Session Title:
Innovative Solutions

Date of talk or publication:
2005

Speaker Name / Title:
Ravi Anupindi & S. Sivakumar

Organization:
University of Michigan, Ross School of Business & ITC Ltd.

Description:
Seven hundred million people, a majority of whom survive on subsistence earnings as either  marginal farmers or laborers, live in more than 600,000 villages spread across a rural India barely supported by a weak infrastructure. These rural poor are trapped in a “vicious circle” of low equilibrium characterized by low margins, low risk-taking ability, low investments, low productivity, and low-incomes. Private businesses can build a profitable business model out of streamlining the rural value chains and facilitating empowered market access for the poor. Profits captured from the process of streamlining the value chains can fund the creation of a market infrastructure that can be leveraged to provide a host of products and services to these traditionally under-served consumers and concomitantly increase shareholder value through this service to society.

An ongoing endeavor by the ITC Group of India called e-Choupal is building a market ecosystem in rural India. Key characteristics of this business platform and the business principles that guide its operation bind the ecosystem together. The power of the platform is illustrated with reference to a wide spectrum of value chains including procurement, distribution, retail, and financial services. “Before-after” process scenarios are documented for each of these value chains, as are the economic and social benefits to stakeholders. The platform is being leveraged, in partnership with the government and non-governmental organizations, to upgrade resource capability in rural India to increase farm incomes and livelihoods and to enable ITC to capture in the process, on a sustainable basis, some of the value generated. The e-Choupal platform empowers the community with real-time information and customized knowledge, facilitates the development of a responsive grassroots organization built on freedom of choice and local management with self-interest, ensures efficiency through competition, overcomes the challenges of the rural landscape through virtual aggregation giving it the power of scale, and delivers the benefits of specialization through collaboration. Through this process ITC sets in motion, to capture the latent value in the dormant markets of the economy of rural India, a “virtuous cycle” created by larger incomes and founded on trust. Perhaps most important, the platform approach of e-Choupal has proven to be scalable—more than 5,000 e-Choupals are servicing some 3.5 million farmers—giving a multiplier effect to its economic and social benefits.