it must have some relevance in the B2B context as well. At the same time, surveys have shown that most industrial brands are just labels and do not really have strong correlation with the qualitative attributes of the product.
Studies show that Business buyers are not necessarily value driven, but individuals in the Decision making units who aim to reduce risk and simplify evaluation by going in for brands that they resonate with. B2B decisions entail personal risk to the Decision maker. If things go wrong, their credentials in the company are at stake, and they could even suffer job loss. Hence a B2B brand not only needs to demonstrate business values, but also personal values. Hence the marketing message must have a rational as well as an emotive appeal. In fact, very few industrial buyers will change suppliers for small price differences. They would rather buy peace of mind. They may rationalize externally, quoting price, performance and features as important. But if we dig deep, they are actually buying trust, comfort. For example, when a corporate signs up with Taj Group of hotels, the decision makers in the administration department have a comfort that their top management will be taken care of at the hotels where they stay, and that there will be no reason for complaint.
Brands help as a means of communication of benefits and value. They help to set expectation on the product or service. The SERVICE QUALITY MODEL is of great importance here. Perceived quality of a branded product is higher than an unbranded product. In the B2B context, a brand achieves greater information efficiency and risk reduction, while in the B2C context there may be more of image value benefits.
However, B2B Branding approach needs to be holistic. There are two broad principles B2B must adhere to. Firstly, alignment. It has to message the right values to the customer as well as incorporate internal values and needs to be marketed within the organization, so that all are in sync. The spirit of the brand has to come across all functions in an organization and very importantly in marketing and sales functions. Consistent and effective marketing to build the brand on functional (like features, benefits), economic (price, time etc) and emotional parameters (like trust, peace of mind, solidity) has to happen.
Secondly, consistency. Often companies talk past their customers, and there is divergence between the core messages companies communicate and the brand characteristics that customers value the most. While companies may project a social responsibility angle, customers may be valuing efficiency or reliability. Hence a disciplined communication of values and messages is important.
When industrial companies benefit from business to business branding, it is often by accident rather than design. However, with a little extra effort and cost, the effect could be much improved loyalty, greater profitability and higher valuation of the firm. Finally, the most successful B2B brands have always kept it simple and stupid (KISS).

RM Sanjay, Director(Sales & Mktg Practice)

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Making your sales effective!!!

Many a times, the sales of a firm  starts off from the founder’s personal contacts and then expands into newer territories. As firms grow and expand, there is  need to diversify and derisk customer base, both in terms of revenue from a particular segment and percentage of contribution from a the top few customers. However, most companies find this desired state alluding, for many reasons. Sales structure, team reporting, carving of markets and sales measurements are the major roadblocks that hold back the company’s sales achievement. Many firms do not get the required ROI despite hiring more direct sales people, training them, and arming them with heavy technology & gadgets.  

How do you get your sales engine firing and delivering the expected results? Start with the basics of your sales strategy, what is the product or service, what would be the best channel to sell, is push or pull the right approach, commercial policies etc. Once your sales strategy is clear, evaluate the structure to see whether it is aligned to deliver the results. Do not just follow the herd by putting more direct costly sales resources, often a good combination of low cost backend and high touch direct sales force is not only useful but cost effective.  Identify systems that cane be deployed without much hoopla!. You do not need Bazooka’s to kill a fly. Do not buy overkill sales systems if you can keep your process simple and stupid.  Importantly, your systems must be able to allocate activities to resources, make them own and drive outcomes. Systems that require less monitoring and less control always work best. Keep away the burecarutic multi-report systems, they are just too much of file pushing, but no juice at the end of tunnel.  

The size and structure of the sales team is also important. The right account and territory assignments, the type of sales resources that you have, their effectiveness, the number of each type of resource, coverage of territory are issues to be kept in mind here.  Most companies make a cardinal mistake of allocating geographic regions interspersed with named accounts. This is a classical “falling between two stools” folly that one must avoid. Follow a simple principle – either geographic or account wise dedication, and stick to it for some time. Intelligent sales managers often rotate sales resources between the geographies to break the monotony and avoid the “familiarity breeds contempt” effect.

