Bharti Airtel's success secret: Reverse innovation

Bharti Airtel's success secret: Reverse innovation

By SiliconIndia   |    5 Comments
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Bharti Airtel's success secret: Reverse innovation
Bangalore: For any telecom operator, the pain point in the initial stage is planning for network requirements and arranging budget for such a capital expenditure.

According to a blog post by Govindarajan and Atanu Ghosh, the success of Bharati Airtel started when Sunil Mittal, Chairman, and his team decided to hand over the responsibility for building up and managing the company's telecom and IT network to vendors. With 110 million subscribers, Airtel is the world's third largest telecom operator.

Bharti chose to engage some of the well-known global equipment vendors and service providers to ensure quality services. It chose Ericsson, Nokia, and Siemens, which were key telecom network-equipment vendors, to build up and manage its telecom network. It chose IBM to build and manage the IT network. These proceedings mitigated Bharti's risk.

The vendors for telecom network management were paid only for the capacity utilized by Bharati, not for the equipment. Through the outsourcing arrangements, Bharati considerably lowered its costs while ensuring quality for customers, since vendors had outstanding competencies in their domains.

By transforming the telecom infrastructure, Bharati was able to offer additional value added services like "Music Bharati". Though the company does not produce music, it has created another source for revenue by distributing music via caller ring-back tones, mobile radio and music on demand.

Bharti has innovated a management model - the virtual corporation - that has enabled the company to manage an enormous subscriber base and still grow cost effectively. Bharti Airtel offers mobile telecom service at $.01 to $.05 per minute, perhaps the lowest in the world. Despite very low prices, Bharti has enjoyed compounded annual growth in sales revenues of 120 percent and growth in net profits of 282 percent per year between 2003 and 2010. Its market cap has steadily grown over the same period and stood at around $25 billion as of April 30, 2010.

Bharti Airtel's innovative business model has now become the norm not just in India's telecom industry but also in the telecom industries of several other emerging and developed countries.

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Reader's comments(5)
1: You rightly said that team efforts & out of the box thinking made Bharti as an world class example for other service providers, however this concpt may not be that much successful in manufacturing sector.
Posted by:Ajay - 14 May, 2010
2: An innovative move....
Posted by:Ishita - 14 May, 2010
Whats innovative is that this article has borrowed heavily from HBR without citing it.
Ken Replied to: Ishita - 17 May, 2010
Ken - I agree. It is only ethical to quote the reference - atleast cite the link! This article is published on 14th May 2010, and the blog on HBR authored by Vijay Govindarajan and Atanu Ghosh, is published on 12th May 2010. Copycat? Yes. But for god's sake "contextualise" your copy. And pay credits to whosoever you have copied from.

Ananth Swaminath Replied to: Ken - 07 Jul, 2010
Mr. Sunil Mittal is a perfect example of an entrepreneur who set broad vision & followed his dream. Somewhere I read that he started his career with helping his father manage a small company and then importing fax machines to India. He has not achieved this success in one night rather he learnt his lessons in those earlier ventures. Bharti is now perfect blend of entrepreneur laid & professionaly managed company. E-P:most suitable model in todays business environment. All the best to him & his team for further growth & achievements.
abhi32002 Replied to: Ishita - 14 May, 2010