Innovation in Housing for the Poor. AGENDA. Solving the big problems. CEMEX: Innovation in housing for the poor. CEMEX discussion as course summary. SOLVING THE BIG PROBLEMS. Based on HBR’s list of audacious ideas for solving the world’s problems (. ID: 168828
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Innovation in Housing for the PoorSlide2
Solving the big problems
CEMEX: Innovation in housing for the poor
CEMEX discussion as course summarySlide3
SOLVING THE BIG PROBLEMS
Based on HBR’s list of audacious ideas for solving the world’s problems (
et al), what does it take to successfully conceive and implement innovations that solve big messy problems?
Poverty and affordable housing is a big messy problem..Slide4
IS GLOBALIZATION GOOD FOR THE POOR?
Management expert C. K.
April 16, 2010)Slide5
CONDITIONS FOR SERVING THE POOR
Move from focus on high gross margins to Return on Capital Employed (ROCE), achieving capital efficiency
Very low capital needs, focused distribution and technology investments, very large volumes at low margins
Prerequisite = TRUST, MNE’s and BOP Consumers have traditionally not trusted each other.
markets are hot-beds of commercial and technological experimentationSlide6
CEMEX and patrimonio Hoy“Much more than a home”
Innovation in Housing for the PoorSlide7
HOW DOES CEMEX SERVE THE POOR?(ANDERSON AND BILLOU, PRAHALAD)
Savings and Payment plans
Distribute or store
Deliver when needed
Does it meet the objectives?Generate business that represents competitive advantagesRepresent an accessible option for poor families looking for a better quality life through households by offering good-quality cement and raw material at reasonable and frozen-pricesOffer access to credit not available to poor otherwisePosition CEMEX as a responsible corporate citizen that is committed to societyBuild social capital
Does it add value, now and in the future?
Does it pay for itself?
Positive cash flowSlide11
NON TANGIBLE BENEFITS
Does it lead to competitive advantage?
New channel for selling cement and materials
Other innovations such as
Enhanced supplier/distributor relations
Employee pride and commitmentSlide12
CEMEX AS COURSE REVIEW
The Market Space
The Innovation:Patrimonio Hoy
Hoy, “savings/property today”, enabling very poor people to pay for services and building materials to upgrade their homes.
Does it fit the definition of innovation?
Action – design, invention, development…
Outcome – product, process, system …
Purpose – customer and company valueSlide14
TYPE OF INNOVATION
Radical or disruptive? Replace existing products, services, or processes.
Incremental? Improvements of an existing product or process design.Slide15
FORMAL VERSUS INFORMAL
Higher revenue per customer
Low revenue per customer
Financing generally not required
Financing is important
Depends on economy
More or less steady
Driven by bargaining power
Convenience-driven (credit, delivery, etc)
Recognized and trusted
Should build trust to deliver as promised
Very high potential
Usually located in places of easy access
Mostly located in remote areas
Stops at the distributor level
Requires close ties with end customersSlide16
WHAT IS INNOVATIVE? Doblin’s Typology
Description of type
Patrimony Hoy Example
How you make money
Small sales, incremental payments, fee for service, contract based on project not sales order, volume-based discounts
Non-traditional consumers (women and very-poor)
How you join forces with other companies for mutual benefit
Relationships with community, suppliers and distributors
How you support the company's core processes and workers
Program design: cells, enrollment, socios, promoters
Credit payment cycle
How you create and add value to your offerings
Separate organization (Patrimony Hoy), Modularization of materials, materials distribution and delivery (storage option)Slide17
How you design your core offerings
Cement is the same
Offer other raw materials
How you link and/or provide a platform for multiple products.
Supplier sell to Cemex
Distributors exclusive contract
How you provide value to customers and consumers beyond and around your products
Credit access, technical advice, architect visits, storage, customer serviceSlide18
How you get your offerings to market
Distributors and storage options
How you communicate your offerings
Word of mouth
How your customers feel when they interact with your company and its offerings
Pride of ownership
Build social capital
Complete solutions provider at low cost
Creating competitive advantage through
High level of commitment to customer service and satisfaction
Digital evolution: efficient production, distribution, and delivery processes through sophisticated information systems
Ability to identify high-growth market opportunities in developing economiesSlide20
Innovation Value Chain (Hansen & Birkinshaw):
Market research conducted by management and consulting team
Tested in Guadalajara
3 month study raised challenges of financing, lack of expertise and storage
Design Patrimony Hoy
Develop credit system
Design and negotiate supply and distribution systems
Teams in selected communitiesSlide21
Is there a culture of innovation? (Price)
Heavy investment in IT to boost productivity and efficiency
Strategic focus on innovation
Skills and Competence
Resources contributed to market testing
Leadership committed through strategy
Formal processes implementedSlide22
THE MARKET SPACE
Innovation Logic (Kim &
Industry conditions given, aim is to beat the competition, focus on current customer base through segmentation and customization, leverage existing assets and capabilities, maximize value within current industry boundaries.
Value Innovation Logic:
Shape industry conditions, aim is to dominate market through quantum leap in value, focus on customer values, develop new capabilities, maximize consumer value regardless of traditional boundaries.
Which is Patrimony Hoy?Slide23
VALUE ANALYSISRED OR BLUE OCEAN STRATEGY?
Promoters: build social capital, earn money
and Partners: access to credit, good quality product, shorter construction time, technical support, skilled labor, excellent service, storage space, accelerated payment options, reduce construction cost, training options, build social capital
Suppliers: steady demand, consistent revenue stream, zero-risk debt collection
Distributors: steady demandSlide24
Culture: Why does this work in Mexico?
Patriarchy, relationship oriented, pre-existing saving behavior through
, role of women in entrepreneurship and saving, poor housing
What are the values & beliefs that support
Economic volatility, distrust
1990’s move to open market
Not a lot of innovation or change in concrete
Drop in formal market sales
Informal market potential of do-it-
Creating Return on Innovation
Innovation FacilitatorsLeadershipInnovation StrategyVisionChampionTolerance for failureStrategic AssetsInput, Process, Channel, Customer and Market Knowledge AssetsPeople Innovation ChampionsSkills & CompetenciesIntrapreneursOrganization CultureValues NormsCommitmentResources CompensationIntellectual CapitalFinancialTimeSpace
Innovation PerformanceNew or altered products, services, processes, systems, organizational structures, or business models.
Return on InnovationBusiness ResultsGrowthProfitsIncreased MarginsMarket ResultsMarket capitalizationMarket growth
Innovation BehaviorsManagement PracticesFormal Innovation ProcessesUnstructured Innovation ProcessesCollaborative Innovation ProcessesKnowledge ProcessesCapture of existing internal and external knowledgeCreation of new knowledgeDissemination and sharing of knowledge
Innovative BarriersMindsetNot-invented-hereNothing-is-invented-hereShortage of resourcesOrganizational bureaucracyLack of motivation
Society / CultureHistorical ContextREGULATORY FACTORSGovernment & Social policiesECONOMIC FACTORSTechnologyIntellectual ResourcesStrategic Partners
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