Most crucial, but often got wrong, is the issue of talent. Account mining is different from opening, hence characteristics of KAM is different from hunter. Having the right mix of hunters and harvesters is key to effective sales management.  Recruitment and selection of the right candidates, putting in place appropriate development and training plans for their sustained success is also a key component. There also has to be clarity on the sales culture that one needs to build and strengthen. If you want to create a group of interdependent collaborative sales teams, ensure the mining and acquisitions teams appreciate this aspect and are culturally attuned to this joint outcomes. Do not fall into the trap of aligning culture using incentives, it seldom works, especially in sales.  When high standards, clarity, transparency, teamwork and commitment are part of the culture and are followed diligently and imbibed in our systems, success is closer then imagined.

Finally sales can be only effective if it is fortified as a continuous and learning system. Systems to gather competitive intelligence, sales support, performance management, rewards & recognition and IT systems such as CRM, KM, BI etc., are all typical support systems that need to be aligned. Hence, building a high performance sales organization is not just about hiring more sales people, or using technology. It is about putting in place all the inter-dependant components in the system that will fire in unison. While the above list is by no means exhaustive, they are just some of the inter-dependencies that need to be built and aligned to have a reliable, consistent and effective sales organization.

 R. M Sanjay, Director (Sales and Marketing Practice)

 

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Stemming the flow of tech start ups???

With new government in town, industry associations and clubs are vigorously raising the ante on many issues of significance to technology start ups. The most recent one being that of Indian origin tech start up’s of Indian origin registering in USA or Singapore or other markets. Are Indian start ups reaching out to these countries because they are endowed with quality research-intensive universities and institutes and availability of highly skilled manpower?. Or it the “country of origin” effect that tilts the scale in favour of developed countries, especially in enterprise application space?. Or is it the special tax exemptions, tax holidays, export and import based incentives, losses against future profits and accelerated capital depreciation as claimed by VC clubs and industry associations?. Is it the exuberating wait of two weeks to register a firm (which is a very insignificant activity considering the host of activities and challenges the start up has to face later) compared to two hours that tilts the decision?. Are these good enough reasons for a product start up to move lock stock and barrel from India and move to these far away shores. Proponents of global trade and one with knowledge of how VC’s cohorts work recognize this has got nothing to do the efficiencies of these regional market but more with how perception of valuation and network work in their favour.
Industry groups and clubs have are recommending government to create a large corpus and invest along with VC’s in the start up, a very laudable “Le Las Vegas Model”. Sherlock would have wanted industry leaders and association representatives who probably had a ring side view of the lacunae and lopsided policies seek more elementary logic. What do Indian technology start ups suffer from, access to high quality infrastructure or access to funds or access to scale up?.
Infrastructure policies including SEZ (often in far flung areas from CBD) can be great vehicle to attract service companies, they have seldom looked at access to high quality infrastructure meeting the requirements of small teams. In many national level institutes, while there is large tracts of space available, ease of access for not so well connected entrepreneur is a challenge. Unscientific spread of costly tax payer money into duplicate incubation facilities has impacted scale of available infrastructure. As often many successful start up’s find their relative flats in Residency Road or small office in Basavanagudi coming to their rescue. Fortunately, infrastructure is a surmountable problem and does not limit the innovative output of technology start up’s, at least not the software products.
On the access to funds front, there are many prizes and awards available for technology start ups, a back of the envelope calculations indicate close to 1400 Crores across several Central and state government schemes. Many are lost in the myriad of departmental allocations and silos, and thus unable to support world class interdisciplinary technology start ups. There are also collateral free schemes like CGSTME which are supposed to fill in the viability gap for an early start up without encumbering the entrepreneur. Unfortunately, most CGSTME loans in reality require collateral and the limit of Rs 1 Crore may not be enough to support the start up beyond 9 months. Another reality check, most bankers would be happy to allocate CGSTME loans only if a VC has already blessed the start up with some investment!. Financial additionality (FA) referring to availability of funds to start ups that would not have been available in the absence of the scheme needs a relook. Many of member lending institutions (MLI) of the scheme including SBI, Canara Bank or RRB have disbursed less that 40% of their budgeted allocations. Over 50% of the disbursement of the funds is for less than 2 lakhs!. Imagine building world class software products with such a large sum. Fortunately, most find raising money from wife, extended family or friends easier to start and hope they waddle trough service revenues to sustain their technology product dream.
Even when technology start ups survive the harsh infrastructure and funding conditions, what really breaks the bone of these businesses is the limits to scale. In most of these “start up destinations”, a major push for domestic technology companies comes from their respective government. E-governance, defence and education sectors are where their respective government not only set-aside markets for their domestic technology start ups, but actively protect this turf from any encroachment. The generous act of their governments helps these companies to assiduously gain scale and build robust products. These government also extensively use their export-import mechanisms including lending institutions to actively promote these technologies in other countries. Many such generous acts carry Singapore or USA products into Middle East or African markets. Imagine what would happen if there are 10-15 domestic technology products that could be used in accelerated power programme or public health or government distribution, all enjoying an adoption of 3 -20 million users per year. That scale is sure to salivate whichever coast VC. Imagine if 5-10 Tally’s could be taught at the government colleges and the exalted institutes of excellence, all gaining a user base of 5 Million per year. If Microsoft has found more enthusiastic raiders in India, it is not for any other reason, but its marketing muscle and reach. Do you wish the stems of technology start ups grow stronger and emerge as trunks, then Watson, it is very elementary support them to grow. Give them space, nurture them and prune them to spread. Very elementary.

