Sunday, October 26, 2008

TATA's Nano-transformation

TATA’s Nano-transformation

The development by Tata Motors of the Nano car, packed with creative features and priced amazingly at Rs one-lakh, is truly an industrial phenomenon. By conceptualizing and commercializing the Nano car, Mr Ratan Tata has unveiled a new industrial paradigm for India. It is a pity that the manufacture of the car had to be shifted to a new site postponing an effective mass launch by at least a year. In this context, the significance of the Nano and strategies to avoid this kind of impediments need discussion.

Strategic significance
The significance of Tata Nano lies in the fact that it is not merely a cheap car or low cost car. If it were just that, it would not have received global attention the way it did. To view the Nano in perspective, there have indeed been several low-cost products in India in the past. For example, cellular phones have been designed for, and introduced, at say 10 per cent of the price of a high-end mobile phone while televisions have been marketed at 50 percent of the price of a brand-leader’s television. However, these were essentially low cost developments with stripped-down features or with procurement economics and were also dependent on overseas technologies.

On the other hand, Tata Nano represents a break-through indigenous technology, which harnessed innovative efforts and intensive investments to not merely breach a price floor but more importantly offer a whole new user paradigm. That Indian talent can design and manufacture superior products with high technology and low prices to create vast new markets is the quintessence of what Tata Nano means to the Indian industry, economy and society.

Technologically, Tata Nano represents the utilization of thought-leading concepts for a mini car design such as a four-seater, four-door spacing, a rear-mounted 623 cc all-aluminum engine, full 4 speed transmission, rear wheel drive, tubeless tyres, high-roof monocoque body and high visibility glass, all of which are integrated for contemporary safety and emission standards. In conceptualizing this novel car, Tata Motors has offered an alternative and safer transportation medium to the millions of small families in India. These could be young couples with dependent elders or evolving families with young kids. The usage need not be confined only to city landscape either. Nano car could trigger a total transportation revolution across India covering urban, semi-urban and rural areas.

While Nano has its critics in terms of the perceived impact on the roads all the criticism is not well placed. Environmentally conscious people can car-pool even on a Nano. Similarly, disciplined Nanos will make a better and safer utilization of road space compared to swarms of speeding two-wheelers. Moreover, the same visionary leadership and the innovative company that brought out a Nano could continue to innovate in terms of incremental innovations such as more economic fuels, exotic materials and multi-terrain transmission.

Viewed from any angle, Tata Nano will have overwhelmingly positive industrial and economic implications for India, if the concepts are leveraged across various industrial verticals and along multiple value chains.

Design drives development
The noted management expert, Dr CK Prahalad has brought out in his book, The Fortune at the Bottom of the Pyramid, as to how an innovative design, whether of a product or a service, can discover new fortune at the bottom of an economic or social pyramid.

Without doubt, Tata Nano will not merely substitute a two-wheeler; it would cater to new users and create new markets. The demand is likely to be far greater than the annual 150,000 Nanos envisaged initially. If Tata Motors and State Governments align their development strategies, Nano factories could spring across several states with a central facility serving as the mother plant for key systems and assemblies. The economic transformation it would bring across material, component and vehicle sectors on one hand, and the sales, service and spare parts sectors on the other hand, on a pan-Indian basis, is likely to be stupendous. Fortune is sure to be discovered at the bottom of the Indian social and economic pyramid.

Tata’s Nano has also illustrated how a break-through concept needs a shared vision, inspired collaboration and cost-focused development across industries spread across years. In view of such intrinsic feature, projects such as Nano have multiplier effects beyond the end-product industry and its markets. Nano, for example, will help all industrial sectors connected with the project to achieve product miniaturization coupled with value maximization, whether it is an engine component or a filter element. It will also lead to new material compositions and novel metal processing technologies.

All these will provide new export opportunities not only for Nano but all associated component and materials manufacturers. The young engineering team of 500 plus at Tata Motors that has developed Nano symbolizes the capabilities and potential of the Indian scientific and technical base to achieve globally competitive product offerings. Nano could, therefore, accelerate India’s drive towards becoming a global hub for design and manufacturing of mini and small cars to start with, eventually qualifying as a global development centre for all types of automobiles.

In this context, Nano has product and market implications beyond the automotive sector. The concept of developing designs that shift up the user paradigms to higher points of value chain while pushing downwards established price parameters has relevance across industries. Post-Nano, it seems entirely feasible that well-conceptualized engineering can optimize any product to add several features at lower costs and create new markets. A reliance on product and process design as a strategy will uncover and eliminate industrial waste on one hand and develop new upgraded products at attractive price points. This will not only improve economic efficiency but also expand economic spectrum through broad-based consumer demand. India can then become a distinctively competitive global industrial base, taking a lead over China, much vaunted only for its low cost manufacturing options. The impetus for competitive and innovative design provided by Tata Nano should be leveraged to position India as a global design and manufacturing power-house.

Global appetite for innovation
Globally, there is an unprecedented appetite for innovation. New waves of innovation aim to bring tantalizing features at attractive price points to consumers, creating new markets and expanding existing markets. Apple’s iconic i-pod and i-phone symbolize the global aspiration for competitive innovation. Integrating several applications within a single device with heightened performance and reduced price, Apple has redefined the consumer electronics game. Tata’s Nano has done just that in the Indian automotive sector.

India now has its own iconic Nano, albeit in a different field. Acknowledged global leaders from General Motors to Nissan-Renault have acknowledged the quantum jump that Nano represents for the Indian industry. It is upto the designers and project engineers and leaders across various industries to innovate and develop their own Nanos to bring India to the centre-stage of global innovation. No device, equipment or service needs to be beyond the challenge and opportunity of India’s new nano-transformation.

Posted by Dr CB Rao on October 25, 2008

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