Now how do you think Coke reacted? Did they say, "Wow, that's brilliant. Think of all the good things that we can do by offering up our empty spaces." We all wish the corporations thought like that. But Coke was no exception. Instead, they thought, "Wow, we have empty spaces, how can we possibly make even more money off of those spaces?" So Coke said no to Simon Berry. Now, let me share an anecdote. A few years after ColaLife got started, our school received a visit from Neville Isdell, who was the former South African CEO of Coke during the time that Simon Berry was getting ColaLife off the ground. I asked Neville if he had heard of the ColaLife organization, and asked him why didn't Coke work with them? His response was, "You're such an arrogant chap." I was surprised particularly because most English people strike me as pretty well-mannered. But whatever happened, the bottom line was that Coke refused and maybe Coke thought, "We never thought about using that empty space, can we make money on those spaces?" Well, if you were in Simon Berry's position, what do you do now? The interstitial spaces was your breakthrough insight and it seemed like such an obvious and painless solution to a major social problem that had endured for decades. His response was what many organizations do these days. They take to social media and they catalyze change. If you want to solve the developing world's problems, you have to get the attention of those in the developed world to be aware of them. Now social media is an interesting channel partner, but it is a channel partner nonetheless because it helps to build awareness and education for the cause. In this manner, ColaLife began to raise awareness of the need for oral rehydration salts and they tried to put pressure on Coke. Well, it was a great idea, but Coke never came around. Instead, it put it's support behind a project for the provision of safe drinking water in Africa. Now that's also a very worthwhile project and one that is closely related to the production of Coke, making Coke requires a lot of water. But let's not miss the important learning point for all of us here, and that is, that the ask matters. How we approach channel partners is a critical conversation and it needs to be compelling from the start. In this course, you will learn how to build the arguments in ask that you will need to get your channel partners to basically do more for less. Let's move to the postscript on ColaLife and take a look at the channel of distribution that they ultimately put into place in their results. That you need to start with what the customer wants and setup the distribution channel to provide it. You must know what they want. In this course, I will show you how to identify this. Then you build the channel with players who provide the services or what we will refer to as channel functions or activities. These are the processes needed to make the product available at the right place in time. First you need the product, the oral rehydration salts, and ColaLife had these kits manufactured and packed in Zambia as you see here on the slide. Now why is it important that it be on the continent? Well, to ensure supplying, give the system a better chance of persisting if it's not vulnerable to supply shocks from overseas partners and weather conditions. Remember, Simon Berry wanted this system to be sustainable into run on its own. After manufacturing, you need someone to transport. For this, they used a medical supplier to move the products to the remote areas. Another channel function that they needed was further products to be stored and inventory held. These wholesalers who did sell applied a 20 percent markup and then they sold the product to retailers or carriers who could deliver the last mile to the remote villages. Now note that in many Third World countries, there is a leapfrogging of technology such that while you may not have concrete roads, most of the population has a mobile phone and wireless networks are in place. So this provided an authentication system and a means to track inventory movement in volumes, to transact sales and even apply discounts to various players along the chain. Finally, the retailer purchase the product and he applied a 35 percent markup when he or she sold the product to the end user who ultimately paid for it. Everyone who wants the cure for diarrhea is able to and does pay for it in this system. Let's return now to Simon Berry, to hear the rest of his story. To test this idea of kits in co-crates, we set up a very large trial which is supervised by Rohit and UNICEF and the Ministry of Health and had oversight by Johns Hopkins School of Public Health and the results were outstanding. We sold 26,000 of those kits to retailers serving these remote communities that had no money. We increased treatment rates with ORS and zinc from virtually 0 to fill 45 percent from a standing start in 12 months. We took two-thirds off the distance that caregivers have to travel to access medicine, because it was available in their local shop, which are far more numerous and therefore closer to their home. We transformed, again that word transform, we transformed the accuracy with which they measured the ORS, because the measuring functionality was built into the packaging. But shock horror, this wasn't important at all. Only four percent of retailers actually use this functionality to transport the kits to their villages. So what we thought was the innovation, wasn't the innovation at all. This is how the kits got to the villages just like any other thing gets to these village shops, strapped on the back