Weaving the magic carpet: Forbes India

Neelima Mahajan-Bansal / Forbes India
Published on Mon, Jul 27, 2009 at 16:08 in Business section

Jaipur Rugs Website

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Kanni Devi’s hands work deftly as they knot brightly coloured wool on tightly wound warp threads. “Do taar chodd ke lagaale re; lal jhai sabaj bachcha; kala chalta,” she sings.
Her husband Chottelal, who is working at the other end of the loom, chants, “haanji”, in sync. It sounds like a Rajasthani folk song but is really instructions based on the design template this carpet has. Loosely translated, it means, “Leave two strings and then put the red on the red; put it behind the green; and put it right on the black.”
Kanni and Chottelal are two of the 125 carpet weavers in Narhet, a tiny village close to Jaipur. Narhet is what local administrators term as a “landless village”. No one here owns land. Most belong to impoverished backward classes and 70 percent are into rug-making.
Carpet weaving is an industry associated with worker exploitation in the popular imagination. But over the last three years, things have changed for Kanni and Chottelal.
Chottelal, who has always lived hand-to-mouth, recently took a Rs. 1 lakh loan to build a pukka house. He put both his daughters in a private school, for a fee of Rs. 100 per child. One month ago, he filed a health insurance claim — and got Rs 1,400 — for hospital visits. He keeps his latest acquisition, a Nokia mobile phone, under his loom. “We would love to buy a TV too but because of the hill ranges around, we don’t get TV signals here,” says Chottelal. Kanni wears bright magenta lipstick now, an indulgence that was unthinkable three years ago.
Earlier the couple used to weave carpets for contractors who paid them Rs. 50-60 per day per person. Now they earn above Rs. 100 a day each. The raw material is delivered to them unlike before when they had to travel to town to get it. Chottelal now has a better sense of carpet weaving, as he has received rigorous training.
Like Kanni and Chottelal, scores of families in this village have made the crossover to a better life.
Changing the Template
The soft-spoken Nand Kishore Chaudhary, founder of Jaipur Rugs, is the person responsible for all this. Chaudhary doesn’t speak much English and has never studied in a business school. But the social enterprise model that he has created for Jaipur Rugs has changed the lives of 40,000-odd weavers in villages across 10 states in India.
Under this model, his Rs. 67.75 crore (turnover) company engages independent weavers in far-flung villages — none of whom are on his rolls.
The idea first came to him in 1990, when he realised that the government was keen to promote carpet weaving in the tribal belts of Gujarat. “The government was using co-operative societies to develop carpet weaving in Gujarat. But I felt that co-operatives couldn’t do this well so it would be a great opportunity for me,” says Chaudhary.
So he relocated to Gujarat and, for eight years, developed a weaver network there. He deputed area commanders to oversee the existing business in Rajasthan. “We had 200 looms in Rajasthan by then and wherever we had a concentration of 50 looms, we would depute an area commander to monitor them, distribute raw material and supervise quality,” says Chaudhary.
Communication was a problem in those parts of Gujarat and Chaudhary needed to be in touch with his weavers. So in 1992, he set up a wireless network there! Since then, he has travelled across India to develop a weaver network. By 2015, Jaipur Rugs aims to have 100,000 weavers on board. For that, Chaudhary has deputed two people who are constantly on fact-finding missions across the country looking for new regions where carpet weaving can be done. “We recently found that in Orissa, there are lots of Muslim women who aren’t allowed to go out of the house. They end up becoming beedi workers earning Rs. 10-15 a day,” says Chaudhary. So Jaipur Rugs started a pilot project in six regions with 500 weavers on board about 18 months ago.
But working with scattered communities of weavers makes it tough to maintain quality standards acceptable to international clients.
