‘Grow big by serving small’

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Sunday, March 9, 2014


FOR business to grow big, it must be able to serve the small. Napoleon Nazareno, president and chief executive officer of PLDT and its subsidiary Smart Communications, has proven this twice in his career and hopes to do the same in addressing the digital divide in the country.

As he received his honoris causa degree as doctor of technology from his alma mater University of San Carlos last Saturday, Nazareno recalled at least two incidents that have proven that the strategy works.

The first was in 1983 when he was working for Swedish company Akerlund and Rausing. He had just been appointed general manager of the Philippine office when he was approached by an officer of Kraft Gen Foods.

They wanted to replace their expensive bottles and tin cans with cheaper flexible packaging materials.

Huge risk

Nazareno said changing the packaging was a huge risk for Kraft back then because its instant juice brand Tang was positioned as a high-end product and the shift to a lower cost package could “cheapen” the brand and affect sales.

“You look at a sachet refi ll pouch and you just see plain, pedestrian plastic. But actually, it was revolutionary technology.

It literally changed the look of supermarket and grocery store shelves by replacing the more expensive glass bottles and tin cans,” he said.

He added that after Kraft started it and succeeded with boosting its sales, most companies followed. “That overhauled the economics of consumer marketing. What used to be available only to the upper and middle classes had now become affordable to everyone.”

Seventeen years later, as president and CEO of Smart Communications, Nazareno was faced with a similar problem.

They had reached a point where expanding their subscriber base was about Napoleon Nazareno highlights market revolutions sparked by rethinking sachet distribution to reach its limit and in 2001, mobile phones were seen as an upper-class service while prepaid services could be had
at P300 at the lowest-considered a burden for many Filipinos.

Then an idea occurred to them-selling airtime in sachets, similar to how many consumer products were being sold.

Electronic load Using existing technology that they were using to deliver the Smart Money service, the company launched Smart Load in 2003, which enabled the transfer of airtime and text load from one cellphone to another.

“The important thing about electronic airtime load is this made it possible for us to offer airtime load in sachet packs as low as P30. Today, we offer loads as low as P5. If we tried to sell sachet loads the old way, using physical cards, we would have lost our shirts. The production and distribution costs associated with selling load via physical cards were just too high for airtime to be sold in sachets.”

Nazareno said this democratized cellphone use in the Philippines, with cellphone penetration nearly a hundred percent today. It also created a network of over a million retailers, many of whom run sari-sari stores and are students, office workers or housewives.

Smart Load was also a world-fi rst and an innovation of Filipinos that many companies around the world have copied.

Today, he said their dream at the PLDT Group is the bridge the divide between those who can access the Internet and those who cannot.

Inclusive growth

“All the studies show that Internet access raises economic growth and improves people’s lives. So, we need to bridge the digital divide if we are to promote inclusive growth that improves the welfare of the poorest of our countrymen.

If before, we dreamed of putting a cellphone in the hands of every Filipino, today we dream of Internet for all.”

While the company has worked on extending its fi ber optic transmission and international submarine cable systems to provide coverage for every part of the country, Nazareno said they are not stopping there.

Once again, they are turning to the concept of sachets to make data services more affordable.

He explained dynamics of their smartphone application called PowerApp, which makes it possible to access relevant services on the Internet for as low as P5.

“To build a jumbo business, you need to learn how to provide products and services in small, sachet packs. To succeed in a big way, you have to learn to serve the smallest of customers.”

Published in the Sun.Star Cebu newspaper on March 10, 2014.

Business

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