Volkswagen Evergreen Beetle Car: Enduring Principles for Living Legacies

Volkswagen recently advertised in India the commercial launch of its iconic small car, Beetle. Sporting the almost similar exterior that made the car a folklore for decades from its first launch in 1938, the Beetle of today incorporates ultra-modern technologies. The author of this blog post is gratified that the launch coincides with the topic of retro-futurism which the author has discussed in his recent blog post titled “What Palm Holds, Eyes Behold: The Retro-Futurism of iPhone SE”, Strategy Musings, April 18, 2016. (http://cbrao2008.blogspot.in/2016/04/what-palm-holds-eyes-behold-retro.html). Without doubt, the arrival of Beetle in a new avatar is a striking example of retro-futurism, and reinforces the insights of the previous blog and offers additional perspectives.

Some comparisons and contrasts with Apple SE are also inevitable and quite necessary. 

Fundamentally, Apple SE being an electronic product and Beetle being an automotive product they are as different as chalk and cheese in design, manufacture and usage. Yet, they represent, in real time context, the relevance and practicality of retro-futurism as a concept. They also demonstrate that ‘retro’ can be as recent as four years (as is the case with Apple SE) and as distanced as eighty years (as is the case with Beetle). Given the thousands of products that have been designed, developed and used as well as rendered obsolete and phased out over all through the four hundred years of successive industrial revolutions, the impact of retro-futurism as a practical paradigm is self-evident.

Origins, growth and decline

The first Beetle was designed as an idea by Joseph Ganz, a Jewish Engineer in early 1930s. Adolf Hitler, however, grabbed the concept and ordered Porsche to develop a Volkswagen (literally, a “people’s car”). The design and manufacture of the Beetle including building of Volkswagen factory was completed in the late 1930s. Enduring the trials and tribulations of successive world wars, Beetle survived to grow as the most sustained small car design, and Volkswagen as the most dominant European automobile company. The Beetle was designed as a basic small family car at the cost of a motor cycle to transport two adults and three children (Is not Tata Nano a retro-futuristic concept?). It was one of the first to have air cooled rear engine and chassis mounted on torsion bars, and a roundish body looking like a bug!

In its long history, over 21 million Beetles were produced. Beetle’s most successful period was the decade of the 1960s, with it becoming a favourite all over the Americas and Europe. However, the emergence of new global designs, especially from Japan, brought its glory down. Volkswagen had to officially end the declining production run of Beetle in 2003, worldwide. There is no denying that Beetle was the most successful rear engine design and had little spec to spec competition in its class. Volkswagen itself had to go through several iterations before its successor Golf could be perfected and popularized.

Interestingly, Volkswagen attempted to update Beetle in 1995 itself with a redesigned vehicle based on its Polo platform. It had the same exterior but used a higher horsepower engine and multi-speed gearbox. The final edition of the New Beetle happened in 2010, marking the demise of the New Beetle as well. The phase-out of the New Beetle demonstrates that there is a difference between the ongoing requirement for annual updating of automobiles and retro-futurism as a distinctive repositioning. Typically, retro-futurism needs to deploy a few breakthrough approaches to breathe new life into the retro designs.

Upgrade versus reinvention

Over the first twenty years, Beetle had continuous upgrades which by today’s standards would look very marginal. For example, the engine capacity moved from 1 litre to 1.2 litre and engine power moved from 24 HP to 36 HP. Elimination of starter button, repositioning of ash trays, redesign of bumpers, windows, turn lights and fenders were all that to claim for upgrades. The first syncromesh gear box did not arrive till the 1960s. Such minor changes continued to propel Beetle until the fade-away years of the 1970s, which brought hot new competitive designs from Japan on one hand and stringent fuel economy and emission standards in US and Europe on the other. Yet, supported by improvements like electronic fuel injection internally and convertible body designs externally, Beetle moved on with a niche positioning until the complete phase-out in 2003.

