Max-ing the disruption curve

“The key,” says Deepak Mehrotra, CEO of mobile phone brand Micromax, “is to be ahead of the curve at the point of disruption.”

Mehrotra should know. In less than five years, his company has moved from provider of cheap alternatives to smuggled Chinese mobile handsets, to the country’s largest Indian-owned mobile phone brand and the 12th largest in the world. And disruption has been its key success driver.

From disrupting the mobile phone market with the launch of dual-SIM handsets, to disrupting the pricing game with its aggressively-priced offerings (in the entry-level category, Micromax has a phone at every price point, spaced at Rs 100 intervals) to disruptive branding by riding piggyback on India’s passion, cricket), Micromax has managed to change the game every time, by writing its own rules.

Or perhaps one should say ‘had’ managed. 2011-12 was not a good year for the Indian device maker. Micromax lost its dominance in the dual-SIM phone segment, a category it had created, to multinational giants Nokia and Samsung. According to Cyber Media Research, Micromax’s share in the dual-SIM category dived from a 13 per cent market share in 2010 to 8 per cent in 2011.

Overall revenues were down 14 per cent from Rs 2,289 crore in 2010-11 to Rs 1,978 crore in 2011-12. In comparison, Samsung’s revenues were up 38 per cent while rival Indian handset maker, Karbonn, notched up 32 per cent growth during the same period.

But that phase was not a downturn, just a breather, while the company caught up with its own headlong growth, insists Mehrotra. And now, it is back doing what it does best — disrupting the market. From launching tablets to foraying into the TV segment to automating the after sales network, Mehrotra has been on overdrive the past few months. The target is set — to make Micromax a $1-billion revenue company by 2014.

Mehrotra believes that the journey has just started for Micromax. “For a company which started just four years back we have done fairly well. We are a clear number three in the very fiercely competitive category of mobile devices. The brand is fairly well recognised,” he says, adding that the company has set sights on gaining a double-digit market share by December, compared with about 8 per cent now.

Address local needs

To achieve the target, the device maker has embarked on a multi-pronged gameplan. The first step is to move up the value chain from feature phones to smartphones, a market currently dominated by the global brands. The company has set up a business unit with a separate distribution channel for smartphones.

“The smartphone revolution is waiting to happen. My gameplan is to ensure that we are ahead of the curve. If a smartphone is possible at Rs 5,000 then I should make it happen three quarters ahead of what others would offer,” Mehrotra says.

The big bet, of course, is on pricing. For instance, the Micromax A90, with a super amoled screen and 8 megapixel camera, is priced under Rs 13,000. A similar phone from global brands would cost upwards of Rs 35,000.

“Every piece of A90 gets lapped up in 24 hours. If someone has this device, the other guy who has that expensive one wonders why am I paying so much,” says the Micromax chief.

Market analysts say that in addition to the pricing game Micromax should address local needs rather than launching me-too products. Micromax’s initial success was because it came up with innovative solutions to local problems.

For example, its initial phones with 40-hour battery became a huge hit in the rural areas, where power is a major problem. “By not focusing on local innovation any more they are just competing on price with same features like other android phones in the market,” says Kunal Bajaj, an independent telecom analyst.

Mehrotra insists that innovation is still the growth engine. He explains that Micromax is able to keep the price low because its smartphones do not sport all the features that are found in an Apple iPhone or a Samsung Galaxy.

Mehrotra says it’s a conscious decision to offer phones with specific features based on the company’s understanding of consumer usage.

Opening up a market

“Devices priced at Rs 35,000 want to be everything to everybody but our research shows that no one uses more than 30 per cent of the phone’s capabilities. If I can give you a 5-inch device with the best-in- class features that you need, at a crazy price, any kid going to college will want to have it. It opens up a different market,” he says.

The company is making sure that it changes models every 10 months to meet the replacement cycle. Micromax is also moving beyond Indian borders. It is now present in 11 countries through a subsidiary based in Dubai which contributed 15 per cent of the overall revenues last year.

Alok Shende, Analyst at Ascentius Consulting, reckons that Micromax has been a disruptive player and has got its act right. “It takes guts to take on the likes of Nokia and Samsung. There’s going to be a whole shift to smartphones and this shift will not happen with people who can spend Rs 50,000 for an iPhone,” says Shende.

The device maker is following a similar ploy in the tablet segment. A late entrant in this space, Micromax is using the education and entertainment platforms to cross-sell its tablets.

Micromax has partnered with players such as Pearson and Everonn to make available relevant content for students. This also gives Micromax the chance to take a piece of the $2-billion education industry.

Entertainment, gaming

Partnerships with BigFlix, Zenga and Indiagames have been firmed up to provide its tablet-users entertainment and gaming features. Although it is still early days, the strategy seems to be paying off as Micromax cornered top market share in the tablet space during the second quarter this year.

The big move, however, came only last month when the Gurgaon-based firm forayed into the TV market. “We want to be present across all forms of screens, starting from a 1.4-inch low-end phone to a 5-inch smartphone to a 10-inch tablet and a 55-inch LED television,” says Mehrotra.

Like in the phone business, here too Micromax is playing the pricing game. Its top-end 55 inch, 3D, full HD Smart TV is priced at Rs 1.29 lakh, about 50 per cent less than products from global brands.

Beyond pricing, the company has tried to address local user behaviour. For example, one of big challenges with a thin LED TV is the sound quality, as Indian consumers are used to loud volumes.

Micromax has tried to get around the problem by creating a separate sound bar. It has set up a 1 lakh sq ft manufacturing facility spread over 5 acres, with a production capacity of 2,000 LED TV units per day at Rudrapur, Uttarakhand. The facility will also manufacture the tablets. Simultaneously, Micromax is also shoring up its offering for the low- end phone segment, where the big volumes come from.

All of last year, it didn’t have a product under Rs 1,400, which gave the likes of Nokia and other Indian brands a free run. Two quarters ago, Micromax launched three devices under Rs 1,200, which it claims have become a big draw.

The company is tying up all of this at the back-end by automating its after-sales support. Lack of efficient after-sales support was a big problem for the company. Mehrotra says he has addressed the issue over the last six months. “My median of servicing a complaint used to be as high as seven days last year. By May, we brought it down to three days and by July to two days. Now our effort is to make sure to address 80 per cent of complaints on the same day,” says Mehrotra.

Service centres

Micromax now has 700 service centres and is looking to add another 700 through the hub-and-spoke model. The company has deployed a system which enables it to know where its devices are being sold, so it can move the support resources into those areas.

But will this pay off? Mehrotra, who cut his teeth in Bharti Airtel as its operations director, believes he can pull it off for Micromax . “I joined Bharti when it used to be a five-circle operation. I have seen it build its scale to be a pan-India player. Micromax is another opportunity to create something really big,” he says.

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