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Enlightened Innovation
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2/7/2010
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Seldom do we see cars that rewrite the history books even before they are seen
running around on the roads. And hardly ever do we see cars that vow to put the
nation on four wheels. The Tata Nano is one such car – a car that has been in the
news for quite a few years, for reasons good and evil. Nano is a car which has
breathed into life due to one man. Give credit to Mr. Ratan Tata for his
determination to build a low cost family car that has come true, finally! Took long it
did, but the Nano came in a beautiful form. Touted as world’s cheapest car by a far
cry, Nano has been the talk of the town around the globe. Head honchos of big
organizations have been pouring in by numbers to have a look at this engineering
masterpiece.
Nano as a part of a "new breed of 21st-century cars" that embody "a contrarian
philosophy of smaller, lighter, cheaper" and portend a new era in inexpensive
personal transportation — and potentially, "global gridlock". The Wall Street Journal
confirms a global trend toward small cars, led by the Nano.
The prefix "Nano" derives from the Greek root 'nanos', meaning dwarf — as with
nanometre. "Nano" also means "small" in Gujarati, the native language of the Tata
family, founders of the Tata Group.
The project to create a 1 lakh (1 lakh = 100000 rupees) car began in 2003, under
the Chairman of Tata Motors, Ratan Tata. The strategy behind the project was the
awareness of the number of Indian families who had two wheeled transport, but
couldn't afford a four wheel car, and was based on the company's success in
producing the low cost 4 wheeled Ace truck in May 2005.
To discuss the innovation strategy for Tata Nano, we first discuss the constraints as
per which the company had to operate.
In pursuit of excellence and to keep up to the initial promise made to people that
Tata will come out with a compact, quality car within a price tag of Rs. 1 lacs, Tata
Motors came up with a design, marketing and operational strategy keeping in my
mind the constraints of:
• Price
• Market Scalability
• Customer aspiration
• Resource efficient
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The report attempts to study the tactics and policies adopted by Tatas under the
enlightened approach to innovation.
• Strategic Innovation
• Focused Innovation
• Holistic Innovation
Strategic Innovation:
Some of the innovations that Tata Motors followed during the process of coming out
with Nano were not only concerned with the only the car as the product, but
extended itself to the whole organizational thought process. Starting from the team
formation to product delivery, everything was thought keeping in mind the promise
of bringing out a quality car within a price tag of Rs. 1 lac that would fulfill the latent
demand of the Indian middle class who could not afford even the lowest priced car
at that time.
• The whole idea was radical and required fresh thinking and challenging of
age old principles of product designing and manufacturing technologies.
Inline with this, the engineering team in charge with the designing and
production of Nano was very young with the average age being only 28.
• Tata Motors were not shy to unlearn and re-learn the processes and they
were open to take in ideas from their strategic partners also. During
development the company reinvented and minimized the manufacturing
process, brought in innovative product design, and asked component
manufacturers to look at current work and design approaches in a different
perspective to produce logical and simple solutions.
• The strategy behind the project was the awareness of the number of Indian
families who had two wheeled transport, but couldn't afford a four wheel car,
and was based on the company's success in producing the low cost 4
wheeled Ace truck in May 2005. The company management learnt and
improved on the design procedure of Ace truck and used this know-how to
come up with the best design for Tata Nano. Also, since both the vehicles
were similar in their basic design and component requirement, the supplier
base was also easier to be put in place.
• Even after successfully launching the petrol and diesel variants of Nano, Tata
Motors have not rested on the laurels. They have taken one step further in
coming out with an electric version which enables them to position it as an
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environment friendly car of the future. This shows the foresightedness of the
management to sense future demand and also the company culture to
continuously innovate and improve.
• Tata Motors set their retail price target before they designed the car. Doing
so let them establish their demographic - in this case, motorcycle owning
families - before pricing them out of the car during the design process.
Setting the price and working backwards also required a fundamental shift in
the way the car was designed, since many costs are fixed once the design is
set.
• Tata Motors top management sensed that the trucks are not going to fuel the
growth the company was envisioning in its future. Moreover, in 1990’s the
company registered first time in its history a loss of $110 million and this
forced the management to start a process of continuous improvement and
coming out with products that the customers wanted. Tata Motors came out
with Indica which proved to be a worldwide hit. Tata Motors were also quick
to realize that there existed a good market at the bottom of the pyramid and
Tata Nano came up as an answer to that.
• Workers at the Tata Motors factory have been trained in Japanese
manufacturing techniques that call for continuous improvement.
Holistic Innovation:
• Tata Motors worked in collaboration with their suppliers very early in the
process - so early in fact that they were able to provide functional goals for
many parts rather than technical specs (i.e. wipe water from windshield vs.
windshield wiper must be x mm by y cm and work at z cadence). This
approach tapped the ingenuity of the supply chain, who delivered
parts that met the functional requirements and extremely low
prices.
• Another cost cutting strategy - Tata Motors’ distributed assembly model,
where they ship the parts to local manufacturers for final assembly. Aside
from the obvious reduction in capital costs, perhaps there are other lessons
to be learned from this practice. Could their approach make catering a
global product line to local tastes, regulations and practical
requirements help contain costs? This is the next strategic thinking Tata
Motors have to undertake to check if the policy can be applied to all the other
car models to allow them to be customized as per the local customer needs.