Another alarming fact: Each month Jaipur Rugs was incurring a loss of Rs. 5 lakh (on a turnover of Rs. 4 crore) due to defects. “That is Rs. 60 lakh wasted each year due to mistakes!” he says. “After a carpet is woven, it goes through 27 other processes and the defects were proving to be a big drain.”
To tackle that, Chaudhary put in place an army of quality supervisors who visit every loom at least twice a week. The weavers — some of whom have been working for contractors for years — are given intense training where proper processes are enforced. “Changing habits is tough. Weavers, who have worked for contractors all these years, are not used to being process-driven. Even the trainers don’t take us seriously initially,” says Chaudhary. Constant communication, he says, is key.
Chaudhary also embarked on a mission called Zero Defect that is being piloted in Narhet. It lays down the processes that the weaver must follow. Says Deepak Sharma, director, Kanvic, the consultants who have taken on the task, “We developed a booklet for the processes the quality supervisors are supposed to look at — this has a full checklist.”
During a seminar, Chaudhary picked up the idea of implementing Quality Circles, or forming volunteer groups that analyse, discuss and find solutions to larger organisational challenges. “I tried to implement this concept with the weaver community by forming self-help groups for them,” says Chaudhary. “These groups meet regularly, brainstorm and solve problems.”
The Next Level
Chaudhary also ensures that the company implements the most modern techniques to help business. Recently, the company invested Rs. 50 lakh and implemented an ERP package (enterprise resource planning package — a company-wide computer software system). Then, in 2007, it took on board a search engine optimiser to ensure that the company name would show up prominently in Web searches. Says Yogesh Chaudhary, N.K. Chaudhary’s son, who looks after the IT aspects of the business, “Our Web presence was very limited. But after doing search engine optimisation, people can now find our company easily online.” Similarly, they realised that many of the small buyers abroad — who are also the most profitable — did not understand English. So Yogesh launched Jaipur Rugs’ Web sites in other languages.
Chaudhary also realises that increasingly, buyers want to work with companies that do not have exploitative practices. Which is why, Jaipur Rugs applied for and attained Social Accountability International’s SA 8000 Workplace and Human Rights Standards.
Chaudhary believes that everyone working for the company is part of a family.
The Jaipur Rugs Foundation (JRF), a welfare foundation for weavers, fits in perfectly with this belief. Says Devendra Shukla, director, JRF, “The foundation aims to take weavers to the next level and make them stakeholders in the business.” It provides skill training, skill upgradation, computer-aided design training and entrepreneurship development.
It also gets the weavers Artisan Cards, a government initiative that allows artisans several benefits, helps them get health insurance, and forms self-help groups (SHGs) of weavers.
JRF is also trying out a new experiment where it will form SHGs of weavers, bring them together as a company or a trust, and produce carpets under the new company’s own brand. A pilot for this is on in Thanagazi in Rajasthan. The ownership of the brand will lie with the weavers and Jaipur Rugs will don the role of a mentor.
A couple of months ago, Chaudhary got a phone call. The voice at the other end said, “Mr Chaudhary, this is CK. Do you know me?” Chaudhary almost fell off his chair. The person on the line was management guru C.K. Prahalad — Chaudhary had met him at a TiE (an NGO for promoting entrepreneurship) seminar in Jaipur in January and told him about his company. Jaipur Rugs is now being documented as a case study in the fifth edition of Prahalad’s Fortune at the Bottom of the Pyramid. Chaudhary is also being invited by business schools like Wharton to talk about his business model. Teams of students and professors from INSEAD and IMD are also visiting his company. Says Chaudhary, “I love exploring. I experiment with small things. When I see the results, I get excited. And that prompts me to do bigger things.”

