'We prefer a deliberate mismatch of ambition & resources'

Innovation is at the heart of Hindustan Lever Ltd (HUL)’s growth strategy, says Managing Director and Chief Executive Officer Nitin Paranjpe. And the only driver of innovation–which is a lesson Paranjpe learnt from the late C K Prahlad who was on the HUL board–is a deliberate mismatch between ambition and resources. The big trick is to think in terms of targets that put ambition so much in excess of resources that you just eliminate the fear of failure.

For example, at a time when the company was adding just 20,000 to 30,000 outlets a year, HUL came up with an ambitious plan to add 500,000 more outlets in a year, which was achieved. Paranjpe’s logic is simple: you need to be doing things to widen the gap with others. If you are not widening gaps, then, in effect, your sources of competitive advantage are reducing.

Another focus area has been to trim costs. Paranjpe remembers the remarks made by a senior colleague quite early in his career – as long as costs are incurred, there is always a scope for reduction. The brief is simple: any cost that is not adding value to the consumer has to be snipped. Every single overhead, be it advertising, marketing or promotions, go through the same assessment: how much value is created, what can I save, what can I avoid, how much effectiveness can I generate in that entire process. Paranjpe calls the process ROMI – return on marketing investment – which is essential to ensure that your fixed costs are spread over a much larger turnover.

Finally, how you achieve the business goals is very important. Paranjpe calls it responsible growth. In November 2010, Unilever announced its Sustainable Living Plan, which has the following big goals: Firstly, 100 per cent of HUL’s agricultural raw material like palm oil, tea, coffee will come from sustainable sources by 2020. Secondly, the goal is to reduce the environmental footprint of the making and use of its products by half by 2020, which means things like greenhouse gases, use of water, energy should come down by half. For example, in Hyderabad, HUL is test-marketing Magic, which is a post-wash laundry product that saves three buckets of water per usage.

In some markets in Europe, Unilever has launched a dry shampoo that does not need water and a conditioner that does not need to be washed off.

“It’s not just a social thing. It opens up new business opportunities by catalysing innovation,” Paranjpe says. And the third goal is to touch the lives of one billion people by positively impacting their health and well-being by 2020 – with products like Lifebuoy and Pureit.

Doing well by doing good will hardly have a better example.