Archive: May, 2011

CHC and the Next Generation

Following the successful transition of the UK part of United Utilities’ non-regulated business and the rapid mobilisation for the start up of the new business called Vennsys, CHC is pleased to announce that it has been awarded a further extension to its current contract with Veolia Water. CHC will provide advice on the transformation of its people, processes and technology to create a customer experience that is measured to be in the top quartile in the industry. The project called Next Generation Customer Experience aims to create a remarkable customer experience which is scalable to accommodate new aquisitions.

Frugal innovation

Frugal innovation is about delivering more value at less cost to more people. It is not a new idea but has received increasing attention recently because of the rising importance of developing countries. Frugal innovation or juugal is the term commonly associated with countries like as India or China to describe a specific kind of innovation which aims to minimise the costs of innovation and the cost of the final product. Various techniques are used:

Combining existing products eg  Nokia’s cheapest mobile handsets come equipped with flashlights (because of frequent power cuts) and multiple phone books (because they often have several different users)

Adaptation eg applying Henry Ford’s management techniques of mass production to heart surgery so that more patients can receive treatment at a much lower cost

Put to other uses eg TCS is looking at using mobile phones to connect television sets to the internet. Personal computers are still relatively rare in India but televisions are ubiquitous.

Substitution eg BYD has radically reduced the price of expensive lithium-ion batteries by using less costly raw materials and learning how to make them at ambient temperatures rather than in expensively heated “dry rooms”

I can see how many of the techniques above could be applied in rich countries. Lean manufacturing was developed in Japan and then adopted by the west in the 1980s. Will the same thing happen to frugal innovation in the 2010s?

Fosters’ hangover

Fosters, Australia’s largest drinks company, has discovered that beer and wine don’t mix. It has spent a fortune (A$7 billion) building up a wine business over the past 5 years but it has performed so badly that it cost the chief executive his job in 2008. Investors hope that the demerged business called Treasury Wine Estates will trade at a market value in excess of the A$2.7 billion that Cerberus, a private-equity firm, reportedly offered to pay for it last September. The Supreme Court of the state of Victoria approved the demerger on May 4th.

Australian wines have suffered badly from a combination of the economic downturn, a strengthening Australian dollar, oversupply and a reputation for being cheap and cheerful. Questions still remain, however, whether the integration could have been better managed.

Fosters is brewed in the UK by Scottish and Newcastle (S&N), a British beer firm. Indeed, S&N brews four out of every five pints of Foster’s now.  

Fosters has returned to its traditional role as “Australian for beer”. Speculation is rife that it will soon be swallowed up by one of the big global brewers, with SABMiller the favourite. Fosters’ hangover is likely to get worse.