MM 5011 KNOWLEDGE MANAGEMENT AND INNOVATION

3rd Individual Assignment Lesson Learned from Elco Mandiri Case: A Brace to Support Patients and a Business to Support Life

MBA Executive 46 29111334 Nindy Darista Utami

MASTER OF BUSINESS ADMINISTRATION SCHOOL OF BUSINESS AND MANAGEMENT INSTITUT TEKNOLOGI BANDUNG 2012

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I.

Business Idea

Fact: The business idea to use wood as brace was come from the small hospital; He found that a proper brace is not always available because of its expensive price and uncomforting situation happened because made from recycle materials and unhygienic braces. Lesson Learned: Outside-In Marketing strategy, recognize the need or problem faced by customers first then make solvable product or service. This can be called Major in minors, superior in small or detail things that can lead to product differentiation. Dr.Elius has observed a lot of need of braces for doctors and hospitals as well as patients. From these customer experiences, He could make wood braces which are practical, comfortable, and hygienic and also offer low price to lower the barrier of small hospitals. Finally, the customers recognized the value of Elco brace and place many order. Experience: This Major in minors is generally known in service company principle that becomes a touch point in their services. Obviously, this is a secret recipe from leader in service excellence such as West Point Super Market, Taco Bell Restaurant, StarBuck and Singapore Air Line who successfully positioned as market leader in giving surprising personalized service. (Marketing magazine No. 16/III/10 24 September 2003).

II.

Product Innovation

Fact: Dr.Elius keeps inventing new product development, new kind of braches, which are useful to customers. It is the key for the companys growth. From the leg brace and infuse brace to arm brace, hand brace, finger brace, and folding brace. Now, Dr.Elius thinks of new kind of brace, brace for air pressure. Lesson Learned: innovation is consistently found to be the most important characteristic associated with success. Enterprises that gain market share and increasing profitability are those that are innovative. Innovation is also strongly associated with growth. New business created with new ideas, by the process of creating competitive advantage in what a firm can offer. In this case, Elco has given an exclusive contract because Dr.Elius had successfully finished a new product innovation namely folding brace. In addition, Desi who take responsibility in production unit, forecasts that the production capacity will be increased as Elco Mandiri will grow further. Experience: Ive experienced as an intern in Unilever. In terms of innovation, they have launched new products including Walls Magnum, Walls Selection and several new variants and flavours of existing brands. Unilever has a wide variety of ice cream brands grouped under the family brand Walls, and each variant has a distinct consumer target. Walls Paddle Pop is targeted at children and its television advertisements always have a cartoon theme with catchy tunes, and are aired in the mornings during cartoon shows. In comparison, Walls Cornetto is targeted at teenagers, Walls Magnum

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mainly targets young adults and adult consumers and Walls Selection has families as its main consumer target. Throughout the review period, Unilever has a value share of 55% in 2010

III. Further Challenge in Human Resources

Fact: Desi said, the critical challenge is standardization. Though Elco has made some standard procedures, patterns and templates there are still product off the forms. This happen usually with new/temporary workers. Another problem is the fact that the sewers are moody. When they have bad mood, everything is going wrong. Lesson Learned: Human resource policies and practices need to be developed to anticipate companys growth. The figure below is an Apple innovation factory, from here we know that people is important in leading to creativity, stimulating bold & enterprising new ideas, and launching successful, profitable new innovations. Therefore, a company need to concern about people first.

Figure I. The Pyramid of Innovation (Apple) Experience: Ive experienced work as service assistant in Panin Bank especially in car loan division. The performance of Credit Marketing Officers(CMOs) was consistently observed by the National Car Loan committee in Head Office. For new CMOs, at first they were not allowed to process customer credit application. They need to join training about 1 month and after that work under the supervisor control until fully understand the good work process. This can be a solution for standardization in completing credit application process. To anticipate moody or unmotivated CMOs, Panin gives a great bonus/incentive and recognition (certificate) for those who perform well (achieved beyond target sales per six month). And for those who are underperformed consistently, they will get fired. Indeed, it seems cruel but Panin has offered benefits for those who well performed anyway. And I realize that company will grow with the motivated and creative employees thus retaining them would only be costs.

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IV.