Volkswagen realized that notwithstanding the decline in sales, there was a huge reservoir of goodwill for Beetle as a design concept and owner experience. The New Beetle which was designed in the late 1990s was aimed at making the car contemporary with 1.8 litre capacity engine developing 150 HP, transverse mounting of engine, nippier drive train, independent suspension, bright colours, ABS brakes, high intensity discharge headlights, traction control, and other stylistic changes. Yet, the combination of the largely untouched Beetle exterior profile and the more powerful Golf internals as the new Beetle was not enough to fuel a new rally for the new Beetle. This is ample proof that retro-futuristic designs must not only retain the best of the old but also integrate the best of the future.

Digital Beetle 2016

After decades of incremental mechanical engineering as above, the Beetle is now reinvented as Beetle for the millennials’ era incorporating digital technologies to make the much loved buggy car future-proof. It is a combination of classic style and contemporary engineering in a future-ready digital platform. It retains the iconic two-door design and rear wheel drive but has now a larger engine series capable of delivering up to around 200 HP of power and up to around 30 KgM of torque, previously unthinkable for such a compact car. It also sports a seven speed automatic transmission, large alloy wheels, keyless starter, light sensing Xenon headlamps, electronic braking distribution, anti-lock braking system, traction control, electronic stability programme, six air bags and digital multimedia. It features all the digital bells and whistles that make travel in a contemporary car a joyous ride of safety and pleasure.

With affordable pricing, the Digital Beetle could scale up to sell in millions again. With premium pricing it could just be an everlasting niche product, selling in just thousands. Either way, the product could continue to retain its iconic status even decades later. Beetle reflects the requirements of retro-futurism brought up in the earlier piece on Apple SE: (i) A product should be developed with a state of elegance that could enable it to qualify itself as a new product even years later, (ii) Recalling a retro design has to be more than for emotional or reminiscence reasons; it should bring the latest technologies within the restored contours, (iii) The higher the size of the industry market base (and its growth rate), the greater is the potential for retro-futuristic products, (iv) Retro-futurism is not about using old dies, moulds or chassis for cheap products but is more about creating superior products with re-optimized cost and technology balance, and (v) importantly, Retro-futurism should never be mere refurbishment; it must be on reinventing the ‘old’ as a contemporaneously relevant ‘new’. 

Living legacies

Additionally, however, there are a few important lessons from Beetle that supplement the above. It is not uncommon to have legends and legacies. What is relatively uncommon is for such legends and legacies to live on physically across generations, which is not impossible as Beetle demonstrates. The enduring living legacy principles are as follows.

Inspirational designs have no expiration risk. As demonstrated by Apple SE and Beetle, inspired, and inspiring, design have no shelf life. They can survive and succeed in perpetuity. Indian epics and Raja Ravi Varma paintings are irrefutable evidence on an entirely different level. This is because inspirational designs and products appeal to the spirit as much as to the eye.

Structured teams can continuously develop innovative themes to perpetuity. History has it that Beetle concept was the brainchild of one innovative designer, way back in 1930s. By virtue of the design getting passed to Porsche, the established car maker, the concept became a reality, with continuous updates by Volkswagen teams. Designers and Developers in harmony can embed lasting value in products.

What lasts in crisis outlasts competition. Beetle was a pre-World War car. Though essentially a civilian design, the product was hijacked for military purposes. Its manufacturing facility was ravaged in bombings. Lasting through the crises, Beetle proved its mettle as a product that is crisis-proof, and hence as a product of sustainable success over generations.

Global businesses can be built on single but marvellous products. Many companies and leaders believe that they require multiple products to scale up, more so globally. While such a strategy has its relevance, Beetle is one example (along with scores of others) that one great product can create, or at least lay a lasting foundation for, a global corporation. Sony, Intel, Microsoft, Facebook, Google, and several other global corporations, each founded on just one core product, are living examples.

Glorious past gives lasting legacies but unflinching faith shapes living legacies. Managements that are driven by numbers of margins and viability as well as phase-outs and fade-outs lose track of the evergreens they have in their midst. It requires more than ordinary managerial skill and leadership insights to identify, support and nurture designs and products of perpetual value.