Dregs in NREGS

Udit Misra / Forbes India
Published on Wed, Jul 15, 2009 at 14:45, Updated on Wed, Jul 15, 2009 at 16:05 in Business section.

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The Roster:
The man
Jean Dreze
The mission
To improve the operation of National Rural Employment Guarantee Scheme (NREGS).

What’s the big deal?
India’s largest social safety net.
Why we need it
To help the rural economy catch up with the cities, the main beneficiaries of economic growth in recent years.
The challenge
Lack of proper field-level records and a mechanism for handling grievances. Need to create locally relevant infrastructure.
What can he do?
As a key influence in the original design of NREGS, Dreze can give ideas to plug loopholes.
People to watch out for
Kaluram Salvi, a village sarpanch in Rajasthan, who has solved some of the problems of NREGS.
Budget highlights
Allocation raised 144 per cent to Rs 39,100.
Kaluram Salvi first came into the limelight in 2002 when he blew his fuse over 50 paise. The labour activist and budding politician was checking out a worker site at Phukiya Thad village in Vijaypura panchayat (council of villages) of Rajasthan. He saw that the officials at the site were paying the workers Rs 59.50 for a day’s work, while the minimum compulsory wage was Rs 60.
Salvi argued with them till the additional money was paid. It was perhaps the turning point in his political career.
Today, with Salvi as the sarpanch (head), Vijaypura has emerged on the national map as a shining example of worker welfare. The grassroots innovations of Salvi and his team has led to a nearly flawless implementation of India’s largest social sector programme — the National Rural Employment Guarantee Scheme (NREGS).
Salvi’s success has recently got corroborated — the government of Rajasthan now plans to take his ideas across all the NREGS sites in the state to plug leaks and make sure the benefits of the scheme reach the deserving.
For a scheduled caste man in a multi-caste community, this is a rare achievement. “I only promised to do an honest job of implementing the different government schemes. I did not offer any favours,” Salvi says recalling his election campaign three years ago.
The good news about Salvi’s experiments couldn’t have come at a better time for the Congress-led government at the Centre, which is looking for templates of efficient but caring governance.
NREGS is an attempt launched in 2006 by the Manmohan Singh government to transform the rural economy through legally guaranteed employment for up to 100 days at a minimum wage of Rs. 100 per worker. The scheme, run jointly by the Centre and the states, has reached several milestones towards its goal, but suffers from the same deficiencies of most other official projects — corruption and diversion of funds.
An audit by the Comptroller and Auditor General of India (CAG) found that crores spent on the scheme may not have reached the targetted beneficiaries.
NREGS is now ripe for version 2.0, without the leaks and the hassles of the first round. In this context, it is worth pondering how Vijaypura conquered the typical problems and made sure the scheme achieves its purpose.
One of the best judges of NREGS implementation is the development economist Jean Dreze, an Indian of Belgian origin. This luminary from the Delhi School of Economics was a key influence in the original design of NREGS. Dreze has lived and worked in India for 30 years, observing the nuances of the rural economy up close. He thinks experiences such as in Vijaypura present many answers to meet the next set of challenges for NREGS.
There is also a clamour for urban employment guarantee and the use of modern technology to prevent corruption. “Many of these things will happen in due course, but it is important to realise that a lot of ground work still needs to be done to ensure proper implementation of the existing NREGS,” says Dreze.
That’s why the Centre can learn from Vijaypura. More than half of the total 1,600 households in this panchayat have participated in the programme. More than 60 per cent completed the full quota of 100 workdays per household. What’s more, at many sites, women account for a lion’s share of the employment. “People work whole-heartedly because the scheme has given them a sense of dignity and partnership in development,” Salvi asserts.
So what did Salvi do right? Basically, he found simple solutions for complex problems.

NREGA, Andhra Pradesh

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Forbes India: Dr Shetty and his business with a heart

Article Link : http://ibnlive.in.com/news/forbes-india-dr-shetty-and-his-business-with-a-heart/96567-7-single.html

Neelima Mahajan-Bansal / Forbes India

Published on Tue, Jul 07, 2009 at 14:25, Updated on Tue, Jul 07, 2009 at 14:54 in Business section

Twenty-day-old Samuel Idoko’s parents were worried sick. The boy’s heart condition needed urgent surgery but back home in Nigeria, there were no hospitals dealing with such cases. They didn’t even have the time to celebrate his birth as they rushed him to Bangalore. Their destination: Narayana Hrudyalaya Institute of Cardiac Sciences.

