Eveready faces the Innovator’s Dilemma

The cover story on BusinessWorld magazine dated 28th of November is titled “Deepak Khaitan and his Magic Lamp”. The story describes the early success which Eveready is having with the LED lanterns. Since April 2009, Eveready has sold 2 Million pieces of these lanterns.The lanterns are priced between Rs 150 and Rs 450. These battery powered lamps are being pushed as a substitute to kerosene lamps in power deficient states such as UP, Bihar, West Bengal and Assam.

According to Deepak Khaitan, Executive Vice-Chairman and MD of Eveready “I can sell 500,000 a month if I could produce them.”

The LED lantern was a product launched by Eveready to provide a fillip to their falling battery sales. Each lantern uses up 6 D size batteries worth Rs  90.

Consumers like lanterns, but they do not like the battery-powered lanterns, as the same article says.

“Consumers want rechargeable lanterns,” says Sansar Lights’ Elahi. Lantern distributors echo Elahi’s voice. But the industry, as much as Eveready, is still double-guessing whether the rechargeable lantern market will ever be as strong as single-life battery lanterns. If Khaitan does introduce them, they defeat the very purpose for which he set up his lanterns business — to prop up D-size battery sales. If he does not — and a rival introduces a better value proposition —Eveready’s nascent lanterns business could be smothered. “

But what about solar lanterns? “As a company, why would I encourage selling solar? It will cut down my battery consumption,” says Khaitan.

Now, that’s a classic innovator’ dilemma, described by Clayton Christensen in his book by the same name. Should you introduce a new technology or product which will cannibalise and annihilate your own old product which generates bulk of the revenue and profits ?

Eveready’s problem is not very different from Kodak’s. Kodak saw its business as chemicals and paper which goes into photography. It did not embrace digital photography, because that would mean killing their main business. Kodak is a pale shadow of the blue-chip it used to be, because it did not wholeheartedly embrace the digital technology. 

Eveready got into lanterns to push their batteries. But if lanterns do well and consumers ask for rechargeable lanterns, the very reason it entered the lantern business would be defeated.

My suggestion to Eveready would be to go the whole hog and make a bigger business out of this accidental success in lanterns. If it means entering into rechargeable or solar lanterns or discontinuing D-size batteries, it should be prepared to do so. Already the lanterns acount for 19% of Eveready revenues, as the volumes pick-up, the revenues and profits could be much higher.

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One thought on “Eveready faces the Innovator’s Dilemma”

  1. When there is no mains electricity, what re-chargeable lantern will do. Eveready lanterns are targetted for the markets, where there either no mains power is available or even if available, is for very short durations.
    Solar charged lanterns could address this problem but due to high cost, poor villagers can not afford to buy. Therefore Eveready is moving in the right direction & shall be successful if able to offer suitable lanterns to the users.

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