Tata Nano, Innovations & Approaches

Tata Nano – A Case of Enlightened Innovation [Type the document subtitle] 2/7/2010 [Type the company name]

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. History and conception 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. •

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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: •

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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: •

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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: ➢ How could Tata Motors make a car so inexpensively? • No Radio, Power windows, air conditioning, anti lock brakes, air bags, remote locks or power steering. •

Rear wheel drive: manually actuated 4-speed trans axle that gives the car better fuel efficiency

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Wheel Bearing: Wheel bearing is strong enough to drive the car at 72kmph but would quickly wear out at higher speeds.

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Analogue speedometer, odometer and fuel gauge.

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Single windscreen wiper

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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. ➢ Open distribution' innovation: Tata have called this 'open distribution' innovation because it mobilizes large numbers of third parties to reach remote rural consumers, tailor the products and services to more effectively serve their needs, and add value to the core product or service through ancillary services. Three innovations in products and processes come together to support 'open distribution': • increased modularity (both in products and processes)

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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 cocreation' 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. ➢ Welcoming users back into the design loop: The Tata Motors/Nano approach contrasts with the strategy of most other manufacturers. For more established automakers each new model represents an advance in tight integration, with more and more of the functionality deeply embedded in electronics that truly represent a 'black box' to the customer. The days of customising cars to personalise them and push their performance limits are rapidly receding into distant memory for the average customer. Yet, as Kathleen Franz, makes clear in her wonderful book, Tinkering: Consumers Reinvent the Early Automobile, it was the open design of early automobile models that blurred the lines between consumption and invention and led to a wave of innovations that were later embraced by the auto industry.

➢ Vendor Management Policy. Tata Nano

got some car parts from vendors who did their own research and development for them to reduce cost. Some vendors developed products with Tata Motors, and quite a few were given designs by Tata Motors. The company even helped some vendors find international partners to make products that met the company's requirements. Some vendors who supplied parts to Tata Nano did competitive buying of material from countries like China and Thailand. This is very similar to leveraging an onsite offshore model in IT. Bibliography: www.scribd.com www.wikipedia.com

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http://www.supplyexcellence.com/blog/2009/03/24/tata-motors-nano-its-realso-howdid-they-do-it/ www.tatanano.inservices.tatamotors.com/

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