Reverse Leadership: Forward Initiative

Leadership is often seen to be synonymous with top positions in an organization. The reasons are not far to seek. Incumbents of top positions would typically possess high competencies honed out of academic studies and practical experience. This would lend maturity and ability to steer the complex affairs of an organization. This conventional paradigm has some challenges in a world where young talent is competent and competitive and is more desirous than ever to climb higher echelons of an organization earlier than the previous generations hoped to. Many organizations do try to provide fast track opportunities to promising youngsters through faster job rotation and independent projects. Despite this variation, leadership is still held synonymous with a position one occupies, the only difference being age is perhaps less of a determining factor.

The fast track paradigm while apparently seeming to find a solution actually ends up leading to additional problems. Comparisons between composed, competent mature leaders and aggressive, talented young leaders apart, the paradigm barely covers a score of young performers at best. Performance tends to be driven by visible metrics and fierce individualism. Eventually, most fast track performers find themselves slowing down at some point of time or other based on demand and supply of talent. Virtuous organizations clearly need a more broad-based leadership canvas to be distinguished on a sustainable basis from others. Many experts, accordingly, refer to the concept of grassroots leadership but this also has its limitations.

Grassroots leadership

Grassroots leadership refers to a concept whereby leadership, as defined by the ability to lead and make things happen, occurs on a universal basis across the bottom of the organizational pyramid. Literally, it would extend to the multiple layers of the organizational pyramid. Exciting and impressive the concept may sound, it tends to remain largely utopian. The reasons often relate to the fact that in most cases focused execution tends to be the need of the hour at the operating levels. In addition, leadership requires space to create and innovate for individuals, which obviously cannot be universally made available. Moreover, most organizational processes are repetitive, requiring standardization and perseverance than versatility and promptitude. There is, however, one or two domains that could enable, or even require, grassroots leadership. Selling in the field is a clear example of grassroots leadership. 

A retail sales person or a field sales person typically serves as a microcosm of the company’s capabilities in its products and services as well as consumer need fulfillment. In a sense, he or she serves as the chief officer of the territory he or she serves. He or she is often expected to promote the products with feature selling, coordinate with multiple agencies to ensure stocks and payments, analyze and address competition, and in some cases take decisions on the spot. A field salesman could be the lowest in the hierarchy but could be expected to take leadership decisions of the highest order. Similarly, designers could be expected to be creative and resonant regardless of the level. These are, however, exceptions rather than the rule. In contrast to grassroots leadership, and in addition to its need in specific domains, reverse leadership is a paradigm of interest.

Reverse leadership  

Reverse leadership is considered to occur when so called ordinary employees or frontline managers, who are outside the leadership arena, demonstrate exceptional leadership in making things happen in the face of anticipated and unanticipated challenges. Reverse leadership provides solutions when apparently none exists. Reverse leadership often ends up providing sustainable solutions including tangibly better ways of performing corporate activities. A reverse leader is often a product of mentorship and typically emerges in an ecosystem that is willing to experiment rather than is terminally afraid of making mistakes. Reverse leadership, unlike grassroots leadership, can occur in any domain or department. Reverse leadership often also leads to visible improvement in the overall leadership strength of an organization.

There could be several examples of reverse leadership in day to day organizational life. In the movie industry, one has the examples of assistant directors coming up with astounding ways of taking certain scenes that defied the imagination of highly experienced senior directors. Cricket teams usually encounter situations where junior cricketers contribute innovative ideas of field formation in the face of opposing teams piling up runs relentlessly. A field salesman could come up with brilliant solution of off-label promotion of appropriate medicines. A designer may come up with redesign of components to reduce costs and weights and enhance strengths. A machine tool operator may come up with ideas to increase cutting speeds with tool feeds backed by novel rake angles. An accounting officer may come up with novel documentation system that cuts processing times and enhances archival capabilities.                                                                  

Characteristics of reverse leaders

Reverse leaders tend to have certain unique attributes that distinguish them from other employees. Fundamentally, they tend to be result oriented and creative process drivers. Observant always of the processes and products they own, they come up with lateral solutions to intriguing problems. Typically, they can operate under multiple constraints and yet provide optimal solutions. Such reverse leaders would require leaders in formal positions who understand the reverse leaders’ impatience and creativity in appropriate perspective, coaching and encouraging them appropriately. The unique approaches of reverse leaders are often borne out of their unique balancing of domain competencies with social skills. They have positive attitudes towards life in general.

