Hello Hi, Today I'm going to talk to about a part of business that usually we don't recognize as a formal industry or a formal business and usually it's referred to in various different reports and documents.
That part of street that we in business take for granted. And we oftentimes don't even look at them. We forget that this entire infrastructure and framework which pretty much runs our life on a daily basis is also a form of business. And we label them as marginalized, Informal, Unorganized sectors.
By labeling this industry as marginalized Informal unorganized because in every parameter of business metric, they very often exceed what we consider to be the tier 1 companies the ones that are listed in high rise buildings nifty the big giants the unicorns and the branded organizations. I Don't know how many of you are aware that close to 50% of the worlds GDP is contributed by this unorganized industry. Not by the organized industry but by the unorganized industry and those of you think that FDI.
The unorganized industry employs close to 90 percent of our workforce. In some countries, 90% of that is Employed by the informal industry by the unorganized industry and as I'll show to you with one example after the other they also perform pretty much in every metric better than Tier one businesses or businesses that we normally consider to be the benchmarks or in many cases the Aspirational companies that we want to join.
I'm sure many of you must have seen these stores these bookstores, food counters, shoe makers etc You see an example of a bookstore on a pavement, You can actually measure that the per square footage revenue and return of investment. That happens in a payment exceeds by several multiples the return of investment that happens in these big malls that you see the shiny malls the the chrome and glass. And the branded stores the payment actually delivers a much better rate of return for every dollar that is invested in a business over there. These books that you see stacked In the pavement, you would have also noticed that many vendors carry these books in their hand now. Those of you who are Marketing students or who are studying FMCG businesses, You'd be taught that there is a whole science in placement of products in the shelf space, actually the self shell place is very actively contested and fought for and there's a whole design principles that go into it. My thought is that the shelf space that you see this old man carrying, He has to carry the set of books and certify it by his sweat equity, he has to make sure that every book that he adds on which is another 200 grams and Every three to four kilos that he carries on a daily basis and by the way when you carry 3 or 4 kilos for more than a couple of hours It doesn't feel like 3 or 4 kilos, It feels much much heavier matter of fact. I tell a lot of my other friends that if you want to know that you have arrived, Then you need to find your book in this stack if it is there in this stack then this old man has certified That your book is going to become a best-seller. Right now you see a salesman and he is a sells boy.
Do you see a salesmanor sales boy who is selling flowers in the street corner and you would have seen them in traffic lights and so many other places? This sales boy who has a 30% margin The flower that he sells to you for 10 dollars, it may have costs him 7 dollars to acquire that and he's got a 30% margin. More importantly he can give you a 50% discount on the spot if he likes your face If you try to get even a 5% discount in our organised business if you are trying to implement a 5% discount that decision has to travel all the way up to the Chied Executive or in some cases the Company Board and Then come down from there, and by the time that decision comes, the opportunity has already been lost. This is an example I want to illustrate to show you how the distribution of wealth in the informal sector is far more equitable than the formal sector.
So suppose you eat a plate of noodles from a Vendor in a street corner, and he charges you 5 dollars for that plate. He keeps only 2 dollars of that 5 dollars the remaining 3 dollars goes into the entire supply chain the people who wash the utensil, the people he buys noodles from, the people who bring it in an auto rickshaw to the street. They are the ones who get it if you eat the same plate of noodles in a five-star hotel Which costs you about 100 dollars? The bulk of that money is kept by the establishment and a very miniscule percentage of that actually reaches into the ecosystem.
The third example I want to show you is the fluidity with which these businesses operate.
What you're seeing over here is a street vendor? Any idea of what he is selling, he's selling something original. Him and other millions of vendors like him. They have to change their entire inventory, their supply chain, their target segmentation, their pitch the method, by which they sell every month or month and a half, so they actually change their entire supply chain their entire business model nore than twelve times in a year. Now compare that with the business transformation on an organizational realignment that big organizations try to do and I'm given to understand from management gurus that it takes anywhere between five to seven years to implement organizational transformation. Which this market does twelve times in a year? That's the kind of community that they have - the kind of agility with which they can operate. If you look at this marketplace, you can see more enterpreneurship happening in this crowded marketplace than you will find in the Silicon Valley or in incubation centers. Let me explain this to you You might have noticed that when you go to these marketplaces, as the red lights suddenly change, a new product will emerge. It may be a toy, sometimes It will be a collector's item. Sometimes It'll be a kind of a detergent to clean your car, Sometimes it's the national flag on 20th of june or 26th of January Or is this Christmas hat that you saw a few days ago now try and visualize How much a planning has to go into this entire process of deciding? Marketing slots and products change throughout the year. The supply chain of the equipment that has to come in with the toys that have to be purchased from China brought in over here the distribution that has to happen with the simultaneous launch of that product on the same day at every red light at every crossing.
