The story of how Bharti Airtel Limited, the largest telecom service provider in India, chose to strategically outsource its core functions is nothing short of a fairy tale. For a typical telecom operator, the pain point during the growth phase is planning for network requirements and preparing budgets for such a capital expenditure. Capacity has to be built ahead of demand, which usually means the telecom operator has to absorb the cost of unused capacity. Sunil Mittal, chairman of Bharti Enterprises, had different ideas. He realized Bharti Airtel's core capabilities were understanding customers' requirements and building brand. The company lacked technical competencies and had limited understanding of the technology. Therefore, Mittal and his top management team came up with the revolutionary idea of completely handing over to vendors the responsibility for building up and managing the company's telecom and IT network. "When the proposal was originally put on the table," said Mittal, "most of our board members' jaws dropped, and they thought we had gone crazy." Emerging markets such as China and India are attractive since they have large consumer bases. But they cannot be served cost effectively with existing products, services, or business models. They demand out-of-box thinking and abandoning some existing practices. Without offering an ultra-low-cost business model, it would have been impossible to unlock the telecom revolution in India. Sunil Mittal's ambition in the early 2000s was to offer point-to-point mobile telecom service that is cheaper than the cost of a postage stamp. Bharti Airtel chose to engage some of the well-known global equipment vendors and service providers to ensure quality services. It chose Ericsson, Nokia, and Siemens, which were key telecom network-equipment vendors, to build up and manage its telecom network. It chose IBM to build and manage the IT network. These actions mitigated Bharti Airtel's risk. The vendors for telecom network management were paid only for the capacity utilized by Bharti Airtel, not for the equipment. Bharti's innovative business model converted fixed costs in capital expenditure to a variable cost based on usage of capacity and revenue from services. Through the outsourcing arrangements, Bharti dramatically lowered its costs while ensuring high quality for customers, since vendors had world-class competencies in their domains. By transforming the telecom infrastructure, Bharti was able to offer additional value-added services on the mobile platform. For instance, its "Music Bharti" is now the largest music company in India. Though Bharti Airtel does not produce music, it has created another stream of revenues by distributing music via caller ring-back tones, mobile radio, and music on demand. With 110 million subscribers, Bharti Airtel is the world's third-largest single-country mobile operator. Bharti has innovated a management model ² the virtual corporation ² that has enabled the company to manage an enormous subscriber base and still grow cost effectively. Bharti Airtel offers mobile telecom service at $.01 to $.05 per minute, perhaps the lowest in the world. Despite very low prices, Bharti has enjoyed compounded annual growth in sales revenues of 120 percent and growth in net profits of 282 percent per year between 2003 and 2010. Its
market cap has steadily grown over the same period and stood at around US$25 billion as of April 30, 2010. Bharti Airtel's innovative business model has now become the norm not just in India's telecom industry but also in the telecom industries of several other emerging and developed countries. The company is an example of how innovation can originate from a poor country ² a shining model of reverse innovation.
Project shakti
Rojamma is a single parent living in Kurumurthy, a small village in the Indian state of Andhra Pradesh. When her husband left her, she earned a few rupees working in her mother's field but found it difficult to support her two daughters. Then she joined a women's self-help group and found out about Project Shakti. "From that moment my life changed", recalls Rojamma. To expand its markets, the challenge for Hindustan Lever (Unilever's business in India) was how to reach millions of potential consumers in small remote villages where there is no retail distribution network, no advertising coverage, and poor roads and transport. The solution was Project Shakti, launched in 2000 in partnership with non governmental organisations, banks and government. Women in self-help groups across India are invited to become direct-to-consumer sales distributors for Hindustan Lever¶s soaps and shampoos. The company provides training in selling, commercial knowledge and bookkeeping to help them become micro-entrepreneurs.
Increasing income
After an initial investment in stock - usually borrowing from self-help groups or micro-finance banks facilitated by Hindustan Lever - most Shakti entrepreneurs net a monthly profit of 700 1 000 rupees (US$15 - 22). This is a far cry from the few rupees single mothers like Rojamma had earned before, and for those with husbands who work in the fields, this typically doubles the household income. By the end of 2009, 45 000 Shakti entrepreneurs were selling products to three million consumers in 100 000 villages. Shakti has brought them self-esteem, a sense of empowerment and a place in society. As Rojamma says: "When my husband left me I had nothing except my daughters. Today everyone knows me. I am someone now". It has meant she has been able to send her daughters to school, giving them the chance in life she didn't have. Find out more from Rojamma's story on video, read the full story in the pdf in related links. Note: The Project Shakti pdf was written in 2005. By the end of 2009 there were more than 45 000 Shakti entrepreneurs covering 3 million homes in 100 000 villages in 15 states in India. We are rolling out similar initiatives in Sri Lanka and Bangladesh. For more information, please see the Supporting micro-enterprise section of our online Sustainable Development Report 2009.
doc_641326802.docx
market cap has steadily grown over the same period and stood at around US$25 billion as of April 30, 2010. Bharti Airtel's innovative business model has now become the norm not just in India's telecom industry but also in the telecom industries of several other emerging and developed countries. The company is an example of how innovation can originate from a poor country ² a shining model of reverse innovation.
Project shakti
Rojamma is a single parent living in Kurumurthy, a small village in the Indian state of Andhra Pradesh. When her husband left her, she earned a few rupees working in her mother's field but found it difficult to support her two daughters. Then she joined a women's self-help group and found out about Project Shakti. "From that moment my life changed", recalls Rojamma. To expand its markets, the challenge for Hindustan Lever (Unilever's business in India) was how to reach millions of potential consumers in small remote villages where there is no retail distribution network, no advertising coverage, and poor roads and transport. The solution was Project Shakti, launched in 2000 in partnership with non governmental organisations, banks and government. Women in self-help groups across India are invited to become direct-to-consumer sales distributors for Hindustan Lever¶s soaps and shampoos. The company provides training in selling, commercial knowledge and bookkeeping to help them become micro-entrepreneurs.
Increasing income
After an initial investment in stock - usually borrowing from self-help groups or micro-finance banks facilitated by Hindustan Lever - most Shakti entrepreneurs net a monthly profit of 700 1 000 rupees (US$15 - 22). This is a far cry from the few rupees single mothers like Rojamma had earned before, and for those with husbands who work in the fields, this typically doubles the household income. By the end of 2009, 45 000 Shakti entrepreneurs were selling products to three million consumers in 100 000 villages. Shakti has brought them self-esteem, a sense of empowerment and a place in society. As Rojamma says: "When my husband left me I had nothing except my daughters. Today everyone knows me. I am someone now". It has meant she has been able to send her daughters to school, giving them the chance in life she didn't have. Find out more from Rojamma's story on video, read the full story in the pdf in related links. Note: The Project Shakti pdf was written in 2005. By the end of 2009 there were more than 45 000 Shakti entrepreneurs covering 3 million homes in 100 000 villages in 15 states in India. We are rolling out similar initiatives in Sri Lanka and Bangladesh. For more information, please see the Supporting micro-enterprise section of our online Sustainable Development Report 2009.
doc_641326802.docx