Ctrl, Alt, Enter the big league

Fortune

THE FIRST TIME I walked into Matrix, a sprawling R&D centre on the outskirts of Pune, I confess I was expecting to enter an ultra-futuristic and uber-modern space like in the movie of the same name. But instead, I felt I had been transported to the dystopian world of The Hunger Games, where dust and noise and unpleasant smells prevail. But if ever anything taught me to look beyond appearances, this was it. Because this place, which smelled like a garbage heap outside a mandi, showcased some of the country’s most useful and cutting edge technology. Matrix is a lab belonging to Praj Industries (ranked 261), one of the few biofuels companies in the country. The company has always used technology, whether it was to set up distilleries for clients back in the ’80s or to set up biofuels plants across the world now.

There’s very little Praj has in common with Nandan Denim’s sprawling facility in Ahmedabad. Nandan, 198 on the Next 500 list, is aiming to become the largest denim manufacturer in the country, overtaking current No. 1, Arvind. Govind Sharda, CEO of the Chiripal Group, which owns Nandan, says the company will get there with a little help from technology. With its reliance on all kinds of tech, from data mining and analysis, to robotics and artificial intelligence, Nandan often seems more like a technology company.

Two vastly different companies but with the same conviction: that using technology can help them break into the big league. That in itself is hardly breaking news; any company that wants to grow, compete, or even just stay relevant, must invest in the technology of the day, whether it was steam power centuries ago, or robotics today.

“If companies invest in the right automation and service providers, and the correct systems and processes, smaller players can give the larger players a run for their money,” says Samay Kohli, co-founder and CEO of Singapore-based global robotics company GreyOrange.

So far, so predictable. What makes this an exciting story is that we are now poised at an interesting intersection of technology, industrial growth, and easier funding. The way forward depends on how companies take advantage of this point in time. Piyush Sinha, who heads the newly set up Big Data analysis unit of NEC Technologies India, a part of the Tokyo-based NEC Technologies, says businesses no longer need to rely on insufficient market intelligence to make decisions. They have mountains of data at their disposal, including from informal sources such as social media, and analytics will help them “make faster and better decisions and more accurate forecasts”.

Yes, data analysis is relatively old hat in today’s artificial intelligence-fuelled world. What makes it relevant still is the fact that there are so many companies, in vastly diverse sectors, using data analytics to bridge gaps in their services and catch up with far larger, more established competitors.

USING TECHNOLOGY TO vault into the big league is something many companies on the Next 500 list are doing to good effect. Take Jyothy Laboratories (rank 12), a long-time favourite with brokers and investors. The company makes a range of detergents and household insecticides and fragrances and owns some of the most opular brands in the country including Ujala, Fa, Mr. White, Henko, and Pril.

“We gather data from our salespersons and retail distributors [not wholesale] in every district. With this data, it is far easier to make transparent decisions based on hard facts,” says Ullas Kamath, managing director, Jyothy Laboratories. Kamath adds that his company was one of the early adopters of Big Data; it used SAP HANA, a database and application development platform that allows companies to store, manage and analyse data from machines and human beings.

The result? Jyothy Laboratories has moved up from 46 on The Next 500 last year to 12 this year, and its profit has zoomed 30.5%. Meanwhile employee cost has gone up a mere 1.5% against the 21.3% average increase in employee cost this year. While it will be specious to attribute the entire revenue increase to better use of technology, the company’s focus on automation is definitely a large contributor in bringing down employee costs.

Praj too uses Big Data for marketing as well as for R&D. “Having data for so many years allows us to design our marketing strategy better,” says Pramod Chaudhari, founder chairman of Praj. “Data analytics allows us to analyse data from nearly 9,000 samples of feedstock. Now, we can design various processes based on the data.”

Here’s the thing. Companies have always had a wealth of data available to them. From manufacturing to sales to service, there has always been information collected, whether from machine or human. The problem has always been in identifying what’s useful in this morass. Deepak Ghodke, country manager, Tableau India, a U.S.-based data analytics company, echoes this, saying that companies now have access to data interpretation tools. “What you make of these assets depends on the intelligence of your algorithms and the insights and conclusions that you can draw. You can use these tools to become much more efficient, productive and beneficial for your customers and even compete with your biggest competitors.”