Unsold inventory has to be taken back. The cash flow has to be managed it has to be done or basis of trust because there are no SAP. No business software. There is no Microsoft Outlook to make all of this happen and all of this happens seamlessly it happens without any Asset Manager, without any foreign fee or NASSCOM or any industrial body Which is supporting it it happens.
The busines happens completely Seamlessly with simply the speed of trust and with the innovation that comes literally at a daily basis the Unorganized sector also has some other great advantages firstly. It's an equal opportunity employer. Whether you're a man woman child transgender Educated illiterate old young matter of fact many of these people who might mention to you just now Usually find their jobs only in the unorganized sector I mean if you are take a poll of how many companies employed transfer sites or employ a Handicapped people or employ aged people You'll realize that it is only the unorganized sector Which takes them in adopts them and gives them ability to earn a living when the organized sector Has either abandoned them? Or don't even look at them you look at how they have to change their synergies literally on a daily basis the Vendor that you see was selling those snacks in the morning he sets up that store in front of Park or places where people Are going out and jogging and he sells a different kind of? Snack in the morning in the evening he sets up the shop in front of a liquor store And he sells a different kind of snack so in the morning and the evening he trips his business model. He'll shift his customers He leverages different synergies in the same city at different times of the day the last person you see on that slide is a tailor in fashion Street, actually he's a Garments owner shop owner in fashion Street and some of you must have been to Fashion Street, right? Do you realize that there are? identical more than 150-200 Identical stores, there is no difference Yes, right most of the customers who come to fashion Street or many many such streets all over India They're going to come only once so there is no customer repeatability There is nothing in that 30 seconds or one minute of interaction This tailor has to visualize the size he has to pick out that garment And it has to happen in the first or the second fit Otherwise that customer will move to the next store now that is the kind of agility that's the kind of? innovation that's the kind of customer understanding that these people have to do literally on a daily basis I also believe That there are more management lessons in the street out there then in many of the bee schools put together and let me give you
This is something that I give away for free This person has learned the lesson which a lot of us take a very long time to learn What is enough and? How do you define what is enough you define when you have had enough? By having an alternate source of revenue and choosing not to exercise That is when you have arrived in life And you can say I have had enough and to my mind this CEO of a medical Establishment actually does more CSR than some of the biggest hospitals that I've ever seen because they do 2% CSR which is mandated by the government he does 50% CSR because he is realized that he's had enough a lesson that very often in corporate India people learn after 25-30 years after getting cholesterol also all those kind of you know other perks of corporate life That's when they start realizing that they've had Now you might be wondering. I'm a former soldier and Why am I talking about India on ink and business and what's the correlation between? Being a soldier and talking about this and let me tell you the reason why? These 1 million young people who are going to come into the job market every month is India's one of the biggest strategic risks These raw energy which is coming into the markets and not finding jobs. You're all aware that while India Inc may be growing in in in in Sensex and in Nasdaq and several other metrics they're not creating jobs the Jobs are actually reducing what's happening because of automation it's happening because we need to be more competitive artificial intelligence so many other technological changes and actually removing jobs Now if this raw energy which is coming in to the streets It's not channelized, and we don't fight the right way to leverage it the right way to find them employment give them what they need Meet their aspiration then this Youth dividend that we keep talking about and you belong to it can actually start turning into a youth nightmare If we have to satisfy the 1 million Young job as aspirants who are coming into our streets every month GDP we'll have to grow literally at double digits, and we know that that's not gonna happen because of India ink So what do we need I? Believe we don't need two or three five thousand crore companies We don't need two or three unicorns what we need is five thousand two or three crore companies That's what and how can we do that how can we as citizens do that after all many of us are young? most of you are young, and you don't have that kind of money, it's not like you can invest and fund But I propose to you that we can actually start a fund and that Fund is called a VC fund and what does that mean we see when you see and you don't have to? Give that fund in the form of money. You can give it in the form of sweat equity You can give it in the form of your passion in the form of your ideas in the form of your intellect and let me Give you some examples, which are actually working as we speak right now you see this Thatched Hut kind of a shop, and this is a shop on the way from Bombay to taro bar It's on the road thought of as a tiger reserve some of you might have heard of it, and this old woman sells What is arguably? One of the tastiest khakhras you will ever eat in your life Now she charges just fifteen rupees for this plate Until the group of youngsters like you had gone to third Oba Happened to mention to her that you know what you can charge close to thirty rupees for it because people from Bombay were travelling are Expecting to pay fifty two hundred rupees, and they'll be happy to pay it so you're not overcharging them You are actually under charging them And you can make it to 30 rupees and secondly you should have a board outside your shop which tells people What is available here, otherwise? How do they know and she looks up and she says I don't know what is the board? What is the board so then these kids actually drew a board on a piece of paper and? Gave that to her and the next time when they went there they found that the shack not only had this board and a mobile Number, but it also had a long line of cars outside and her business had not only quadrupled But her bottom line had also increased by eight times because she's also Doubled the price one idea one simple element that was implemented And this old woman had an orbit shift in her life Why can't we do this with all these people who are trying to have a fighting chance against these organized laundries organized? Industries organized bakeries organized food joints this local is-3 Val of yours what why can't we just go to them? Train them a little bit give them a little bit of capex so that they have a twenty thousand rupee better iron Why can't we encourage them that we will give our clothes only to these marginalized people and give them a fighting chance I? Live in a place called Prabha Devi and and right in front of my house I see a very organised bakery there many of them, and you probably recognize which one This is and next to that is this old man who has been baking bread for 40 years The tag sign of the the modern bakery says we bake our own bread Suleiman Kaka has been doing it for 45 years.
