Dear ATCA Colleagues; dear IntentBloggers

[Please note that the views presented by individual contributors are not necessarily representative of the views of ATCA, which is neutral. ATCA conducts collective Socratic dialogue on global opportunities and threats.]

We are grateful to Mehmood Khan, Global Leader, Unilever Innovation Process Management, for his contribution "Innovation: Sustainable Value Creation in the face of Global Risks -- Countering Climate Chaos, Radical Poverty and Demographic Skews" to ATCA.

Mehmood Khan is the Global Leader of Unilever Innovation Process Management based at the landmark Unilever House, City of London, UK. His latest set of responsibilities have added another dimension to his core expertise in the Unilever Business of accelerating business growth through Innovation by following common global process and systems. The nature of work involves working with people around Unilever by establishing Unilever Innovation Communities across the business as well as spanning across Categories, Brands, Continents and Country boundaries. Through Mehmood's drive, these Innovation Communities provide platforms for building innovation capabilities, incubate creativities, and grow them into true business innovations.

Since 1982 Mehmood has been with Unilever and has worked in wide areas of the trans-national business: Marketing, Exports, Procurement, Business Development and Innovation. Out of 22 years at Unilever, 10 years have been in pioneering new Unilever businesses in diverse countries including Vietnam, Cambodia, Laos, Mongolia and North Korea, along with developing new portfolios in China and other countries in East Asia. Mehmood originates from India and has lived in Holland, Singapore and is now living in the UK. He graduated from Haryana Agricultural University (HAU) Hissar and then did his post graduate Studies in Management (1977) from the Indian Institute of Management, Ahmedabad (IIMA). While still at IIMA, Mehmood worked with Prof Ravi J Matthai on Experiments in Educational Innovation. On graduation from IIMA, Mehmood worked in the voluntary sector on turning Indian livestock to become a more productive resource and making them into a base for cottage industries. This work led Mehmood to building professional farmers organisations. Mehmood is a Managing Trustee of Rasuli Kanwar Khan Trust and IIM Europe and a Trustee of GEN Initiative UK. He is married to Sanobar for 27 years. Together they have two college going children. Sanobar runs her own North Indian Restaurant business in Mongolia and an electronics marketing company in UK, China & India. He writes:

Dear DK and Colleagues

Re: Innovation: Sustainable Value Creation in the face of Global Risks -- Countering Climate Chaos, Radical Poverty and Demographic Skews

Introduction

The world we live in faces many challenges on many fronts. Just for starters, population is set to shoot up from 6 billion to 9 billion people on the planet in the next few decades. This, in turn will increase the pressure on resources on this planet even more. Too much of the world still lives in poverty. And the planet can't cope with the way we're treating it. We're already seeing environmental degradation and the consequence of global warming in extremes of flood and drought in different parts of the world; Katrina-like hurricanes, scarcity of water and the disappearance of various species of plants, insects and birds; even animals are under grave threat, including the polar bear and the tiger.

Thankfully, unless one is a complete pessimist, the opportunities to do something, too, are enormous. The key question is how to tackle the challenges and tap the opportunities to create a sustainable future for ourselves, our children and our grandchildren. There will and must be multiple angles and many answers. But a very powerful answer I can see out there is Sustainable Value Creation Enterprise. Sustainable Enterprise which begins with you and me.

A Personal Journey through Nai Nangla, Haryana, India

To illustrate, I'd like to share with you my personal journey - starting, first of all, in the village where I was born in the Northern part of India. The village is called Nai Nangla and it is situated about 75 km south of Delhi, in Haryana. It has a land area of around 400 acres. When I was born, it was a village of around 350 people, in 70 households, so families were, on average, five in number. As I go back every year to my village, I have kept mental records of how things have changed over the years.

During my childhood, I remember beautiful landscapes, with streams of water flowing with plenty of fish in them, and buffalo cooling off in the water. The fields were teeming with deer, rabbits and pheasants, and each season there was something different growing, so it was always green and colourful.