Established in 2001, this 1,000-bed hospital and its sister concern, Rabindranath Tagore Institute of Cardiac Sciences in Kolkata, together do 15 percent of all heart surgeries in India. At the rate of 30 cardiac surgeries a day, the Bangalore facility handles the highest number of heart surgeries in the world.

It’s not for nothing that patients come here in droves. It has an impossible-sounding success rate of 95 percent and charges a fraction of what other heart hospitals do. The charismatic Dr Devi Shetty, the hospital’s founder, has been relentlessly pursuing a mission: To make world-class healthcare affordable to the masses. “Hundred years after the first heart surgery was done, only 8 percent of the world’s population can afford it,” he says, quickly pointing out that this is a five-year-old statistic and today we might be worse off. “What happens to the rest?” asks Shetty.

Filling the Gap

Shetty’s hospital has managed to dissociate healthcare from affluence. The patient is told beforehand what he will pay. This is fixed irrespective of any future complications or the duration of stay.

A heart surgery here costs Rs. 110,000, much less than what it costs elsewhere. Even so, you pay the full price only if you can afford it. Many don’t pay at all. In 2008, out of 6,088 heart surgeries at the Bangalore centre, only 1,232 were fully paid for. Yet, the hospital makes a tidy profit. The Narayana Hrudyalaya group had a turnover of close to Rs. 300 crore in 2008-09, up from Rs. 150 crore in the previous year.

Narayana Hrudayalaya is now moving to have the largest number of beds in the country, beating Apollo Hospitals which has 6,000. It is creating multi-specialty “Health Cities”. The Bangalore facility will be ramped up to 5,000 beds. In addition to the 1,000-bed heart hospital, it has new cancer, orthopedic and eye hospitals. In the next two years, it will add two more, one for women and children and another for tropical diseases. The Kolkata facility will also be expanded to 5,000 beds. The idea is to have a health city in every state of India and have a presence in every emerging economy of the world. Already work is on to set up facilities in Malaysia and Mexico. “Next year our turnover should be Rs. 600 crore and after Phase 1 of the Health Cities plan is complete in 2010, we should be closer to Rs. 1,000 crore,” says Sreenath Reddy, chief financial officer.

All this will be done without increasing the costs of the business. Before Devi Shetty, it was considered impossible to drive down costs to such levels; even now, no one has been able to replicate this. Top-flight management researchers want to understand how Shetty does it. “The mortality rate in Narayana Hrudyalaya is much lower than in New York State for similar kinds of heart disease,” says University of Michigan’s C.K. Prahalad. The hospital has been discussed extensively in his 2004 bestseller, The Fortune at the Bottom of the Pyramid. It has also become a case study at Harvard Business School. Adds Kokila P. Doshi, professor of Economics at University of San Diego’s business school, “Till now the trend was that government serves the poor. Shetty has shown that private enterprise can serve the poor profitably.”

Leveraging Scale

But how does Shetty do it? The answer lies in what he likes to call his “Wal-Mart approach to healthcare”. Wal-Mart proved that with size, the cost of inputs could be challenged. “They had the size which let them dictate terms to anyone starting from a giant like Procter & Gamble to potato growers,” he says.

Shetty relentlessly pursues Wal-Mart’s dictum of “everyday low prices”. Only that potato growers have been replaced by pharmaceutical companies and medical equipment manufacturers, who account for almost 40 percent of a hospital’s revenue outflow.

Here’s how it works: Most catheters sold in India by multinationals, for instance, are not manufactured by them. But the original equipment makers don’t sell directly to hospitals unless they get sufficient volumes. Narayana Hrudyalaya has the volumes: It handles 30 heart surgeries and at least 1,000 walk-in patients a day. It was able to convince them to supply at a low cost.

Scale helped Shetty shave off costs of medical tests too. Take blood gas analysis. At Rs. 350-400 per test, it forms the bulk of the cost for an ICU patient in India. At Narayana Hrudyalaya it costs merely Rs. 8.50 per test!

