“Sacrificing Short-Term Benefits For Long-Term Goals Helped Us Survive”

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Sunil Raina, president and business head, Lava

The last ten years have been a roller coaster ride for many mobile phone brands in India. While some entered and captured the markets, others simply ceased to exist. The brands  from China have been ruling the mobile phone market. According to several reports by the likes of Counterpoint and International Data Corporation (IDC), at least four of the top five mobile phone brands continue to be from China.

In this context, it is heartening to know about an India based mobile phone brand that has not only survived the influx of foreign brands but even made a big impact in the domestic feature phone market. Sunil Raina, president and business head, Lava, in an exclusive conversation with Electronics Bazaar’s Mukul Yudhveer Singh, shares how the company has made it into the list of the world’s top five feature phone brands. Excerpts from the conversation follow…

EB: Lava is the fifth largest feature phone brand in the world. What is the secret  recipe behind this success?
The answer to this question is very simple. From Day One, Lava has focused more on building the fundamentals of a business rather than taking shortcuts for shortterm gains. There were two key things that we did—one at the front-end and the other at the back-end. We chose longterm goals over short-term benefits.

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When we ventured into the mobile phones business, the design ecosystem for it was nonexistent in India. At the backend, we invested in a design house facility located in China. In fact, ours was the only Indian company to have a design team (of around 700 people) located in China. I must add here that no one at that time was interested in a design facility. This investment in a design house was the first fundamental that we knew was essential for long-term survival.

The second thing that we did was start our own manufacturing facility here in India. Instead  of going with a third-party, we wanted to ensure that the products we retail are made by us. In a nutshell, we have always ensured that everything related to phone-making was in our control.

At the front-end, what we also refer to as the sales and distribution side, we realised that  while almost every brand goes to the same retailer and distributor for sales, there is still a  lack of transparency. Our teams researched and found out that the schemes and incentive programmes run by a lot of brands are not transparent to the channel partners. The more  the number of retailers and channel partners a brand ties up with, the more the transparency gets lost. It gets difficult to deliver the same message to every retailer and channel partner.

To address this challenge, Lava invested in a technology based tool that connects the company to all its channel partners. We ensure that the same message is delivered to everyone in our sales and distribution chain.

EB: Tell us more about the company’s long-term and short-term goals.
Lava sees mobile phones as devices that humans are most attached to. The experience of
using mobile phones that’s created by various companies is usually what diffe rentiates one brand from the other in a consumer’s mind. If you see things from a channel partner’s point of view, they sell both feature phones as well as smartphones. When we started operations, Lava would launch an average of two to three models of mobile phones in the market every year. This strategy was driven more by what our competitors were doing and less by what the consumers were looking for.

Eventually, brands started exiting India and we realised that the product experience, and not the number of models you launch in a year or a month, matter. We re-visited our strategy, and discussed focusing on the product experience rather than the number of launches. As a part of the process, we shrank our product portfolio from 70 models to around ten. Understanding the importance of the product experience helped us find the differences  between long-term and short-term goals.

Choosing the customer segment also guided us towards differentiating between long-term
and short-term goals. We designed and delivered mobile phones for people who had not used technology. Now we are at a point where we can easily start competing in the mid-level segment. All this has been possible because of the differentiation that we could make in our long-term and short-term goals.

EB: Why did you decide to develop a system for the Indian channel partners and retailers, and how exactly did that help?

The mobile phone industry and channel partners work on promises. Brands usually promise a date by when they will transfer payments to retailers. The system that we have developed is a two-way communication tool between the partners and us. It also enables us to directly transfer any amount into a partner’s bank account. In fact, we are the only mobile phone company that follows this exercise. Building trust among channel partners was always among one of the fundamentals and this system has helped us develop that trust.

Thanks to this system, Lava has not missed a single payment in the last two years. We pay our channel partners on the same date that was promised by us. This platform connects our factories, mother warehouses, state warehouses, distributors and retailers with the help of technology. Every transaction that happens in the ecosystem gets updated on our SAP ERP system. The best part is that anyone working in the Lava team can update information on this platform using a mobile phone. Be it a distributor, retailer or an instore promoter, if a transaction has to be carried out, it will only be through this platform—there is no other way to carry out transactions for Lava products.

Our channel partners use this platform to raise complaints and give us feedback as well.
From payments and complaints to product launches and scheme updates, our channel partners rely on just one platform. We now serve around 160,000 channel partners in India through this one system.

EB: Speaking of channel partners, which channel did you depend more on initially?
When brands from China started foraying into the Indian markets, there was a lot of cash-burn happening over the online channel. The offline versus online war, especially for feature phones, started intensifying. Consumers started switching to online channels because of deep discounts. Brands started following different tactics. Some created new separate brands for the online channel, while some started selling the same products at different prices on different channels.

We decided to go the offline route. The reasons behind this  decision included the consumers we wanted to serve and the channel partners we were associated with. Lava made it a point that whether on the online channel, or the offline channel, each of its products would be priced similarly. Coming back to the long-term goals again, we realised that the deep discounting was because of the cash-burn that was happening.

One day (in the long-term) the brands would have to stop this cash-burn. There has always been support and trust between Lava and its channel partners. They have been there for us in tough times and we have been there for them, too. That has also helped us extend
our channel presence in all parts of the country.

EB: You mentioned that the in-house design team, R&D and manufacturing also played a great role in your success. Please elaborate.
We used to have a 700-member team working on design and R&D in China. Now Lava does
most of that work from India. The China team was working on designs of smartphones till
now. But we are also planning to start that entirely in India from August, this year. The point is that we started designing feature phones for Lava way back in time. We slowly understood that third party design houses keep multiple consumers (brands) in mind while designing feature phones. Such designs are more brand-specific and less consumer-oriented. How the in-house design team helped Lava in the long-term was that it designed feature phones around consumers in India.

It’s very simple—if you want a mobile phone to be equipped with localised features and capabilities, you cannot depend on designers sitting outside the country. The Lava Pay service that works without the Internet is the biggest example of how we provide what Indian consumers need.

EB: Can you give us any other example of localised design?
A lot of mobile phone consumers in rural India rank mobiles with good speakers and big batteries as their first choice. Then comes a mobile phone’s capacity to hold vast amounts of data. To meet these needs, feature phones must have a big battery and big speakers. This, at times, makes the device look bulky and less appealing. Our India team solved this issue with brilliant designs. What makes us the number five feature phone brand in the world is the fact that our phones have very good speakers, exceptional battery life and good storage, and yet these do not look bulky.

The ability to customise in accordance with Indian requirements has been possible only because of our in-house design team. The best part is that from end-consumers to channel
partners, everyone plays an important role in designing these feature phones.

EB: What’s the next area of focus for Lava?
The key focus from here is going to be innovations in the feature phones, as well as in the entry level to mid-budget smartphones. Lava is already working on features in devices specially customised for the Indian consumers. When I say innovation and features, I mean what has never ever been attempted or done before. Our R&D team is already working on these features and we will announce many of them very soon!

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