Fast forward 40 years, and the latest population count of Nai Nangla is 1,700 people with, on average, more than nine in a family now. As the land area remains the same, the pressure on the 400 acres has become five times what it was 40 years ago.

Streams have dried out. In fact, the drinking water is coming through a pipeline from a bore well which is 5km away at the bottom of the Aravalli Hills. There are no deer, rabbits or other wild animals any more as there is nothing for them to graze on. The cropping pattern has changed and now the villagers are lucky to get one good crop a year, depending on the vagaries of the monsoons.

That is my village today. So what is the relevance of this little Indian village of Nai Nangla to Sustainable Value Creation? A lot! It is a showcase of both the opportunity and the challenge. 1,700 people are an opportunity in many ways, for the potential of what they bring to this world. From the detergents industry perspective, they are an opportunity, because they need soaps and detergents for health and hygiene - to wash themselves, their fabrics, utensils and homes. If we extrapolate to rural India, we are talking of 700 million people and, globally, over 4 billion in rural populations around the world. So the opportunity is huge but the challenges, too, are enormous.

Sustainable Value Creation Model -- Capitalism at the Crossroads

How can we tackle these challenges? If you listen to the anti-globalisation movement, big business is part of the problem, not part of the solution. But, as I've already indicated, in fact, there's a strong case for arguing the opposite: that business is particularly well-equipped to lead the drive towards global sustainability.

Multinationals now account for more than 25% of world economic output and, though they employ less than 1% of the world labour force, that 'less than 1%' is highly qualified and skilled . So they have both the economic clout and the talent to make a difference and, arguably, a greater responsibility too.

And I'm not the only one arguing it. There's a good book I can recommend, if you're interested, called Capitalism at the Crossroads, by Professor Stuart Hart of Cornell University.

As he concludes, and I quote, "global governance is in its infancy, religious fundamentalism has become a divisive rather than constructive force, and civil society lacks the resources and technology to make a large enough impact on its own... We desperately need a third way, one premised on a combination of global interdependence, sustainability and local self-reliance. Commerce may be the only institution with the resources, capabilities and global reach to make it happen."

In Practice in Vietnam

Again, I can draw on my personal experience. Back in early 1990s, I was involved in setting up the Unilever business in Vietnam. At the time, the country was still one of the poorest in the region and the Doi Moi reforms were only just beginning to open the economy up to foreign investment by companies such as ours. So there was, in those early days, very little exposure to the private sector and a lot of scepticism as to what benefits we might bring. I put my own and the company's proposed approach into the form of a model, so I could share with them our values and try to explain.

The model I shared with them was Sustainable Value Creation. In this model, for it to work, everyone in the chain has to be able to find value. It has to start with people - as people and as consumers. Do we understand their needs and circumstances, their fears and aspirations?

The other essential early link is employees. What is their motivation? Do they believe in the business and what it stands for? How often does it seem to be the case that people work solely for money, and volunteer on weekends to find satisfaction?

For this model to work, each one of us needs to examine our values and choose to work for a company or organisation whose values are compatible with our own. In my case, my values are defined by my upbringing, and I joined Unilever 24 years ago because I found its values compatible with mine and still do - I relate to them and it motivates me.

After the company and its employees, suppliers and customers are the next links in the chain and they must be able to find value too. Then there must be value too for the community as a whole, and the environment. And finally, value for investors.

As I said, our partners and the authorities in Vietnam were sceptical - sceptical that it was really possible for enterprise to create value like this, for all these stakeholders - not at the expense of some for the benefit of others.

But we went on a journey together in Vietnam and, last year, Unilever Vietnam celebrated its 10th anniversary of operations in Vietnam and received a high honour from the Vietnamese State President and Prime Minister, recognising the company as "a model of foreign investment in Vietnam." I think it's because we are delivering according to that model. Every time we launch a product, within seven days, 95% of the population can reach it. We have several of the most-loved brands in the country, and Omo is right at the top.

We are one of the preferred employers in the country, and preferred customers for our suppliers. The retailers - most of whom are small businesses - love us because we have such a close connection with them, and the community loves us because we are acting responsibly and generating all this activity.