Dr TR Madan Mohan

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Rename & Rebrand for Success!

A good book always needs a catchy title to get the attention of roaming eyes of onlooker and induce him to buy and convert him to a reader. At the same time the name should also be relevant to the plot. Not all books can have “no branding” strategy as successfully exploited by author Naomi Klein. No name strategy is unlikely to fly if you are a company or product. Legal and differentiation require one to embrace a name.  Like books, the name of a company should also be easy to recall and must create an interest in the minds of the people. Even in the ancient era, Kings named and also created symbols for their Kingdoms by which people recognized them and identified them for generations.

In this Start-Up era companies have come up with the most creative names which are easily recognizable. The etymology of names for a business makes the impact in the minds of the customers. Most common and famous etymologies used in names recently are the removal of vowels (Flickr, Quikr, Scribd etc.), use of most common words with unique suffixes (Spotify, Mashable etc.).  There are many famous companies which have become extremely popular only when they renamed themselves. Few examples would be, Andersen Consulting which is now popularly known as Accenture, Lucky and Goldstar which is now known worldwide as LG, Tokyo Telecommunications Engineering Corporation is now the famous SONY, Blue Ribbon Sports which later became the one of leaders in the sports wear industry – Adidas.

The most common reasons why most companies opt for a name change are

  • Renaming dictated by merger
  • Name associated with failures
  • Name not appropriate for NEW world markets when it comes to GLOBALIZATION.
  • Difficult to remember
  • Name changes according to Vaastu and Feng Shui
  • Name is outdated in terminology  : Name has to appeal to a NEW & more affluent market
  • Name has negative connotations in the new markets they are serving
  • Name need to reposition & new the corporate brand
  • Name is against cultural norms in different states
  • Name is geographically restrictive
  • Name is limiting in range of operations
  • Name no longer fits in the businesses they are in
  • Name is in trademark conflict
  • Name is misleading to customers
  • Difficult to pronounce
  • Name is Too long

The various steps to be followed in renaming a company is 1)Define the purpose for renaming 2)List out various names according to the purpose 3) Shortlisting of the names 4)Select a winner 5) Validate the name with existing companies and domains 6) Repeat from Step 3 if validation fails.

Think both creatively and strategically when naming/renaming a company. Cool sounding names don’t always become a winner. While selecting the name, firstly the company should measure the emotional value or sensitiveness of the existing name in the minds of the customer. Secondly, check for compatibility with the product or service provided by the company and whether a customer will be able to relate the company to a product or service when he/she hears the name. Thirdly follow the basic naming rules like keep it short, unique, easily recallable and easy to pronounce. Renaming a company can open up new opportunities in the market for the company. It’s like coming in for a second innings but only to play it better with the proper strategy.

Kaarthik Shakthi R

Junior Consultant – Marketing

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OEMs/Dealers; Get Your Basics Right!

While aftermarket revenues could contribute an upward 30-50% of existing revenues, many OEMs are not prepared to gain from it. Most OEMs fail to meet their service level agreement which subsequently leads to decrease in customer loyalty and negative word of mouth. Why does this happen? It is simply because they do not manage their weakest link in the chain, dealers.