It is an evolved human characteristic to be creative and innovative and to constantly invent or discover something new, and build new businesses around it. While there can be no two opinions that it is a natural path, it is equally important to retain the soul and spirit of the original innovation and creativity. The paradigm of living legacies, as discussed herein, inspires us to recognize that certain types of unique innovation and creativity are everlasting in nature.   

Posted by Dr CB Rao on April 28, 2016

The Mind of the Imitator: Replicating, Improving or Evolving?

Imitation, it is said, is the best form of flattery. Imitation is the natural follow-on for innovation. Innovation itself is a complex and challenging but essential facet of progress, as we discovered in my blog post of last week. The said post on three horizons of innovation titled “The Mind of the Innovator: Imaginative, Re-imaginative or Disruptive?” was published in Strategy Musings, September 19, 2015 (http://cbrao2008.blogspot.in/2015/09/the-mind-of-eternal-innovator.html). While it is good to be innovator, not all individuals or firms can be innovators. Several individuals and firms find it not merely expedient but even appropriate to be imitators. Given the high cost of innovation and the intellectual quality that drives them, innovations are protected by patents. Innovations that are not protected by patents or whose patents can be challenged and innovations that outlive the granted patent life are open to imitation.

Imitation, unfortunately, has acquired a somewhat negative connotation. Imitation, at least at an intellectually objective level, needs to be seen as a natural concomitant of human and corporate behaviour, and of social progress as much as innovation is.  Imitation, actually, is the creative aspiration and expression of individuals and firms to reach to the level of a leader. The adage ‘art imitates nature’ puts imitation in its perspective. Human innovation, like nature, is fundamental. Just as art brings nature to every home and office, imitation brings innovation to the common man. In fact, the greatest contributions, in terms of both affordability and availability, to healthcare sector have been from development of generic pharmaceuticals which are replicas of pharmaceuticals or are essentially similar in respect of biologic products. This one example, leading several other examples from other industries, is more than sufficient to demonstrate the power and relevance of imitation.

Simple but complex

Simple as may sound, imitation is also a complex subject that involves as much science and art as innovation does. Firstly, there can be no bar on, or imitation of, ideas. Creativity in ideas by a few and embracing of expressed such ideas by many is a fundamental first step for efficient and equitable socio-economic development. Parallel innovation is not imitation. This is best illustrated by Nobel Prizes which are often shared by scientists working in different universities and laboratories across the globe. Industrial development takes place innovatively by parallel developments of similar, if not identical ideas, but developed innovatively. For example, the idea of elliptical exercise equipment could be shared by many but only a few can produce differentiated elliptical equipment with truly harmonious leg and arms movement with differences in innovation (for example, Precor and Octane).

Imitation does not seek to change the product configuration or functionality. It seeks to simply make it cheaper or more efficient (or both). Lack of patent barriers does not mean that imitators have an open sky opportunity. There could be significant other barriers for imitators, including barriers related to development, production, people, quality, and market barriers. Market barriers could include brand image, channel access, distribution strength and so on. Imitation with differentiation is essential for acceptability. At firm level, viable imitation could be a matter of superior management skill but at an individual level viable imitation is harder to achieve. No individual can, in fact, be imitated though some of the characteristics can be imitated; for example, characteristics like application, communication, networking can be imitated but the total personality cannot be.

Imitation, whether at firm level or at an individual level, requires a clear strategic thinking backed by execution excellence. The reasons are obvious; an innovator has the first mover and first provider advantage and, more often than not, succeeds in building a brand loyalty. Imitator has to challenge the innovator to be able to succeed. And most imitators take the easy but important route to succeed – of competing on price. In some ways, this is a natural structural reality of imitation as the imitators do not need to commit huge sums of money in experimental R&D or prototype evaluation on one hand or on distribution channels and market making on the other. In several cases, third party manufacturing may be an available option and in some cases, the market itself may be weary of market dominance by a monopolist. The real challenge of imitation lies in none of the above which are fairly commonplace enablers or corollaries of imitation.