Answer to the Question

1. Can Dr.Elius find researchers that as enthusiastic as he is to make medical equipment products in Bandung, Indonesia? 2. To increase the use of braces, Dr.Elius has to keep thinking. What else can his braces are used for? 3. Local manufacturer of medical equipment in Semarang and Tegal request to be allowed to display their product at Elcos showroom. In return, both manufacturers promise to market Elco braces in their cities. Dr.Elius agrees he wants to see that Indonesian manufacturer flourish in the medical equipment field. However he is wondering: Are there any other arrangement to cooperate with those manufacturer? 4. Dr.Elius received requests from several companies who want to distribute Elco braces both domestically and to foreign market. Some of them indicated that they want to distribute the braces under their own brands. Should he go with them or go global by himself? Answer: 1. Yes, I believe Dr.Elius can find researchers that as enthusiastic as he is to make medical equipment products in Bandung. For example, Dr.Elius can cooperate with FSRD ITB (lecturer and or students) in terms of innovation in product design (a design that focused on useroriented innovation). University can be a good source of innovation by inviting intelligent lecturer/student to join and make an innovation technologically. Experience: I read from Development Institute of Innovation and Entrepreneurship ITB. The article talked about FSRD teams who designed industrial products of LG Electronics for Indonesia Home Theater Set and PT. Indovickers Furnitama for their Mobile Office Storage System(Moss). 2. The next use of brace can be Thermobrace/back brace for children who suffer scoliosis (curvature of the spine) - New research published in BioMed Central's open access journal Scoliosis In many cases of childhood scoliosis, treatment is not required because the condition corrects itself as the child grows. However for the remainder their scoliosis can be successfully treated using a back brace, or in severe cases surgery, which prevents the spine from curving further. This brace contains a tiny heat sensor and is able to monitor how long it is worn, and that kids are also happy to wear, means that overall compliance with doctors recommended prescription was over 90%. 3. Below are some arrangements to cooperate with both manufacturer: - Transfer valuable expertise. The example can be by having marketing/technical representative in partner showroom. Hopefully, this would help the buyers when asking for product specification/complaint/solutions.

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- Allocation of profits, losses and draws. 1. Allocation of profits and losses in proportion to a partner's percentage interest in the business 2. A regular draw of each partner (a withdrawal of allocated profits from the business) 3. The timing for profits distribution, semiannually or at the end of each year. Dr.Elius and both manufacturers may have different ideas about how the money should be divided up and distributed, so this is an area to which they should pay particular attention. 4. In my opinion, Dr.Elius should go global by himself and relies on itself to build overseas production or sales bases one by one. Here are some reasons: Advantages: Enables a company to globalize step by step according to its own timetable Its advantage lies in that it provides the management team with a cushion period to learn to enhance its operation capability in globalization. Alignment of cultural management system and relatively low risk In Merger and Acquisition for example, 70% of cross-cultural M&A deals turn out to be failures, as the projected efficiency cannot be attained. Among the 70% failed M&A deals, 70% of their failures are because of obstacles in cultural integration - the two parties have different ways to do things and make decisions. The company falls under Elco Mandiris control Elco Mandiri has control of its products, brand and customers The company gets a big part of the cake Elco Mandiri would receive full profit from sales because while the majority of profit goes to their own pocket. Disadvantages: The process of globalization may be slow Elco Mandiri has to seek development in one country after another. While in Merger & Acquisition, the company could speed up their globalization because company can rise among the top-rank companies and enhance itself in a short time. The risk of failure is high The risk of failure when use their own strength is high as it has to fumble its way by itself. Elco has no partner to share certain part in the value chain; they do production, sales and market on their own.

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Experience: I ever heard that Huawei Technologies and ZTE have followed this path. These companies rely on itself to build overseas production or sales bases one by one. This growth strategy enables a company to globalize step by step according to its own timetable Conclusion: Since the advantage has more point over the disadvantage, then I prefer Elco Mandiri to go global by himself. But, if obviously the company has limited resources and capabilities (see from the real finance data of Elco Mandiri), then I prefer Elco Mandiri to form strategic alliances in seeking for globalization.

Here are some reasons for strategic alliances: Advantages: Low cost Elco Mandiri can leverage the resources and strengths of its strategic partners. Low risk The risk of failure would be lower because it will be shared by its strategic partner. Disadvantages: Elco Mandiri falls under others' control Elco Mandiri cant control of its products, brand and customers Elco Mandiri gets a small part of the cake It is because the majority of profit goes to others' pocket Experience: I read from article the strategic alliance is the major model used by Taiwanese companies in seeking globalization such as Galanz, Midea and Changhong have taken this way. They concentrate on a certain part in the value chain and form strategic alliance to do sales, production, R&D and market together.

Personally, I suggest Elco Mandiri to gain ground gradually when going global to reduce risks. They can first focus on a certain region or a product so that there will be lower risks and their staffs can have an opportunity to learn. No company can go global for free and in no time. They should build capabilities to operate and manage businesses globally
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