Market leadership and Innovation with Digital transformation — Asian Paints Story

I was attending a session on Data Analytics for Business Leaders and there was mention about Asian Paints as a pioneer in using Information Technology and Data Analytics to become a market leader in the Industry.

Asian paints was one of the the 1st private company in India in 1970s to ever buy a Mainframe computer at a cost of R 8 Crore. This was 10 years before ISRO and IIT- Bombay had used a supercomputer, and 21 years before any other company in India used it. IT system was used for demand forecasting with the help of data analytics and improving service levels across the supply chain in comparison to other few companies which later used computers for only payroll and administration work.

It was in 1942, 26-year-old visionary entrepreneur Champaklal Choksey along with his friends Chimanlal Choksi, Suryakant Dani and Arvind Vakil saw an opportunity to make an entry in the Indian Paint market along with three of his friends. From 1967 they became the market leader in India and has been in this position even in 2021.

Way back in 1970s Asian Paints understood that delivering products that customer wants at lowest price, good quality and choice of products and colors is the key to be the leader in the industry. While most of the Paint manufactures were strengthening their Distribution network by adding more distributors to the augment supply chain and sales, Asian Paints founders thought differently and brought in Innovation to shorten delivery to end customers by removing Distributors from their supply chain and having only strong dealer network. This was a bold bet the founders took.

This was achieved through Asian Paints investing on Information Technology to understand and build a integrated platform to manager customer requirements, dealer requirements, raw material sourcing and logistics / delivery to dealers. This was made real time to replenish stocks of dealers all over India multiple times in a day. Such is the level of Supply chain system that was created with Demand forecasting / prediction of customer product requirements.

With such a strong Supply Chain systems integrated with IT they built a very profitable business with efficient cash management. Free Cash flow is a important metric that succinctly captures a part of this idea is the cash conversion cycle. Study showed that Asian paints had a Cash conversion cycle of just 6 days. With this Cash Flow they could reinvest on Innovation and expanding their market. A comparison with some of its peers highlights why Asian Paints dominates the competition the way it does.

One of the most challenging aspects of the Painting business is predicting latent demand for different shades of paint. It’s perhaps next to impossible to forecast demand for thousands of shades of paint and so it is an extremely challenging task to meet the needs of the end consumer within a limited time frame. The usual process involves the dealer in question taking the request, forwarding it to the nearest depot or warehouse, where they mix and match the required shade of paint after which the supply is made available which could take anywhere between 10 to 20 days.

Asian Paints brought in a key Product and Supply Chain Innovation to solve this issue through what is called Delayed differentiation. This was achieved through producing generic products and introducing differentiation at the end of the value chain. This helped dealers to the final mixing using tinting machines in their warehouse to exactly deliver to customers choice of paint. This is a key differentiator for Asian Paints market leadership in Indian and Asian Paint Industry.

Asian Paints as an Organization continuously focuses on Product Innovation and Digital transformation leveraging technology. They have 54% market share even today and have been increasing their Net Profit Margin continuously. They continue to invest in ERP systems, Data Analytics, Visual Analytics, IoT, Artificial Intelligence, Conversational chat bots, Natural language translation and 3-D visualization of home décor.

Organization focus on Customers, Shareholders and continue to Innovate in a competitive market is very key aspect for Market leadership and success. It is great to a see an Indian company doing it for more than 75+ years. We need more such organizations to think ahead and bring in Innovations to gain market share in their respective Industries.