Three horizons

The previous blog post on innovation hypothesized three horizons of innovation, namely imaginative, re-imaginative and disruptive. The author proposes that imitation, likewise, can be made to happen in three horizons of replicating, improving or evolving. Imitation at its basic form of replicative imitation exists when a complete spec to spec to copying is resorted to. This happens, in fact, at the tail end of imitation lifecycle when a product or service is commoditized with low entry barriers. Replicative imitation can survive solely on the basis of price competitiveness for lack of any differentiating feature. Replicative imitation gets a lift when such products are offered by firms with a superior reputation for quality, customer satisfaction or scale and scope. A processed food product offered by an FMCG giant, for example, would be seen as a better product than that offered by a small scale regional player though it could just be a perception and not necessarily a reality.

Imitation in the middle horizon of improving imitation occurs when a product or service idea is imitated with notable improvements thus providing a differentiation. Firms as a matter of routine seek to imitate their own products with improvements. The personal assistants in smart phones, for example, are improvements over successive generations of their own products. Improvement in imitation can help firms gain a foothold in the marketplace in the face of dominance by an innovator. Samsung’s Galaxy phone line-up has been an imitative improvement by an imitator firm seeking a strong entry into the turf of Apple, the dominant innovator. Even innovators gain through imitative improvements. The market believes, for example, that as a concept Apple’s latest launch of iPad Pro is an imitative improvement over the rather successful Microsoft Surface tablet computer that could revive iPad sales.   

   

Imitation in the higher third horizon of evolving imitation occurs when a product concept is evolved to imitate innovative competition better. Bajaj Auto’s Quadricycle (RE 60, now called Qute!) is an evolution to compete with its own three wheelers on one hand and the lower end of LCVs and passenger cars operating in the taxi segment on the other. Tata Motors is taking the evolutionary imitation to the next level by launching Magic Iris, its low end LCV, as a safer alternative to Quadricycle. Evolutionary imitation has pros and cons. The advantage obviously is the ability and felicity to build on an existing platform while the disadvantage is that evolutionary product development may not mach the robustness of a ground-up holistic new product development. This is evidenced by the criticisms being faced by RE 60 in terms of safety and other challenges. Yet, evolutionary imitation represents one of the most impactful facet of balanced product development.

Philosophical balance  

As a high level philosophy, everything that is synthetic is nothing but an imitation of nature. Whether it is innovation or imitation, neither is as original as nature. To consider, therefore, that only innovation needs to be aspired for, and imitation needs to be deprecated is probably presumptuous. That said, innovation represents the higher intellectual challenge of fundamental development while imitation represents a different type of challenge of holding one’s own against innovation. With three forms of innovation (imaginative, re-imaginative and disruptive) and three ways of imitation (replicating, improving and evolving) being available, firms can develop a judicious mix of innovation and imitation. The balance between innovation and imitation depends on whether and how originality and creativity are built into only product development or all through the value chain, from development through manufacturing to delivery of the product.

There are three principles for such a philosophical balance. The first is to innovate in a niche where the firm is willing to commit significant resources, including time. This could be in terms of reinforcing the core strengths of the firm or adding new core strengths. Investments by Sony in camera sensors and by Samsung in OLED panels are two examples of the first type of innovation that strengthens the core competencies. Investments by Microsoft in devices, especially gaming devices like X-Box and computing and connectivity devices like tablet computers and smart phones are examples of the second type of innovation, The second principle is to unhesitatingly imitate a pioneer’s idea, especially when it purports to become a new wave but develop, manufacture or deliver the product in a more innovative way than the pioneer could or would. Development of elliptical trainers with additional patented movements or development of body-countered seats with electronic dynamic adjustments are two examples.

The third principle is to just imitate all through the value chain but making sure that in each part the firm offers better quality and lower cost. The third principle reflects the essence of generic competitive strategy, with a strong focus on superior execution. Markets and nations immensely benefit when a fair and judicious balance of innovation and imitation is offered to the consumers.  Firms and individuals need be neither obsessive nor deflective of either. The challenge for leadership is to develop an ecosystem wherein both coexist symbiotically because that is the way the society gets benefitted the most. In its pristine form, innovation transforms the way we live. In its sublime form, imitation stretches innovation to its limits. At some point they combine to reinvent both innovation and imitation. The brilliant mind of an artful imitator is no less important to this world than the exceptional mind of a creative innovator, and vice versa, in a philosophical sense!

