How Mahindra Used Uber’s Strategy To Disrupt The Tractor Market – Strategy With RS

Uber for tractor!

To be successful companies have to disrupt or destroy there own business before others do it!

Sounds preposterous?

Let me share with you, an example, how it is executed – in real life!

Take tractor sales. It is used for farming & hence its market resides in rural India where farming is the main occupation.

But tractor sales have been under pressure for the last 2 years.

Why?

Insufficient rainfall in the last 2 years has made farmers vulnerable & they are postponing decision to buy tractor.

Result: Tractor companies’ are experiencing falling sales.

Mahindra & Mahindra is a market leader in tractor market. It too is experiencing falling sales.

 

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If you were hired by Mahindra’s Tractor division to get their sales graph moving northward – what strategy would you recommend to them?

Let me share with you the strategy Mahindra is proposing to deploy to get the sales moving up!

It is proposing to disturb its own business. Yes you read it right!

It is implementing a strategy made popular by Uber – instead of getting framers to ‘buy’ tractors they plan to ‘rent’ it to them whenever they require it.

Result: The farmer does not have to cough up large sum of money upfront for buying the tractor. They can rent it when required & for the duration required by them. This results in an improved cash flow & profitability for the farmer.

To implement this strategy Mahindra is planning to launch a digital platform – Trringo, which will connect farmers who wish to hire tractors / farming equipment & owners of tractors / farming equipment who wish to let it out on rent & guide them using location based mapping system to the nearest Mahindra franchise – so that both parties can achieve their business objective.

Trringo will have 2 revenues streams.

1. Franchises fees: Trringo is a franchise model & hence will make money through franchise fees paid by franchise owner.
2. Commission: Trringo will charge a commission fees to both parties for facilitating business between them.

Will Trringo – Uber for tractors succeed? Only time will tell because Trringo will be launched in June’16.

Business Lesson for us:

1. Companies will have to reimagine customers journey

2. Companies will have to proactively disturb/destroy their own business & reemerge in a more formable avatar.

3. Customers will not pay for a company’s inefficiency. A company therefore should squeeze out inefficiency / wastage from its system & process.

4. Increasingly customers will shun buying products – they will opt for ‘pay as you use’ model. You should start exploring how to implement this model in your business.

5. Your business should solve a social problem: In Trringo case the social problem they are attempting to solve is – mechanisation of farming. Currently only 35% of farming is mechanised. Through Trringo they are attempting to increase the mechanised component of farming, which will lead to improved output & profit for farmer… the benefit will eventually trickle down to all of us.

6. Technology will eventually collide with every industry … you should proactively embed technology into your business model.

If you wish to proactively disrupt or destroy your business, so that you remain competitive, then I will invite you to read my article published on Founding Fuel, titled, ‘Disrupt or destroy your business to make it stronger’. This article will introduce you to how companies we admire – Amazon, Netflix & others proactively distrusted / destroyed there own business & emerged in a formidable ‘new’ avatar & went on to win our respect & trust!

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rajesh-srivastava-insideiim

In this series, Rajesh Srivastava, Business Strategist and Visiting Faculty at IIM Indore gives you a regular dose of strategy case studies to help you think and keep you one step ahead as a professional as compared to your peers. Rajesh is an alumnus of IIM Bangalore and IIT Kanpur and has over 2 decades of experience in the FMCG industry. All previous Strategy with RS posts can be found here.

Comments

8 comments

Sajal Singh

Interesting. But dont you think the online platform may not work. How will farmers
1. Know about this platform(paper ads ? Awareness? Etc) and
2. How will they connect, transact online? Most of them are traditional, poor and lack any internet literacy.
3. Internet connectvity is still a novelty in Rural india. Localization might help. (Language etc)

Are they over optimistic?

Rajesh Srivastava

Sajal, apologies for the delay in responding.

1. Rural india has the most cost effective way of communication – Buzz (Word of Mouth). If the proposed solution genuinely addresses customers’ pain point in rural India then it will create a positive Buzz.

2. In rural India, there is an eco-system that exists where others pitch in to help. Take letters. When an illiterate person gets a letter, the postman reads out the letter. Similarly for internet – a local eco-system will evolve organically to take care of this concern.

3. As you would see Internet connectivity in rural India is on the ascent. Let me share with you data published in Mint –
“India, which has the third largest Internet user base in the world after China and the US, had about 375 million Internet users in October. By December, this number is expected to overtake US, the report said. China currently leads with more than 600 million Internet users.

Active Internet users in rural India are expected to reach 117 million by December and 147 million by June 2016 on the back of growing penetration of mobile phones in the country.

Rural Internet users witnessed a 77% jump to reach 108 million in October 2015. The number of active rural mobile Internet users grew about 99% to 80 million by October 2015, and is expected to reach 87 million by December and 109 million by June 2016, the report stated.

The contribution of mobile phones as the main Internet access point in rural India has grown to 60% in 2015 from 38% in 2014. The usage of common service centres to access Internet has reduced to 6% from 26% a year ago.”

4. My personal opinion is that they are not being over optimistic. Like any other company, they are trying to explore new avenues for monetisation.

PaniendraDutt

Sir, I too agree with the above comment. In addition to that, each village in rural India have few affluent farmers who own tractors. These farmers use their tractors for their needs and also rent-out to other farmers within their village.
1) Convenience for poor farmers ( don’t have to go to the city/town)
2) In most cases the poor farmers return back the favor by working in the landlords field’s (so, they don’t have to shell out a buck)
3) The local village farmers have a mutual trust amongst themselves when it comes to paying back the rent (delayed payments) as against the franchisee owners who have cut throat terms and conditions.

Clearly, I don’t see any profit for the franchisee owner from “‘renting the tractors” is concerned and so for the Company. Secondly, as I mentioned most affluent farmers do own other farming equipment as well who would rent-out in a similar fashion.

I’m sure a company like Mahindra has taken this viewpoint into consideration.

But it would be interesting to know, how the company would generate revenue through this business model. ( Sir please give your opinion on this ).

Rajesh Srivastava

Paniendra apologies for responding so late.

Yes I agree that many villages will be having landlords who own tractors which they would be putting out on rent.

To be able to answer your question, let us move from tractor to loans. There is a well established eco-system in rural India. Whenever any villager needs funds, he can go to the local moneylender / landlord. Therefore, micro-finance companies would have had no opportunity to provide loans. But as you would notice that well-run micro-finance companies are doing good business in non-urban India.

Yes, landlords in rural India would be having tractors which they maybe renting to others. But, the company research may have indicated that the rental charge by land-lords may be exorbitant. And hence a real pain point exists in rural India which the company would be trying to reduce or eliminate.

shashank1511

Again a stunning example how Mahindra War Room competition is able to solve real life challenges faced by Mahindra group.I remember this being a caselet in 2015 MWR competition and bright brains across B schools in India have again showed their mettle.

Rajesh Srivastava

Shashank I agree with you that it is a stunning example of how an organisation can solve real life problems.

Rajesh Srivastava

Akshay apologies for responding late. I would be the wrong person to answer this question. I would recommend that you contact the company directly.