JUGAAD- The Indian Way of Business

This is the first article of the series to be written by Dr.K.Prabhakar on

different Indian business practices in different states of our country.
Present article adopted research from The India Way: How India’s Top
Business Leaders Are Revolutionizing Management (Harvard Business
Press, 2010), supplemented with authors talk with some of his students. If
you find any practice kindly inform the author, it will be acknowledged and
gratefully shared for betterment of India. profkprabhakar@gmail.com.

The concept of jugaad is over riding strategy that is rooted to the

Indian environment. If you are in towns like Aligarh in Uttar Pradesh, there
are three wheelers powered by motors which carry approximately 14
people! It is designed by mostly uneducated mechanics of rural India. It is
temporary solution, unstable and not reliable, however it serves the
purpose. But jugaad as a concept has a legitimate place in management
thinking and practice.

Jugaad points to the capacity of Indian firms to adapt quickly and

improvise creatively to deal with limited resources. They constrained by
hungry politicians asking for bribes, insensitive and corrupt government
officials, criminals ready to help both to enforce their orders and judiciary
ready for any orders from politicians. In this kind of arrangement how
Indians and Indian organizations compete in the world? The skill for
improvisation and adaptability as embodied by jugaad has given Indian
companies a major competitive advantage first in India and then overseas.

There are several challenges to doing business in India. Eighty

percent of its citizens live in rural areas with limited resources. The reforms
of 1991 opened India’s economy to the rest of the world and added another
layer of difficulty, competition from multinational corporations with more
resources. And yet Indian economic expansion has accelerated to one of
the highest rates in the world recently. Concept of jugaad is using fewer
resources with weak infrastructure to compete in the world. Bharti Airtel is
one of the examples. Sunil Bharti Mittal who started with 60,000made a
radical decision to grow: He outsourced key operations and worked on
marketing. Ericsson, Siemens and Nokia partnered with Bharti. Bharti took
advantage of the existing structures created by others in its business
environment.
 Very low price point offered by competitor Reliance Communications,
Bharti Airtel came up with an innovative strategy of outsourcing key
activities. Until then organizations were outsourcing only the non key
operations and key operations are held by the organization. The low price
of Reliance is another example of Jugaad as described by one of its former
employee to the author. The business team and the technical team met
Dirubhai Ambani with technical and economic calculations. He asked the
team to wait for some time and in their presence made a call to one his
relatives in Gujarat.

He asked her, how she is communicating with her son who is in a city.
She told that she receives post card every week and it costs one rupee and
she replies with another post card. He told the team, if you want to reach
maximum number of customers in India you should keep price to one
rupee. The technical calculation at that time was to offer at six rupees per
call.

Through HUL turned to women’s self-help groups that already existed in

rural areas by use of Jugaad. The rural women are hard working and keen
to supplement limited household income. They saved money and lent to
each other. In Project Shakti, individuals borrowed money from this pool,
used it to purchase HUL products, and then resold those products within
their communities. HUL took what was originally a problem, a country full of
fragmented markets with little communication between them, and found a
way to use it to benefit all parties involved. HUL gained access to
previously untapped markets while community members gained
entrepreneurial experience and were able to purchase products they may
not have had access to otherwise.

One more example comes from ICICI Bank. As India’s largest privately-
owned commercial bank, investment bank and insurance provider, it faced
many challenges when expanding its commercial banking business. The
company faced the same problem HUL did: establishing a relationship with
the country’s rural citizens. Building new bank branches would be too
expensive as the average deposit in rural areas would not be high enough
to cover the cost of operating a branch. Rather than opening branches,
ICICI decided to use existing channels such as microfinance organizations
and local fertilizer distributors.
 ICICI had these organizations carry out some of the activities a bank
branch would, thereby giving it access to a larger customer base. By
supplementing an existing structure from other organizations, ICICI was
able to provide its services to a much larger market. It has pioneering the
concept of Employee on the Street or EOS. A business manager is
encouraged to recruit if he finds any person on the street to sell the service.

Indian culture is full of instances of people using the modest resources at

their disposal to solve problems and find ways around seemingly
impossible situations. Of course there are also some negatives associated
with jugaad. One of them is a lack of consistency and discipline that can
emerge from such informal improvisations.

You have success stories of Indian Postal Department which created a

brand known at SPEED POST.

Indians have developed the skill of finding innovative solutions wherever

they can and this skill has inevitably found its way into Indian business
practice. If there is one thing managers can learn from the examples of
jugaad, it is that traditional methods of doing business do not work all the
time. No environment is static; and the ability to adjust to changes and
improvise is a valuable skill for any manager to learn. An excellent study has
been done and given in the following book.

Peter Cappelli, Harbir Singh, Jitendra Singh and Mike Useem are
professors of management at the Wharton School of the University of
Pennsylvania and are the co-authors of The India Way: How India’s Top
Business Leaders Are Revolutionizing Management (Harvard Business
Press, 2010).