How? “Most hospitals do just 20, 30 tests in a day. We do about 2,000,” says Shetty. He used that to persuade manufacturers to merely “park” their machines in the hospital and instead make money from selling chemical reagents for the tests. It’s a win-win: Narayana Hrudyalaya saves on the cost of these machines (Rs. 12-15 lakh each) and the manufacturer does Rs 50,000 worth of business selling reagents every month.

Unlike other hospitals that make most of their money through in-patient care (procedures and operations), Narayana Hrudyalaya makes the bulk of its profits in the out-patient department (OPD) — just through registrations and investigations such as ultrasounds and X-rays.

The logic is simple. “At the OPD level, every person can afford to pay Rs 200-300. When he needs treatment that will cost Rs. 2-3 lakh, that is when he expects help,” says Reddy. “Today the revenue point for every hospital is in-patient services, which give a margin of hardly 8-10 percent while our margin in the out-patient is 80 percent,” adds Shetty. “So you try to get huge numbers of out-patients.”

But to get so many people to the OPD, you need a sound value proposition. “Patients will come to you provided your in-patient cost is affordable — if you are doing a heart operation for Rs. 60,000-70,000, or a brain operation for, say, Rs. 10,000. So you reduce your in-patient cost,” says Shetty.

Each evening, Shetty and his team of senior doctors examine a profit and loss account for the day. If they go below their average realisation benchmark of Rs, 95,000 the next day they prefer patients who can pay more. Also, Shetty searches for ways to save — he got his microbiology department to make hand-wash and disinfectants in-house, bringing down the monthly cost from Rs. 4 lakh to Rs. 50,000.

Practicing Quality

‘Specialisation’ is his mantra to ensure quality even as costs are driven down. “We train technically skilled people for a particular job,” says Shetty. So each surgeon specialises in doing only bypass surgeries or valve replacements or paediatric surgeries. That gives them phenomenal experience.

Shetty does something else to cut costs. Every ICU patient has dedicated nurses watching over him, 24 hours a day. They work eight-hour shifts, standing in front of the patient. Shetty doesn’t provide chairs: “The moment you provide a chair, the efficiency of the nurse goes down by at least 30 percent.” He encourages attrition among them: “As they grow older, they don’t contribute as much to patient care, but their salary keeps going up.”

To keep salary costs low, he hires people with basic college education and trains them for jobs like reading radiology charts.

Going forward, the biggest challenge for Shetty is how to make sure all this doesn’t remain a one man show, and get the same quality. “That means enormous commitment to training and recruitment,” says Prahalad.

Shetty is clear that the new facilities will be run by people who have perfected their skills at Narayana Hrudyalaya so that there’s no cultural mismatch. It is already running 49 training programmes and the plan is to turn it into an academic institution. “When you have an academic institution as a hospital, the succession plan is already in place,” he says.

The Wal-Mart Effect

Dr Devi Shetty’s Narayana Hrudyalaya in Bangalore uses economies of scale to keep the cost of treatment low

Rs 8.50 for a blood gas analysis

This normally costs Rs. 350-400 per test and forms the bulk of the cost for an ICU patient. Where others do 30 tests a day, Narayana Hrudyalaya does 2,000. It used these numbers to persuade manufacturers to install machines — which cost Rs. 12-15 lakh each — for free and make money instead by charging only for chemical reagents for the test.

Rs 110,000 cost of a heart surgery; 6,088 heart surgeries (in 2008), 1,232 fully paid for; Rs. 300 crore turnover (2008-09)

Unlike other hospitals, the bulk of its profits come from the out- patients ward, where the cost to the patient is low but the margins are as high as 80 percent. The number of walk-in patients remains high because they know the cost of surgery will be subsidised should they need it.

30 heart surgeries, 1,000 walk-in patients a day

Medicines and equipment account for 40 percent of revenue outflows, but original equipment makers for instance, don’t usually supply directly to hospitals. Narayana Hrudyalaya used these numbers to convince them to supply directly, at a low cost.