The major reasons why dealers fail to deliver an effective after-market service. One is the lack of agency and incentive alignment. Dealers find managing post-sale operations cumbersome and are just happy to skim the revenue from fresh sales only. Many dealers lack the necessary skilled resources, inventory but just gloss over service commitment. Secondly, Lack of comprehensive supply chain management, and ineffective SOPs from OEMs compound the matter further. So it is quite common to see customers waiting for a free vehicle pick up promised by OEM and also an unreachable dealer service desk. Customers planning to drop their vehicles at dealer showrooms and catch their Monday morning work schedule, beware! You may end up waiting in the lobby for hours. Dealers of many world class OEMs are woefully short of qualified human resources. Spare parts unavailability or delay in shipping spare parts is a common problem. Lo, that is not the end of agony, even after getting the vehicle well past the promised delivery date; customer must be prepared to see recurrence of earlier complaints or some new larger issue surfacing after the service.

What is the way out for OEMs? Incentivize service and parts business for your dealer. Invest in basic training and evaluation of dealer staff across after-cycle process. Invest in your own resources not just at sales cycle but at after-service cycle also. Manage parts availability and protect grey market penetration.

If you are a dealer, bring down the walls within your organization. Too many departments working at loggerhead with each other does not help you. Ensure information flow & communication happens seamlessly and data visibility is high. Adopt SOPs as they help you to know the productivity and revenue generation opportunities you may be currently missing.  Training and employee engagement is very crucial to effectively gain cost advantage. Drivers, technicians, bay engineers must be incentivized for ownership, initiative and quality of outcome.

Banu Priya P
Junior Consultant – Marketing

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GOCO pill for efficient running of government hospitals

With over 12,760 hospitals and over 24,000 primary health care centers, public health care forms the backbone of India’s health care services. However, many studies on utilization of health care facilities indicate that citizens prefer private health care over state run public hospitals for the cost and quality of services provided. Research studies indicate that over 80% of citizens prefer to use private sector facilities for minor ailments, even when higher quality doctors are available at public hospitals. Studies also highlight 78% of household prefers to go to private sector to private sector for their cleanliness and professional handling of patients. Several studies indicate while many state run hospitals are staffed with better quality and more experienced doctors, it is the infrastructure and service issues that turn many patients away. Dismal sanitary conditions, long waiting times, lack of basic HMIS, high infection rates, and substantial clinical care are some key issues that force the public health care facilities out of choice set. The other significant factor is rude behavior of staff and functioning of the hospitals. While cost of treatment in government hospitals may be free, bribery, insensitive behavior, limited working hours dissuade the use of public health care systems. CAG audit reports also point out to inefficient use of public funds. Many hospitals had Digital X-Ray, Pet scan machines lying for years in open and rusted, as they could not hire competent staff to man the job.  One eminent government administrator mulled about 40% of funds go unutilized and about 30% of the instruments including OT end up as scrap as preventive maintenance is given a go by. Political interventions, inbreeding and bureaucracy precipitate inefficiency and apathy.

Several state governments in India have recognized the need to bring in efficiency, affordability and higher reach of state health care system. States of Karnataka, Gujarat, Kerala have introduced novel PPP mechanisms, including insurance schemes to cover the economically weaker sections. While exceptions like Jayadeva Hospital, Bangalore and Rajiv Gandhi Cancer Research Institute, New Delhi may exist, many suffer from poor infrastructure, lack of motivated staff, poor sanitation and hygiene issues. State governments have brought in concrete steps to address service quality and implement continuous quality improvements. While insurance and other related PPP interventions have certainly improved the access to better quality health care to underprivileged population. However, the fundamental issue with improving the hygiene and service quality of government run hospitals has not been addressed. Governance, management of efficiency and effective utilization of resources has been given a go by.

Should state governments adopt a proven PPP approach used in military complexes to efficiently run the hospitals. Government Owned Contractor Operated (GOCO) model is a proven model where industrial, academic and non-profit organizations manage government national labs.  A GOCO model enables each partner to perform relevant duties. The government subsidizes the healthcare mission, increases reach and use of affordable healthcare, while private sector implements the mission and manages using best business practices.  Several state governments, Karnataka, TN, J&K, Maharashtra have tried limited GOCO approach by letting 3rd party private players run and manage the diagnostic facilities. Private firms (install) or manage the machinery, maintain and offer the services at prescribed government rates to reach out across various segments. Below poverty line (BPL) families benefit from affordable diagnostic services and public funds are effectively used to primarily serve the healthcare mission and generate revenues.

While this limited outsourcing has brought in technical efficiency in only one department, overall management and effectiveness need further exploration. State governments must explore complete GOCO approach to allow private partner to run the hospital efficiently. Many challenges like insufficient doctors, inability to attract specialists, lack of appropriate rewards and recognition systems to motivate employees, that currently affect state run hospitals to achieve greater heights can be rightly addressed by GOCO partner. The GOCO partner a trust or an academic institution or an industry partner can bring managerial efficiency and high quality delivery focus, while state governments can successfully pursue appropriate investment and high impact mission goals.