Posted by Dr CB Rao on September 26, 2015  

Innovation with Perfection: When Parts Become the Whole

Innovation is seen as the hallmark of creative development while perfection is seen as the surrogate of supreme quality. Customer delight arises from a combination of innovation and perfection. Innovatively designed products that are made to perfection surprise, delight and inspire customers. From an economic point of view, a combination of innovation and perfection results in greater productivity and sustainability. The beauty of this combination is that it is applicable not only to products and services but also to processes. Generally, however, innovation and perfection are seen to be somewhat antithetical to each other, with innovative products running the risk of failure and perfect products being a result of highly standardized inputs and processes, proven in millions of repetitive cycles. This intriguing reality has probably a socio-economic behavioural causation too; one can wait for innovation but not eternally and one can seek perfection but not at the cost of immediate needs.

While innovation could be a result of spontaneous intuition or diligent serendipity, and perfection could be a result of a mind-set steeped in conformity and quality, in most cases innovation and perfection are highly organized activities requiring time and effort. In principle, the greater the time and effort expended on innovation and perfection, the greater is the possibility of innovation and perfection. The pathway to innovation on which time and effort are spent is often dictated by the target of innovation. The pathway to perfection on which time and effort are spent is dictated by the level of specifications on one hand and usage feedback on the gap between specifications and requirements on one hand and the gap between specifications and performance on the other.  The targets of innovation and perfection are, themselves, set somewhat subconsciously by what humans as the experimenters see as the limits for innovation or perfection. As this process is complex, practitioners seek optimality which ironically could be sub-optimization.

Substrates

In reality, innovation that we see in products or services is invariably preceded by innovation in basic technologies. The innovative televisions of today are made possible because of innovations in display screen technologies such as OLED that were seeded a few years ago for palm size screens. When several innovative technologies become available novel products incorporating such technologies get to be developed, albeit with a lag. Strange as it may seem, rarely innovation gets defined ab initio at the end-product level. This facet of innovation in multiple technology substrates represents both an opportunity and a challenge for product level innovation. The opportunity arises in terms of choice and speed while the challenge arises because of imbalance in innovation of parts. Rarely one gets to have a total product technology mission that targets innovation in raw materials, components, integrating systems, manufacturing equipment, production processes, and end-products as one holistic mission.

That perfection does not necessarily move with innovation, and vice versa, is fairly obvious. Apple which has seemingly attained perfection with its iPhone range until recently (say, till iPhone 5) has not necessarily been innovative in all the departments. On the other hand, as the innovation level (as exemplified by a slim form factor) got bumped up in the iPhone 6 range, perfection lagged as evidenced by bending phones, protruding camera modules and blurred images in some lots. Samsung has been innovative in form factor and stylus based phones but never reached the top in terms of perfection. Incorporation of OIS modules in slim phones represent a greater challenge in terms of achieving perfection rather than integrating innovation. Inevitably, every first generation innovative product, be it cell phone or holography headset, emerges to be a rather bulky, blunt or crude form of innovation (at least, until after the next generation products are unveiled).

Parts and the whole

The author of this blog once wrote a post titled “Style is Substance: Management of Product Design and Manufacture”, Strategy Musings, August 8, 2009 (http://cbrao2008.blogspot.in/2009/08/style-is-substance-management-of.html). The post argued that the style of a product demands substance in design and manufacture of a product, and boosts efficiency, encourages creativity, promotes flexibility and drives growth but also demands management competence to ensure all of this. The blog post was, in fact, inspired by the crop of stylistic products that began to be unveiled during those years. Much intellectual water has flowed under the bridge since then with rapidly evolving products and amazingly shortening life cycles. While style and substance seem to have stood up over the last six years as a solid pair, perfection and innovation seem to be moving out of step, of late. This can be traced to the mismatch of perfection and innovation in the parts and the whole.