For example, when we wanted to launch our Lipton tea brand, a tough challenge in what is a coffee country, we looked for where we could add value and started talking to college students in Hanoi. The idea was to try to get some insights into the youth of Vietnam and one of the things the students were telling us was that they were freer now to enjoy themselves and party, even in mixed settings with dating between boys and girls, but they couldn't afford the alcoholic beverages they aspired to, to make the party more 'fun'. So together with one of the students, a guy called Minh, we came up with the idea of making Lipton part of the party. He was in charge of the Lipton Pubs and Music campaign, which provided music and entertainment to liven up their party scene and helped Lipton take off as an affordable, non-alcoholic, cool drink for young people.

More recently we are working with local partners and our global partner, the FDI World Dental Federation to raise awareness of the importance of good dental hygiene among children, under a programme called Protect the Vietnamese Smile. Oral care is a big issue in Vietnam with some 85% of children aged 6-8 suffer baby tooth decay, according to recent Vietnam Dental Institute statistics. Our P/S brand has provided a million sets of education kits to over 22,000 kindergartens and primary schools and 3 million sets of 'My first P/S' to under 11 year old school children. So far tooth decay in 9-11 year olds has reduced by a third. And yes, of course, our business benefits too.

Unilever Vietnam today is a 300 million dollar plus business, and still growing. As for Vietnam, its GDP has grown over 7.5% a year since 2001. Deep poverty, which is defined by the Asia Development Bank as a daily income equivalent to under USD 1, has declined from over 50% of the population in 1990 to around 10% in 2003. By this measure, Vietnam has overtaken China, India and the Philippines. It also has a higher life expectancy and lower mortality rate than Thailand.

Testing the Model in Indonesia

I feel good about what I helped to get going in Vietnam. But of course I am aware that the issues and the impacts of this value creation enterprise can be many and complex and there remains much debate around, essentially, whether the value that multinationals create ultimately helps or harms the world's poor.

We did a study with Oxfam which has been particularly insightful in this respect. Oxfam had extensive access to, and cooperation from, our Unilever Indonesia business, to investigate in detail the socio-economic impact of our business on poverty reduction over a period of two years. The findings from this project were many and complex and the full report is available on the internet if you are interested.

What I would like to highlight just briefly is the extent to which Unilever Indonesia's operations were found to be creating value at the various links in our sustainable enterprise model. The study estimated that, while the company directly employs only 5,000 employees, it indirectly provides the equivalent of another 60x as many, or 300,000 full time jobs. Just over a third of that indirect employment was in providing inputs. The largest part of this was farmers, accounting for about 80,000 jobs. The company sought deliberately to support small farmers growing crops such as soybeans, coconut and sugar, helping them by providing credit, guaranteeing purchases at a contracted price and offering expert advice on improving seed quality.

But the area where most jobs were created, over half, was in distribution and retail, mainly in the millions of small shops and street vendors. Through them, about 95% of Indonesian households were estimated to buy at least one Unilever product.

So the fan effect of the value creation enterprise was found to be very extensive. And also complex. In Oxfam's words, "the creation of value, income, assets, and employment in itself is not necessarily an indicator of positive impacts for people living in poverty: this depends on how the benefits of the value chain are distributed, which depends in turn on other factors..." The study explored, for example, the risk of small farmers becoming over-reliant on a single, powerful buyer, and the risk of Unilever crowding out small, domestic competition which, in fact, did not appear to be happening.

The Power of Wal-Mart

Now let's travel a few thousand miles and take a look at one more example. To Bentonville, Arkansas, to be precise, in the US. Wal-Mart's epiphany, if you like - its new-found drive to go green - has generated no end of scepticism and accusations of 'greenwash'. But look at the power that this giant corporation has.

In a short space of time, the retailer has become the biggest seller of organic milk and the biggest buyer of organic cotton in the world. It also estimates that, if each customer who visited Wal-Mart in a week bought just one long-lasting compact fluorescent light bulb, that would reduce electricity bills by USD 3 billion, save 50 billion tons of coal and keep one billion incandescent bulbs out of landfills over the lifetime of the bulb .

