Have a Coke and a Power Grid

When Peter Drucker landed his first job, just out of high school, as a trainee at an export firm, one of the firm’s most reliable sellers was a cheap padlock, which was purchased by the thousands in India. At one point, Drucker’s employer decided to spruce up the padlock a little, in order to make it harder to open without a key.

“But the improved padlock turned out to be unsalable,” Drucker recalled in Innovation and Entrepreneurship. Indian customers did not want a padlock that was harder to open, because most of them threw away their own keys, and yet thieves still stayed away. “Four years later,” Drucker noted, “the firm went into liquidation, the decline of its Indian padlock business a major factor in its demise.”

Doing business in India has always required keen sensitivity to the nuances and needs of customers there. So it’s not surprising that Coca-Cola chairman and CEO Muhtar Kent, writing in McKinsey Insights, underscores the adjustments Coca-Cola has made to penetrate the market.

India as seen from space. Image source: NASA
India as seen from space. Image source: NASA

We figured out, for example, that it wasn’t enough to provide small stores with Coke signs and teach them to display our products,” he writes. “Many couldn’t keep our drinks cold, because they weren’t connected to the electrical grid. More critically, small stores in India often are run by women, who have more difficulty than men in exercising economic rights like getting access to credit.”

However, Kent notes, Coca-Cola was able to work with these owners to address “problems in ways that helped them, helped their communities and also helped Coke.” For instance, bottlers have assisted in supplying nearby villages with running water. Coca-Cola has had a major hand in bringing electric power to village stores, which “helps us sell our products cold—but it also means electricity for the whole village.” And the company has even been helping women to secure property rights for their stores. Kent concludes that anyone looking to succeed in India must recognize “that our future is tied to the communities where we operate.”

Given that Drucker consulted for Coca-Cola, it’s not surprising that his principles are right in line with those laid out by Kent. The notion of trying to provide more than just products and a sign to retailers was, in fact, something that many businesses learned in Japan, where, as Drucker advised in The Frontiers of Management, “the manufacturer is expected to finance the distribution of his goods.” He added, “To do this was the secret of Coca-Cola’s success in Japan.”

More broadly, Drucker advised enterprises to stay deeply aware of their effect on their surrounding communities. “To discharge its job, to produce economic goods and services, the business enterprise has to have impacts on people, on communities and on society,” Drucker wrote in Management: Tasks, Responsibilities, Practices. “And, increasingly, in our pluralist society of organizations, it has to add to its fundamental concern for the quantities of life (economic goods and services) a concern for the quality of life, for the physical, human and social environment of modern man and modern community.”

How do you see India evolving over the next decade, and what’s the role of multinational corporations in this evolution?