Product design as a technical discipline has such versatile facets that a few parts can make a significant change to performance but such trend can neither be unlimited nor perpetual. For example, a superior drive-train can step up an automobile to a different performance trajectory but without matching strides in overall strength-weight parameters or navigation systems, enhancement in performance of parts would soon be blocked. When breakthrough products are conceptualized, every part needs to be thought of for innovation and perfection. When Airbus A380 was designed as the largest commercial plane, each and every part had to be redefined to newer standards. The difference between a spaceship for a lunar expedition and a spaceship for mars mission would need a complete conceptual redesign. The challenge of perfect innovation lies in absorbing the approaches from such uncommon products to common products.

Perfect innovation

Perfect innovation may be defined as an organized process in which each component of a product is covered with innovation. This requires concurrent engineering and manufacture of a different detail and differentiated calibre. To institutionalize perfect innovation, a firm has to approach product development and commercialization in two distinct tracks. The first track covers the routinely followed quick-upgrade product cycle. This would incorporate typically certain innovative upgrades to differentiate products across generations; such product cycles may alternately focus on innovation or perfection. Typical examples are found in white goods and consumer goods sectors. The improvements in loading systems or washing cycles in washing machines, enhancements in purification and water recovery in water purifiers, integration of new materials in cooking systems, miniaturization of routers and dongles, enhancements in pixel density of display screens, improvements in aperture sizes of camera sensors and inverter integrated air conditioners are examples of such routine product developments.

The second track, which actually is the track of perfect innovation, reappraises the entire product concept in terms of the total design and functionality of the end-product at one level and the design and manufacture of every material, component, system and assembly at another level. The first editions of digital camera, smart phone, flat panel television, and several such others represent close examples of perfect innovation. The reasons are that each of the products had several totally new components (not merely upgrades of existing ones) involving new materials, new designs and new manufacturing processes. All of these products had new operating systems as well. Introduction of digital technology has enabled definition of metrics for measuring innovation and perfection. Until the entry of digital technology, mechanical fits and tolerances determined the perfection of manufacture. Digital technology helps monitor the perfection of manufacture as well as on-site performance on a continuing basis in critical equipment such as medical imaging equipment, diagnostic equipment and infusion equipment.

Bill of innovation

Perfect innovation is a multi-stage iterative process which starts in the first phase with a total redefinition of the product concept. This stage can be applied to any product, from a telephone or a television to a hotel room or operation theatre. This stage requires truly out-of-the-box thinking on product configuration, which could reposition even plateauing or declining products. For example, the land telephone which has reached a stage of plateau can be subjected to this process.  From a mere dialing instrument for physical communication, it can be converted into a home management robot. At the very least all the functionalities of a smart phone like multiple ringtones, display screens, voice assistance, voice recording and play back, and a number of utilities such as alarm, compass and calendar can be incorporated. At a higher level, it can be embedded with a mini-computer which can provide instructions to various devices and equipment in home, serve as daily organizer and also serve as a real-time camera to record entrants to the home. A fundamental re-positioning of a traditional product, based on a new technology substrate, is the first phase of perfect innovation.

The next phase is the crucial operative phase which comprises four parallel inter-connected streams of technology substrate choice, detailed bill of materials, bill of innovation corresponding to bill of materials and component-specific manufacturing perfection scheme, including testing and quality assurance and equipment planning. These four streams encompass the product on an end-to-end basis, from design to delivery. At the end of this second phase, the first prototypes of the new breakthrough product would be available. The third final phase is the iterative phase when the prototypes are honed to perfection, adding incremental innovation and perfection to each component to perfect the overall product style and substance. At the end of this phase, the product would be ready for homologation and commercial manufacture. As opposed to a typical 6 month upgrade cycle, perfect innovation would require a minimum development and commercialization cycle time of 3 to 5 years. Firms would do well to split their R&D and Manufacturing functions into Improvement Business Units and Redefinition Business Units.

Posted by Dr CB Rao on September 01, 2015