In our case, Wal-Mart has helped our All brand Small & Mighty laundry detergent - which is a concentrated detergent in a smaller bottle - become a huge success.
We'd tried to launch concentrated detergents before, notably in Europe in the '80s, but with not very much success because people perceived they were getting less value for money and tended to overdose the concentrated detergent anyway.

But Wal-Mart agreed to give Small & Mighty heavy promotion and premium positioning in store. The result: we have a successful, market-leading product, and savings in packaging, water and energy in production, and fuel for transportation, Wal-Mart has cost-savings in packaging and transportation among other things, consumers find it easier to carry and store, and the environment benefits. I forget how many 'wins' that adds up to.

The Whole of the Pyramid

All of these examples have one thing in common, apart from the fact that they are all part of my working life experience. That is, they are aimed at meeting the needs, not of the few at the top of the pyramid, but of the many.

The huge power of Wal-Mart's greening initiative that has NGOs so excited despite their scepticism is that it has the potential to make eco-choices accessible to many in the US, not just the privileged few who can afford it.

Similarly our success in Vietnam has much to do with our focus on meeting the needs of the many, not just the wealthy elite.

That is not easy. It involves being adaptable and open to changes in the business model - accepting lower margins for higher volumes, for example, and creating a local distribution network that includes many small retailers and vendors to reach the rural villages, and may require support with micro-credit and advice, etc.

It also requires a holistic view of the brand imprint - for example, making laundry detergent available in sachets may bring cleanliness and hygiene within reach of many more people but it also creates a waste problem when all those sachets are thrown away.

The thing is, it's a challenge that our industry is ideally suited to, because that's what we do: make products that meet universal everyday needs for health, hygiene and wellbeing. We're not making Rolls-Royce engines or Lear jets (though I've nothing against those great brands).

Our Lifebuoy brand's Swasthya Chetna marketing programme in India and Bangladesh that promotes handwashing with soap is boosting sales of Lifebuoy, sure, but it is also helping large numbers of people, especially children, avoid death or disease from diarrhoea. In terms of value creation, does it get any bigger than that?

Squaring the Circle

For me personally, though, what has really brought this all home to me - literally - is what has happened back in my village of Nai Nangla. Earlier this year I helped to facilitate a meeting of all the villagers there - and people involved in the village life - to help them understand what their main problems were and how to prioritise these, so they could start to do something about them. They came down, perhaps not surprisingly, to water, education for children, unemployment, health and hygiene.
One of the things I'm thankful that I was able to do was introduce a scheme to the village that I thought could make a difference and that I know of because it is run by my employer, Unilever.

Shakti is a scheme to train rural villagers in India in business skills mainly by connecting women's self-help groups, set up by the government and NGOs, with business opportunities. Again, it is about finding new ways to serve the needs of the many, not the few.

Hindustan Lever offers the groups the chance to become very local, small-scale sellers of the company's products, or indeed to use their skills in another way.
Most of the women who have chosen to participate in Shakti have managed to create a sustainable micro-enterprise for themselves, generating a steady income that almost doubles their usual household income. A local bank has come in on the ground as well, to help with micro-credit

Now there's a buzz about the village and much more of a sense of self-empowerment. It may not bring back the deer and the rabbits but it has started showing the people the way and given them hope... . And if we can make this work for one village, my village... then how much can we do with our scale around the world?

Conclusion -- The Journey Continues

The point is, we each have our own personal journey - very individual and diverse. My experiences have personally kept me energised in my more than 24 years with Unilever, and have fuelled my belief that enterprise can take the lead in sustainable value creation - and should.

In truth, I believe it comes down to - and starts with - each one of us. When we examine our values and the values of the company that we work for, can we say that they are aligned? If so, then we can make a world of difference from our workplace.

Thank you

Mehmood Khan

[ENDS]

We look forward to your further thoughts, observations and views. Thank you.

Best wishes

For and on behalf of DK Matai, Chairman, Asymmetric Threats Contingency Alliance (ATCA)