• Working closely with the sourcing team led to many interesting inputs on
what was possible and what was not. The driving instrument cluster is
uniquely placed in the centre, giving the car an open look and enabling
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everyone in the car to look at it. It also makes the dashboard equally
amenable to left hand and right hand driving.
• The top management, even Mr. Ratan Tata was actively involved in the
designing phase of the car. Inputs from all the teams were taken to come up
with the best design.
• Manufacturing planning: The interesting challenge here was that aiming for a
very low cost car meant the entire organisation had to be leaned down - not
just manufacturing, but materials, design, human resources, and so on. The
team has taken the benefit of best practices from other industries such as
cycle manufacturing or PC manufacturing that involve mass manufacture and
assembly.
• The planning team was joined by members from other processes - the paint
shop, weld shop, press shop, assembly shop.
• Quality systems have been thought about, put in place and well documented
well in advance; so implementation becomes easier. The maintenance
practices - failure mode analysis and development – had all been completed.
This ensured all this during the planning phase itself and this reduced the
breakdowns when the project started and cut down unexpected challenges
once the actual implementation started.
• Suppliers located within 50 kms of the main manufacturing plant which
reduces transportation cost and fosters just in time procurement strategy.
Focused Innovation:
• The Nano has 21% more interior space and an 8% smaller exterior, when
compared with its closest rival, the Maruti 800. The car will come in different
versions, including one standard and two deluxe variants. The deluxe version
will have air conditioning, but no power steering.
• The use of a rear mounted engine to help maximize interior space.
• The Nano complies with Bharat Stage-III and Euro-IV emission standards.
• Fuel economy (combined City + Highway): 20 kilometres per liter.
• The car conforms to environmental protection, and will have the lowest
emissions in India. Thus it douses the fear in the mind of the
environmentalists about it being the reason of shooting up emission limits for
mass adoption as well as the perceived notion of cheap products being of bad
quality. The Nano will also replace many overloaded and worn-out two-stroke
polluting vehicles, both two and three-wheeled.
• With a length of 3.1 metres, width of 1.5 metres and height of 1.6 metres,
with adequate ground clearance, it can effortlessly maneuver on busy roads
in cities as well as in rural areas.
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• Its mono-volume design, with wheels at the corners and the powertrain at the
rear, enables it to uniquely combine both space and maneuverability, which
will set a new benchmark among small cars.
• The lean design strategy has helped minimise weight, which helps maximise
performance per unit of energy consumed and delivers high fuel efficiency.
• The Nano's safety performance exceeds current regulatory requirements.
With an all sheet-metal body, it has a strong passenger compartment, with
safety features such as crumple zones, intrusion-resistant doors, seat belts,
strong seats and anchorages, and the rear tailgate glass bonded to the body.
• Tubeless tyres further enhance safety.
• The high fuel efficiency also ensures that the car has low carbon dioxide
emissions, thereby providing the twin benefits of an affordable transportation
solution with a low carbon footprint.
• The mono-volume design establishes a sea of change from the two-box
layout of the 800. What it ensures the Nano with is extremely short
overhangs and tight packaging. For a car of this size and image, the Nano is
an extremely sexy looking car with futuristic design cues. The bonnet line is
steep and unites together with the bumper in a seamless way.
Some of the interesting facts that should be looked into while discussing how Tata
Motors was able to bring down cost and some of the radical thoughts brought in
during the process of rolling out the car are clubbed below:
• Rear wheel drive: manually actuated 4-speed trans axle that gives the car
better fuel efficiency
• Wheel Bearing: Wheel bearing is strong enough to drive the car at 72kmph
but would quickly wear out at higher speeds.
• Fundamentally, the engineers worked to do more with less. The car is smaller
in overall dimensions than the Maruti, but it offers about 20 per cent more
seating capacity as a result of design choices such as putting the wheels at
the extreme edges of the car.
•
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➢ A modular design revolution
• One of the most significant dimensions of innovation is its modular design.
The Nano is constructed of components that can be built and shipped
separately to be assembled in a variety of locations. In effect, the Nano is
being sold in kits that are distributed, assembled, and serviced by local
entrepreneurs. The company could produce the mass items and ship it to
them as kits.
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• aggressive leveraging of existing third-party, often noncommercial,
institutions in rural areas to more effectively reach target customers
• creative use of information technology, carefully integrated with social
institutions, to encourage use and deliver even greater value
• Modular designs combined with creative leverage of local third-party
institutions help participants to get better faster.
Companies such as Tata and Cummins are going far beyond 'customer co-
creation' in the narrow sense of soliciting isolated ideas from customers.
Instead, they are building long-term personal relationships with customers,
enriched by the specialised capabilities of broad networks of third parties
that generate much deeper insight into customer needs and afford
opportunities to tailor value.
Bibliography:
www.scribd.com
www.wikipedia.com
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http://www.supplyexcellence.com/blog/2009/03/24/tata-motors-nano-its-realso-how-
did-they-do-it/
www.tatanano.inservices.tatamotors.com/
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