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Lijjat Papad Case Study - How Lijjat Papad became a successful cooperative employing 42000 women.


Ashish Kumar
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Today’s case study is one of the most incredible case studies that I have ever talked about. This is a story of 7 ordinary women who had no background in business, no significant educational qualification and with just 80 rupees in capital they were able to build a business empire worth 1600 crores which is spread across 69 branches and more than 42,000 employees. This home-grown brand that I’m talking about is none other than Shri Mahila Griha Udyog Lijjat Papad.

Now, what’s more fascinating about this company is not the growth of the company but the fact that the business philosophies of this home-grown company somehow seems to have very close resemblance to extraordinary companies like Starbucks and Apple also. The question is- What is so special about this papad company and how has it lasted for more than 62 years And how did these 7 women manage to build a business empire out of just ₹  80 in capital. The answer to this question lies in the incredible history of the Lijjat papad. This is a story that dates back to the late 1950s India when India was a fairly underdeveloped country. And back then even literacy was considered to be a luxury. And even in terms of literacy during those times woman’s literacy was not even considered important because of which only 8% of women in India could read and write while 92% of women in India were illiterates. On top of that, women were not even allowed to go out and work and the earning capacity of the families was not enough to afford a decent standard of living.

 

That is when in 1959, Mumbai. A group of 7 amazing women from very ordinary background came together to discuss a business idea which wouldn’t need them to step out of the house, wouldn’t need education and yet could produce a competitive product in the market. That is how the idea of Lijjat Papad was born with just ₹  80 capital that was given to them by a social worker. They first started selling their papads at a local store and soon enough due to the superb quality and taste of the papad even other shops started buying their papads. And that’s when they started scaling up. Now, when they started scaling they had the opportunity to hire women at a dearth cheap cost because they were one of the rarest avenues of income for women which allowed them to work from home.

 

When these women had their first board meeting they established the fact that the primary goal of their business wouldn’t be to make money but to empower women from the smallest households of the country and to provide them with the livelihood to nurture their family. They also established the fact that money would only be used as a fuel to scale their impact on the women of India and not be the sole purpose of their existence. So instead of hiring women, they started to give out ownership to every woman who joined their business and called them Lijjat Sisters rather than employees. This is what you call as collective ownership, wherein every employee owns a small part of the company such that the profits and losses, both are shared by every single person in the organisation. So regardless of your age, caste, religion even if you were at the lowest hierarchy of the Lijjat Papad organisation, you’d still own a part of the business. Now, most of us might think that this is just another business move but I gotta tell you guys that this attribute of collective ownership is one of the foundational principles that make Starbucks an extraordinary company. Because you know what ? Just like the sisters of Lijjat papad own a small part of the company regardless of their position in the organisation, every employee at starbucks is considered as a partner in the business rather than an employee. Everyone starting from the baristas who serve coffee to the customers, to all the way upto the senior management officers, each one of them are offered stock options of the company. So this way, just like the Lijjat sisters every employee in Starbucks could be a small owner of the company And this move develops a deep sense of ownership which cultivates a culture of greatness wherein every employee is motivated to go out of the way and to contribute diligently towards the growth of the organisation. But the only difference between both these companies is that while Starbucks ideated this with MBA masterminds and with a million dollar capital backing, the 7 sisters of Lijjat did it way before Starbucks, in 1959 without even knowing what an MBA degree is. Such was the business acumen of these incredible women.

 

The second phase of Lijjat was building a robust supply chain that would be cost effective, ensure quality production and would fit the lifestyle of the women who work for the company. So instead of having huge office spaces they used the houses of the sisters as their small centres of papad making. The flour would first arrive from the mills to the respective central location wherein the dough is made. And after the dough is made, the sisters will be brought by a bus facility provided by the company. Over here they would collect the doughs and then go home, make papads, dry them on the veranda and then deliver the papads the next day. And lastly, after the delivery of the papads they would collect their money and the dough for the next cycle. This would be followed by surprise visits by the supervisors to check the quality of oil they use, the hygiene check of the house and most importantly the process of making papads. Now the sisters are also given aluminium papad makers to ensure that the papad is produced in a standardised manner. This happens at all the branches. If one of these branches does very well, the profits are distributed among the sisters. And if not, the losses are borne by the branch members together.

 

After all of this comes the most challenging part of all and that is sticking to the vision and mission statement of the company. Now people, for most of us mission and vision statements are just stupid formalities and they have no real significance for us. In the corporate everybody knows that mission, vision and values are just fancy words written on the wall. And at the end of the day if your boss wants to kick your ass, he is going to do it anyways. At the same time in case of colleges also even your principle wouldn’t remember the vision and mission statement of your college. And this is the reason why most of us do not understand the importance of mission and vision statements. But here’s a thing guys Mission and vision statements form the very foundations of every single organisation. And when designed and followed the right way, it can help the organisation sustain for a century. At the same time, if not done right they can even bring down a million dollar business.

 

A classy example of the same is Apple, when Steve Jobs got fired from Apple in 1984, Apple was a million dollar company. Until he was there at the company, the company stuck to it’s value because he was a formidable player in the industry. But after he left, they started to derail from their values. And within just 10 years they were almost about to go bankrupt. That’s when Steve Jobs got called back to Apple to fix things and get the company back on track. After he took over the company, the first question he asked to every single engineer to every single designer and every single manager was What does Apple stand for ? And what are the values that we believe in as a company. Because the biggest mistake that Apple made was while he was not around they started to loose their identity and started to deviate from their values because of which they started making products with no sense of purpose. Eventually, the brand lost it’s unique identity and customer loyalty just faded away. So Steve Jobs comes back, asks this question and within some time the entire team is absolutely clear as to what exactly they were supposed to do. And this is what got them the ‘Think Different’ campaign that told the world what Apple truly stood for. And within just 2 years the same company with the same engineers and the exact same resources then went on to create history to become a legendary company that made products that changed the world forever. And again as soon as Steve Jobs left we all know what’s happening with Apple. This is the importance of mission and vision statements.

 

Here’s the most mind-blowing fact of all. In it’s 62 years of existence, not a single time, Lijjat Papad has ever deviated from it’s core values and even today After expanding to 67 branches and scaling up to 42,000 employees and after exporting their products to 15 different countries, they still abide by the core philosophy of their business, that is, Sarvodaya, which means Progress for all. While we live in a world where billion dollar corporates, even with the slightest change in the policies wouldn’t think twice before firing thousands of employees and putting each one of their family’s life at stake. On the other side we have got Lijjat Papad wherein with every single machinery they bring in for automation, they make sure that not a single woman is asked to leave the organisation. Because they are 100% clear that their ultimate purpose of business is not to make money but the empowerment of women so that they can give their family and children a better quality of life.

 

On one side where we have got these evil companies who would put the health of their frontline workers at stake just to maximise their profits. On the other hand we have got Lijjat Papad wherein even if they have a great year, they make use of the extra profits to sponsor the education of the children of their frontline workers regardless of their age, caste, religion or even the position in the organisation. And they do all of this just so that the next generation of these frontline workers can be given the opportunities that they truly deserve. And last and most importantly while inspite of being at the pinnacle of the technological revolution there are people like you and me who often keep doubting our capabilities. And here we see a standing example of 7 incredible women who had no educational qualification. no background in business and no fancy investor, And yet, they were able to build a business empire that is now empowering generations of women all across the country. And that too during a time when women had no scope of opportunities. If this isn’t an epitome of greatness I don’t know what is.

 

This is how how Lijjat Papad became a successful cooperative employing 42000 women.

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