of a bicycle. This is why this works. This is no secret to the likes of Coca-Cola and Unilever and all those people that get their products to these remote villages. You have to start with your customer and what they want. Then you have to market like mad what they want and make it profitable for people to fulfill the demand that you create in their minds. It's called a value chain. Everyone along that distribution chain response to that same motivation, they're all adding value, either they're making the product or they're getting it closer and closer to the customer. They're adding value and taking a profit to do that, and this pulls the medicine out to the remote communities. Now those of you who work in the health sector will realize that this is not normally how the health sector works. The health sector work, does it completely the other way around. It starts with an expert or the board of experts with totally good intentions, trying to work out what they think people need. For this to work, you have to know what people want. Need and want are not interchangeable words. They're completely different and that difference is really important in this situation. Now, this kit thing not going in the crates was a real problem for us, because we've won so many awards globally. This product, won product design of the year in 2013, it beat Nike trainers, it beat a really cool set of Bang and Olufsen wireless speakers, it beat the Olympic Cauldron. This was product design of the year 2013. By 2014, we threw it out. This is what the world has signed up to and it wasn't working. But it's okay, because this is where the business guru, Stephen Covey comes in, who said, "The main thing in business is to keep the main thing the main thing." So they were uncomfortable sort of 10 minutes when we realized this wasn't working. Then we thought of this and we felt fine. The main thing for us is not designing cool things that win awards, the main thing was to get diarrhea treatment to those caregivers so they could treat their children. So once we felt better after this, we still have to combat all the design people who said we deserted our principles and all that. But anyway, that was easy to deal with once we stuck to our purpose. He closes with an important point, and that is this notion about innovation around access. Nowadays, ColaLife's oral rehydration salts are widely distributed throughout the African continent through retail stores in major cities like Shoprite pictured here. But this notion of access, just as he specifies here, is that "We are not promoting a product. We're promoting a game-changing new approach to diarrhea treatment at home." Access is how the products get to market, and this aspect of the marketing mix can be a huge source of value for customers apart from the product. So don't miss this. The implication is that you can create huge value for end-customers that has nothing to do with the product itself. Instead, the value is all about how and when that product is made available on the terms that consumers want. This is essential idea and the takeaway value of this course. So if you fall asleep and you don't remember anything else during our time together, please remember that the role of the channel is to create demand, to make money, and fulfill or provide that demand. This is the task and job of a channel's strategist, which is what you will become by the end of this course specialization. Now, throughout the course and in many of your readings, you'll see this graphic of a wood tower. This wood tower represents the channel strategy that you can build in any firm. Your channel strategy can be perfectly upright, just like this wood puzzle with all the parts in place, and that is one version of channel strategy. You might even call that channel nirvana. However, most working channel strategies never reach this point. Instead, most channel strategies look more like this. Because in order for most channel strategies to stand and be somewhat workable, you really don't need every piece. In fact, you may not be able to afford or find every piece in order for this structure to stand. As you saw with Simon Berry's, rethink, number 1, and number 2, your channel strategy might have to be adjusted to the market conditions, or legislation, or cost changes. So the pieces of your strategy might move in and out as channel members are eliminated or replaced, and your firm's priorities change over time. It's also important that your channel strategy have what's known as a channel captain, and this can be any organization in the distribution channel. It doesn't have to be the manufacturer, it is sometimes the retailer and sometimes it's the players in between. However, the channel captain is necessary for providing the vision for how the whole system should be designed to work together, and where incentives should be placed to grease the wheels and make the whole thing self-sustaining. Now, Simon didn't start his organization with a channel strategy, but it became the only solution to accomplishing what he needed, which is to get necessary medicines in the hands of the people who need it. You, on the other hand, are different because you have the benefit of learning how to design this channel system from the start, or to adjust an existing channel system to make it better. So over the course of our time together, my goal is for you to adopt the systematic mindset of a channel strategist. The good news is that effective channel strategy is available to anyone who's willing to learn it. It is not a skill that anyone is born with, nor does it come intuitively.
