In January, I had the opportunity to visit India. One of the most eye opening parts of the trip was the half day I spent at the Dharavi slum that was made famous by the movie, “Slumdog Millionaire”. It sits in the middle of Mumbai, the financial capital of India and is the second largest slum in Asia. Dharavi is only one square mile, but is home to over 1M people. The density of the slum grew over the last 100 years because of the expulsion of factories and residents from Mumbai and the rural poor migrating to the city.
This slum is big business. Dharavi has an active economy with approximately 10,000 household enterprises that mainly employ residents. Being so densely populated, many of them sleep and work in the same place. Dharavi exports buffalo leather, fabric and pottery products around the world. The total “reported” annual revenue of all the small businesses in the slum is estimated at over $665M per year. Most people I talked to believe it is actually over a billion dollars per year.
There is a lot that American entrepreneurs can learn from these business owners. They include:
- Find a niche by doing what others won’t. A lot of the work done in the slum is what others in the rest of Mumbai do not want to do. There is a big business of recycling all types of plastics and metals. These need to be sorted by hand which is labor intensive. Many materials also need to be dried manually in the sun afterward. Lesson: What can your business do that customers need, but other people don’t want to do? Go do that at a profit.
- Always be testing (ABT). There are no long term business plans written here. People simply find a job that needs to be done and start doing it. Alternatively, they set up shop outside their home or the one restroom that serves 1,000 people daily and see what people buy. If their product or service does not sell well, they adjust the next day. Lesson: Prototyping and testing are an important part of growing any business until you find want your customer will buy over a long period of time.
- The highest price is what people actually pay. There is a tremendous amount of competition in Dharavi since there are so many people. They still focus on the value a product or service brings. For example, there is always a “tourist” price which is the highest since they are willing to pay more than anyone living inside the slum. Lesson: Find customers that value your products the most so you can sell at a top price for maximum profit.
- Relationships still matter. It’s not only about price, but who you know and have trusted to work with in the past. In Dharavi, historical ties, religion and geographic location within the slum play an important role in the supplier and customer relationships. Lesson: Everywhere in the world, people do business with who they know, like, and trust. Think about the actual basis of your relationships with your suppliers and customers. If it’s not based on trust, then it is more fragile than you think.
What have you learned about business traveling outside the U.S.?