India Economy

Cool, by design

Shyam Pattabhiram | Updated on August 03, 2013 Published on August 03, 2013

Companies such as Apple have managed to capture and retain the style quotient.

While Indian companies have had a cost advantage that has been honed over decades, foreign players have a design advantage.



I am in London this week after a long time. I won’t be clichéd by talking about how clean the city is, but what I do want to discuss is the dominance of ‘style’ that I notice all around me. This trend can possibly be observed in most modern cities of the world. I wonder, if there is something that we can learn from this trend in terms of what is likely to happen over time in India and use it to extrapolate the kind of industries and companies that are likely to prosper in the decades to come.

By ‘style’, I mean the importance of design, both internal functioning and external appearance.

Cost to style

If you think about it, most of the leading brands in the world have thrived by being purveyors of style. This is particularly true when it comes to consumer products. Even technology-oriented companies such as Apple, Google, Facebook and Bose — which were once underdogs, are popular today because they managed to capture and retain the style quotient by keeping their products/services ‘cool’.

We have heard of bottom of the pyramid theories but we have also seen how products, such as the Nano, initially failed to appeal to its very target customers because of a perception problem. Could it be that as economies evolve, the focus shifts from cost minimisation with style in the background to style maximisation with cost in the background? In economics parlance that’s equivalent to switching the objective function and the constraints. What are the industries that are likely to be impacted by the transition and what would it take to be successful in such a scenario?

On the face of it, almost all industries that provide consumer products and services, including soft and hard infrastructure, are likely to be impacted.

Implications

Cost is merely a function of the factors of production (for example, resources used) and business models (outsourcing, offshoring, and so on) which can be replicated.

However, a unique and successful design involves much creativity and is hard to replicate — due to issues such as first-mover advantage, branding and IP protection.

While Indian companies have had a cost advantage that has been honed over decades, foreign players have a design advantage.

With global players increasing their presence in India and with new policy initiatives, such as opening up of FDI in various sectors, it is only a question of time before global peers are able to match the cost equation of their Indian counterparts.

From then on, successful Indian companies will be those that are able to make the transition from cost as a competitive advantage to design as a competitive advantage.

A case in point is what’s playing out in the IT services industry. With global players, such as IBM and Accenture, having replicated the offshore global delivery model, Indian players, such as Infosys, are struggling to preserve their margins by differentiating themselves from the rest. The same is unfolding in the auto sector.

Players such as Renault/Nissan are developing products customised for India that are aimed at offering global design at Indian costs.

However, it is worth noting that some of the larger Indian players in sectors that are witnessing a design transformation have already shown signs of success, such as the indigenously developed XUV-500 by Mahindra.

Enablers' APPEAL

As consumers become more sophisticated and their purchasing power increases, it becomes essential for consumer product companies to appeal to their evolved tastes.

One part of this appeal can be provided through better features, for example, five blades in a shaving razor instead of one — what I would call the internal functional design.

But another key aspect of emotional appeal is external appearance and packaging. Above all, there’s perception that is shaped through marketing and branding.

What this means is that enablers that help industries to raise the bar on the style quotient will benefit the most as an economy evolves. These are firms that provide advertising, marketing/branding, packaging, engineering design, architecture, product/industrial design services, and so on. Some of these sectors may still be nascent in India compared with the rest of the world, but these are the players who have the potential to transform everything we interact with on a daily basis to make it a more elegant experience.

Tata Elxsi is one such firm, which in some sense, is a brand behind many brands.

The company’s industrial design division works with companies to help develop unique designs for their products, which could range from automobiles to Horlicks.

(The author is a business consultant. Feedback can be sent to >perspective@thehindu.co.in)

Published on August 03, 2013
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