There is no big deal with that Now what does it take for us to give him patronage to go to him and ask him to? Service us instead of going and buying that bread from that industrialized sliced bread cutting machine Infrastructure from where it comes there are hundreds of examples like that where we can actually take out our little bit of involvement our passion and make these miracles happen because I genuinely believe there are more miracles per square feet in India on ink and I want to give you a very very Very poignant example of that and you see in this picture This boy his name is Prathimesh The one whose face is circled now that image and Another boy called Jitu there were these two boys who used to be working in Mahindra and Mahindra And they used to work in Mahindra and Mahindra as office boys they were about 12th class pass and one of them had done his graduation from a night school They used to run about 5000 rupees a month Which is what office boys used to get in the year 2005? Which is where the story took place a b-school from Bombay bellacor you might have heard of it one of the one of the outstanding B schools of India They decided to do a very bored experiment they decided that we are going to pick two office boys Who are barely twelfth class pass and you know? they're the circumstances the financial circumstances the the the environmental circumstances that they come from the exporter and all of that and They said we are going to put them in our college with 14 mentors. They selected 14 mentors from amongst the students and The tasks given to them mission given to them was you will take these two kids with you Through this two years MBA program, no punches will be poor. No subsidy will be given There'll be no letdown on the marks or the marking system because they don't have the privileged background It is your job to train them everything that they don't know teach them anything that they need to know to Pass the MBA there to teach them ms word excel. They're there to teach them michael Porter's five forces in Wada Paau Language and The amazing thing is that not only these two kids graduate from that college They also in the merit list of the sixteen came eleventh and thirteenth which means that they beat their own mentor This is a picture which was taken in 2007 where you see them Standing with mr.
. Anand Mahindra Now there are three very important aspects that I want to tell you about this story The first aspect is when they were earning five thousand rupees a month and they were earning 60, 000 rupees in annum they were not a customer for a bank they were not a customer for a automotive company they were not a customer for a housing loan They couldn't be but the moment they got their first job incidentally both of them were placed in ICICI Bank Unfortunately Jitu is no longer with us. He died because of blood cancer but Prathimesh much went on to become Manager and their first starting salary was 6 lakhs so from 60, 000 They went to 6 lakhs now. They became a customer for a bank.
We have to stop thinking of building smart cities without smarts ideas. Instead of that We have to start building cities with hearts with the street vendors and business peole in mind.
How business is conducted in the street, What is the models? How do people survive on less than two thousand three thousand dollars a month? How is that possible they learned what they learnt. the market opportunities at the bottom of the pyramid, so it was a win-win for the entire stakeholders all the stakeholders who participated in this experiment, so What's the point? I'm trying to make with all of this? I think a lot of young people today and especially You lot and by the way all of you sitting, Anybody is sitting here in this auditorium belongs to point zero zero zero zero one percent of humanity or if you won the lottery of life, You're born and the right family had the right education, got the right breaks And you are if you can understand this talk watching it on video Then you belong to that minority who can understand English who's got a mobile phone with you you you you understand what I'm saying We have a choice our choice Is that we can look at these sexy companies that are listed out there and be aspirational about joining them? And you will join them And you'll you maybe make a difference maybe make a difference in a large You know organization like that any effort that you put in It's so I have some friends or some you know interns who come up And tell me you see in this Microsoft Windows version 10 you see this icon I made this icon that says contribute on the other hand you can choose to actually work with India on Inc and There you will have to work directly with the CEO CTO CFO chief marketing officer is the same person by the way You will have to persuade that person to adopt your idea if that person adopts your idea you will see the success or failure of that in literally two to three weeks and the cost of your idea will be paid for by that person either with success or failure if he succeeds He doesn't orbit shift if he fails he goes to bed hungry that night that is the Delta in which you are experimenting your intellect your education the the The potential that you think you have to be great managers great strategies great leaders. It must be first tried and Implemented in India an Inc because any idea that works in Indiana creates an orbit shift It takes a person who is in a certain economic strata lifts that person from that strata takes that person to a completely different strata Not only changes his life, but changes the life of his coming generations his children will go to a different school They will have different hygiene. They will stay in a different place, and that's the difference that you can make The way things are right now.