Artificial intelligence-based forecasting can determine the right price of a product at any given day or even every hour by looking at various factors like prices of similar products by competing firms, day of the week, season etc to attract new customers, reduce churn and help determine which customers are most profitable.

Kamath of Jyothy Laboratories explains how his company uses disparate sets of data to decide on what and how much to manufacture. “We take rainfall prediction data from IMD [India Meteorological Department], and using our own algorithm, we decide the amount of mosquito repellent to be produced and marketed. We can actually decide how much to produce for each district.”

Tableau’s Ghodke says his company’s customers use data “to innovatively produce new products and services”. Tableau’s client list includes the likes of HDFC Bank, Eveready Industries, Ashok Leyland, EClerx, CRIF High Mark, and Star Health. “Price elasticity of items has become especially important in these times because the hyper-connected consumer constantly redefines values by comparing values even when browsing in a brick-and-mortar store,” says Gopinath Narayan, professor at the Faridabad-based National Institute of Financial Management.

Equally important is the fact that companies can monetise the data they have, or create new revenue streams based on available data. A company like Star Health and Allied Insurance, for instance, which sits on massive amounts of data on health, income, and occupation of all its policyholders, can segment the data and use that to target customers for specific policies.

“As an insurance company, our entire business hinges on the availability of reliable data. Our pricing and modelling depends on analysis of data, not only from our products but also from external sources in the industry,” says Sethuraman Kannan, CIO and vice president of information technology, Star Health.

Using tools such as Google Analytics 360, Max Life Insurance was able to understand a customer’s insurance-buying journey. The company claims that it closed FY17 as No. 1 in the online term market, and that it recorded a 115% year-on-year growth thanks to its digital sales channel.

IT’S NOT JUST about Big Data. Companies, particularly in manufacturing, are using robotics and automation to improve productivity. Nandan Denim, for instance, needed 2,500 people to man 100,000 spindles; today, with automation and other technological advances, that has come down to 1,100 people. It’s not necessarily reduced employee costs, but has allowed the company to invest more on highly skilled workers as well as on skill development.

“It is imperative for companies to automate and innovate if they want to survive in this hypercompetitive world. It is more about survival than anything else,” says Narayan. If smaller companies want to make the leap into the big league, automation should be one of their key mantras.

Over at GreyOrange, 27-year-old Kohli is an ardent evangelist of robotics— and not just because he makes a living selling robotic systems. Nor is it only about beating larger competitors, he says. Automation and technology systems can “make India into a competitive manufacturing powerhouse of the world. China has already done it and it is time for India to take the plunge”.

One of the most popular products from GreyOrange is its linear sorter, an artificial intelligence-powered robotic conveyor belt that picks, sorts, packs, and dispatches packages according to volume, weight, and destination. It’s a huge success with e-commerce and logistics companies like Flipkart, Jabong, Pepperfry, Aramax, and Ekart Logistics. There’s also Butler, a robot that carries goods and stacks them in warehouse racks. This product has become a hit with pharmaceuticals players because they can be sure that the right drugs are stored in the right place.

Warehouse automation products, like what GreyOrange provides, will allow companies to grow without necessarily investing in bigger warehouses. Robotic sorters improve efficiencies because they are faster and more accurate and, unlike human workers, need no time off. “With better product profiling, more reliable measurement systems, and logistics and distribution, companies can cut revenue leakages, enhance productivity and efficiency and thereby help them become more competitive vis-à-vis the bigger players,” says Kohli.

There are other kinds of tech innovations that companies have adopted. Praj, for one, uses the “walk through” technology provided in some modelling software to visualise how a factory or system will look; the technology also allows its designers an inside view of where the pipes and walls are, so they can understand the flow and ensure there’s no confusion.

THE ONSLAUGHT OF new technologies and the speed that characterises the connected world is forcing even the giants to revisit their business models and future investments. With automation, data analysis, and tech tools easily available, smaller companies are no longer intimidated by their bigger, richer competitors. For once, the playing field appears level, and those companies that are willing to automate, digitalise, and innovate have the best chance to grow and prosper. “Today, even a small hospital in a tier II city can provide similar levels of health care as any big hospital in a metro by the use of technology,” says Vikas Arora, cloud business leader for IBM India and South Asia.