However, switching over to the GOCO model is not going to be easy. State governments need strong political will, transparent and efficient process to identify the right partners and importantly the right structure and process to manage the GOCO contract. Creation of an independent board under the chairmanship of district administration with members consisting of prominent citizens, elected representatives, members of Medical council, GOCO partner is a must.  GOCO operations must also be aligned with the health mission using performance frameworks such as results based framework (RBM).

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Privatization of national scientific organizations

Scientific organizations are a crucial part of national innovation system (NIS). They create a pool of scientific resources who are employed in creating relevant scientific innovations for the nations. These research organizations help in technological advancement of the industry by transferring lab-proven technologies to commercialization. They may be engaged in development of civilian technologies such as agriculture, Food, or IT or defence and related technologies.  In developing countries context, these research labs help in accessing and developing trade restricted technologies. They also help increase the nation’s bargaining power at international technology negotiation tables. However, one fundamental flaw with these organizations is that they are designed to fail and falter in long term. Their structures are too bureaucratic, they have low flexibility to hire and disengage talent as the need be, have administrative challenges in matching salary and other benefits to attract the best minds, contribution and engagement with industry is arms-length and have very few sources of revenue generation. Most of the organizations, even those involved in applied science and technology areas, become too dependent on federal grants to survive.

In this background, governments across the world are trying various approaches including privatization to bring in competitiveness and sustainability into these organizations. Council of Scientific and Industrial Research (CSIR) has reduced its total number of labs from 42 to 38. The federal government defence lab establishment, DRDO is leveraging the business expertise of the private sector by partnering with FICCI to market 40 of its most promising dual-use technologies. 26 of its 50 laboratories are participating in the venture, and the DRDO intends to consolidate and reduce its number of 50 laboratories to manageable less than 10 labs.  Governments have also pursued complete divestment of R&D labs, for example Centre for development of Telematics (C-DOT) has been acquired by Alcatel.

Privatization enables organizations stemmed in the “science and commercialization push” regime of the past to embrace and deliver the “demand pull” of business engagement with markets and customers today. Privatization can yield several benefits. The elimination of bureaucracy allows selective hiring and retaining of manpower, raising overall productivity.  PPPs also enable cost-sharing, while preserving the expertise of technology transfer processes and commercialization techniques. These are areas where the private sector is likely to possess a strategic advantage, both in experience and business acumen.

What are the necessary elements of privatization that set the tone for success? The experiences of other nations in R&D partnerships offer valuable insights. The United Kingdom has been especially successful in privatization of its government-owned R&D entities. Through a structured approach, identified labs are driven to satisfy a set of defined goals, typically consisting of cost recovery through sale of products or services, cost reductions and meeting task deadlines within allocated budgets.  Labs are exposed to participating in the market-based tendering process and are gradually moved away from their association with the government. Post privatization, labs continued to receive government orders and obtain funding through statutory government processes for a limited period.  The United States has approached privatization of public research labs through direct private participation in R&D consortiums, or by adopting a Government Owned Contractor Operated (GOCO) model. European nations such as Norway, Sweden and Finland have pursued some hybrid models of privatization, mostly preserving government ownership but with significant private sector policy adoptions.

Given this diversity in the approach to privatization, what model has works best for countries like India?. While there are no informed analysis on the approaches the outcomes yet, successes and failures of privatization is salient upon: (1) a clear objective to facilitate the building of necessary capital, after evaluating market potential (2) creation of a collaborative environment conducive to the sharing of technical know-how (3) attraction of the greatest minds with top class talent across the country (4) a smooth technology transfer process across establishments to enable successful commercialization of a product or proprietary knowledge. Certainly, there is no ‘cookie cutter’ approach to be applied to all R&D facilities owned by the government. Each entity should be evaluated for its contribution to the technology pool of the country, and more importantly, assessed on whether conversion to the private sector will possibly make the entity more productive and efficient.  An additional factor to consider is the uniqueness of the lab in terms of human resources, processes and infrastructure. A government R&D lab with unique research resources and facilities is likely to have a network of research relationships that extends beyond government agencies. Increasing the competitiveness of the R&D sector will determine whether India can sustain its S&T advantages over time, while catering to our national interests of security and economic development.

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