The Great Debate

The frugal revolution

Adrian Wooldridge

Jan 18, 2012 02:57 IST

General Electric’s healthcare laboratory in Bangalore contains some of the company’s most sophisticated products—from giant body scanners that can accommodate the bulkiest American football players to state-of-the-art intensive-care units that can nurse the tiniest premature babies. But the device that has captured the heart of the center’s boss, Ashish Shah, is much less fancy: a handheld electrocardiogram called the Mac 400.

The device is a masterpiece of simplification. The multiple buttons on conventional ECGs have been reduced to just four. The bulky printer has been replaced by one of those tiny gadgets used in portable ticket machines. The whole thing is small enough to fit into a small backpack and can run on batteries as well as on the mains. This miracle of compression sells for $800, instead of $2,000 for a conventional ECG, and has reduced the cost of an electrocardiogram to just $1 per patient.

In Chennai, 202 miles farther east, Ananth Krishnan, chief technology officer of Tata Consultancy Services (TCS), is equally excited about an even lower-tech device: a water filter. It uses rice husks (which are among the country’s most common waste products) to purify water. The device is not only robust and portable but also relatively inexpensive, giving a large family an abundant supply of bacteria-free water for an initial investment of about $24 and a recurring expense of about $4 for a new filter every few months. Tata Chemicals, which is making the devices, hopes for an eventual market of 100 million.

GE and TCS are doing something more exciting than fiddling with existing products: they are taking the needs of poor consumers as a starting point and working backward. They are producing radically simpler products in order to reduce costs: instead of adding ever more bells and whistles, they strip the products down to their bare essentials. But there is more to frugality than simply cutting costs to the bone. Frugal products need to be highly adaptable.

Anurag Gupta, a telecom entrepreneur, has reduced a bank branch to its essence—a smartphone and a fingerprint scanner—so that banks can take ATMs to rural customers. These products also need to be tough and easy to use. Nokia’s cheapest mobile handsets come equipped with flashlights (because of frequent power cuts), multiple phone books (because they often have several different users), rubberized key pads, and menus in several different languages. Nor does frugal mean second-rate: emerging-market consumers are obsessed by both value-for-money and the latest trends. GE’s Mac 400 ECG incorporates the latest technology. Many inexpensive mobile handsets allow users to play video games and surf the net.

The fortune at the bottom of the pyramid

Frugal innovation is not just about redesigning products; it involves rethinking entire production processes and business models. Companies need to squeeze costs so they can reach more customers, and accept thin profit margins to gain volume. Three ways of reducing costs are proving particularly successful.

from Newsmaker:

Wait, now the right hates General Electric?

James Ledbetter

Oct 13, 2011 18:57 IST

By James Ledbetter The opinions expressed are his own.

For many years, the River Café, an elegant restaurant that sits just below the Brooklyn Bridge, had a plaque on its wall declaring, in effect, “If you work for General Electric, go eat somewhere else.”

This unusual exclusion policy had a simple explanation: for three decades, two GE plants in upstate New York dumped as much as 1.3 million pounds of polychlorinated biphenyls (PCBs) into the Hudson River, poisoning the fish supply that River Café depends on. The effect that this contamination had on wildlife—and on anyone who ate too much fish caught in the Hudson—was severe enough to create one of the largest Superfund projects in the history of the Environmental Protection Agency.

The Hudson pollution was not unique; the bend of the Housatonic River in Connecticut where I grew up was frequently unswimmable, because of PCBs floating down from a GE plant in Pittsfield, Massachusetts. Another aqueous assault, another massive taxpayer-funded cleanup. (Update: A GE spokesman tells me that the company paid for the cleanup of both rivers. Of course, there were also costs to taxpayers, but this is an important distinction.)

Thus, you didn’t have to own a fish restaurant to have a negative opinion of General Electric. Indeed, on the American left in the 1980s, GE was about as comprehensive a corporate bogeyman as could be imagined, and was the target of one of the few anti-corporate documentaries to win an Academy Award. In addition to its overt environmental sins, the company made nuclear power plants. It made nuclear weapons. It was one of the largest military contractors in the country, which made its ownership of a major broadcast network seem disturbing. It paid so little in corporate tax in the 1980s that it apparently offended Ronald Reagan’s sensibilities—and he’d been a GE spokesman!

So it was jarring to read in the Wall Street Journal this week that GE is now a punching bag for the political right. Sarah Palin has charged on her Facebook page that GE has become “the poster child of corporate welfare and crony capitalism.” When Newt Gingrich attacked GE for paying no taxes during the Tea Party-sponsored presidential debate last month, the audience applauded—twice.

What is going on here? How did a venerable left-wing target become an apparently convenient right-wing target?

China Inc. takes stock after overseas buying spree

– Wei Gu is a Reuters columnist. The opinions expressed are her own –

Abundant liquidity, government support and a strong yuan fueled Chinese companies’ overseas buying spree.

But since they went out at the peak of the market and did not have a clear strategy for acquisitions, it should come as no surprise that most of those deals have turned sour. Once bitten, twice shy.

Crisis-ridden companies around the world are hoping that cash-rich Chinese buyers will come to their rescue, but the Chinese are not eager after getting their fingers burnt.

Chinese regulators are now giving more scrutiny to foreign deals, forcing interested buyers to lay out the most pessimistic scenario when seeking their approval.

Bankers said Beijing is skeptical about buying everything except resources, which is seen as important to China’s strategic interest and involves few integration challenges.

BUYING THE BRAND

Cleantech stock implosion yields gems

Eric Auchard

Dec 9, 2008 19:35 IST

– Eric Auchard is a Reuters columnist. The opinions expressed are his own –

Cleantech, with its intoxicating mix of high-tech promise and save-the-world bloody-mindedness, has fallen harder and faster in the destruction that has visited growth stocks in 2008.

Underscoring the sector’s risks, German solar cell maker Q-Cells cut its 2009 outlook on Tuesday, saying slack demand could linger until the middle of next year amid a growing industry price war. The stock lost nearly a fifth of its value in trading and the news sent down shares of rival companies.

But while it’s too early to say when the selling might be over for solar and wind stocks, gems lie in the rubble of collapsed valuations, ready for investors to snap them up when markets recover their appetite for growth and its attendant volatility.

To understand what is possible, take measure of the decline: The WilderHill Clean Energy Index, composed of around 50 renewable energy and conservation stocks, has lost three quarters of its value year-to-date, twice the loss of the S&P 500.

The mea culpas are flowing. “Every stock we cover has performed worse than the S&P 500 year-to-date,” Raymond James analyst Pavel Molchanov confessed recently in a note to clients.

In recent weeks, solar stocks, the global sector’s biggest segment by far in terms of market capitalization, have cracked up — laid low by the sharp fall in the price of oil, the plunge in the euro, the credit crunch and a move to safer havens.