The key takeaway in this digital age is that owning more assets does not necessarily translate into a leadership position. Globally, companies such as Google and Facebook have proved that it is possible to follow an asset-light strategy and still lead the market. It’s a strategy that’s beginning to find favour in India as well, even with manufacturing companies such as BPL.

Pramod Chaudhari (left), founder chairman of Praj Industries. (Right) Samay Kohli, co-founder
and CEO, GreyOrange.

This model has seen the rise of aggregators, whose aim is to help smaller companies grow without burdening them with assets—by aggregating raw materials and selling them at a discount to smaller players. Power2SME, an online business-to-business player that is helping SMEs become future ready, has built simple-to-use tech platforms for companies, which allow them to track their orders as well as undertake transactional activities such as placing new enquiries, checking price quotes, uploading purchase orders, checking status of delivery, account statements, notification of payment due, etc. This platform is available 24×7 to all customers and enables them to reduce costs and build efficiencies in their business processes, helping them compete on an equal footing with large enterprises.

“Our goal is to provide a complete digital ecosystem for the medium and small-scale sectors, resolve their top 10 pressing problems, and thereby free them from the day-to-day hassles of running the organisation,” says R. Narayan, founder and CEO of Power2SME. He says the name of the company was inspired by a John Lennon song about power to the people. More important, it also describes its mission statement: empowering smaller manufacturing units to optimise their true potential by sticking to their knitting without being bogged down by infrastructural and other issues.

Power2SME is one of the few aggregators, helping companies with everything from finance to procurement, but it is not the only business set up to help companies manage their business. There are business-to-business players like TradeIndia and IndiaMART, as well as technology solutions providers like NEC and Marg Compusoft. NEC Technologies, for instance, offers scaleable data analytics solutions to companies. “It not only reduces the initial costs, but is scaleable architecture means that it can be used across appliances,” says NEC’s Sinha.

Marg Compusoft offers software services to help smaller companies manage everything from accounting to inventory and store management. “Our software will also help in predictive analytics, which will allow the company to take a decision on what to produce, how much to produce by looking at historical data,” says Sudhir Singh, managing director, Marg Compusoft. The company has recently slashed the price of its GST solution from Rs 10 lakh to Rs 10,000. “If you choose the right software, there is really nothing to worry about GST. An intelligent software will take care of all issues, including different rates for different products,” says Marg’s managing director, Thakur Anup Singh.

Brijesh Agrawal and cousin Dinesh Agarwal, founders of IndiaMART, want to disrupt the traditional marketplace for industrial goods, where hundreds of buyers and sellers congregate. “The very reason for the existence of such a marketplace has become redundant because the Internet allows, theoretically speaking, an unlimited number of buyers and sellers to come on a single platform and transact business,” says Agrawal.

The cousins decided to replace the crowded bylanes of Chandni Chowk with the information highway, and created IndiaMART, an online marketplace for industrial goods. Although IndiaMART proved a success, the cousins wanted to utilise the tech platforms available to set up an end-to-end virtual market, with everything from payments, packaging, logistics, and delivery resolved. That was Tolexo, a portal that provides access to almost anything a small industry needs, from power saws to safety helmets to office supplies.

THE DEMOCRATISATION OF technology (with the growing popularity of the cloud) allows even small companies and bootstrapped start-ups the chance to use the same platforms and services as their much larger peers. With automation, Big Data analysis, and other tech tools easily available, smaller companies are no longer intimidated by their bigger, richer competitors.

With digital platforms like Alibaba, Amazon, and Flipkart, even a tiny organisation can become a ‘micromultinational’. Any company can source products, services, and even ideas, from across the world, and can, in turn, sell everywhere (subject to the law).

“The digital form of globalisation has meant that even the smallest company can be born global and hope to compete with the best in the world,’’ says Narayan of the National Institute of Financial Management. We are, in many ways, seeing the birth of a new industrial revolution based on algorithms, and those who embrace it will grow and prosper.