Reverse leaders have a strong level of self-awareness which is accompanied by a strong sense of self-worth too. Their confidence, coupled with social skills, enables them to be non-egoistic but proud about their ability to drive a change. Their confidence often arises from a deep understanding of their core domain and their ability to contribute to the departmental and organizational competitiveness through such skills. As a result, when an organization is confronted by a problem, formal leaders and peers tend to look up to the reverse leaders for creative results. Reverse leaders display a high level of integrity and risk taking in their work, building trust and credibility in their competency and commitment.

Not surprisingly, reverse leaders carry out their assignments for the sheer pleasure of achieving results rather than for grandiose plans of creating fabulous careers. Typically, therefore, they are  seen to be transparent without any hidden agendas. As an extension, they also tend to be individual performers being content with the image of do-gooders. Much of their passion and dedication is driven by a motto of delighting the customers, whether internal or external. The satisfaction of changing the internal operating landscape through product and process improvements and influencing customer preferences through better product and service offerings tends to be of genuine fulfillment for them.

From reverse to formal leadership

Given the significant talent base, positive attitude set and selfless approach to performance, it is desirable that an organization nurtures an ecosystem that enables reverse leaders grow into formal leaders. This requires, at a simple level, coaching and mentoring by select formal leaders   to make the reverse leaders aware of the larger contributions they can make. At a more advanced level, they would need to acquire additional skills so that they can replicate their accomplishments on a wider scale. While certain reverse leaders would content to be individual contributors other reverse leaders would be willing to take on additional roles. Organizations which are able to recognize the different types of reverse leaders and recognize, develop, motivate and reward them would develop a solid and sustainable leadership base, and remain ahead of others.

Posted by Dr CB Rao on December 26, 2012                                                      

 

From Type to Touch: For the Text, What’s Next?

Human civilization has seen centuries of evolution and development as an increasingly knowledge society, solely on the basis of oral and written communication. The myriad languages of the human race have been the vehicles of division as well as integration of societies. While oral communication has always been through a complex interaction of the brain, tongue and the mouth, the written communication has seen transformational changes as the human race and technologies developed. In India, Vedas, slokas, epics and poems which were captured on the palm leaves in the ancient root language Sanskrit (as well as in the other Indian languages) are a compelling evidence of the human’s unceasing quest to develop, race to develop, communicate and archive knowledge for the present and the future.

While oral expression has been a natural endowment, written expression has been a manmade competitive advantage. Writing materials have played a very prominent role in the development of diverse cultures. They have helped not only in preserving the history and culture of mankind, but have also deeply influenced the scripts, languages as well as man's mode of thinking. To understand ancient writing materials, therefore, is to understand ancient cultures in a better light. Societies which preserved knowledge, like the Western world, progressed while societies which were indifferent to preservation, like India, lost several treasures of knowledge. India has seen writing forms evolve over  several centuries using virtually every form of materials, from palm leaves to copper plates and stone slabs to modern paper; but so much more of ancient wisdom, it is felt, has not been captured at all. And, of whatever that has been written down a lot has been lost in history too.

Shift and Change

 Ever since the advent of computer, the domains of writing, publishing and dissemination have seen nothing short of a revolutionary transformation. From the initial binary punching to later day language typing, computer has seen a step function jump in processing power. From being a data processing machine, computer has become the backbone of new age information technology. Development of various computer languages to converse with the computer has customized computers to multiple uses.  Software capabilities and hardware power evolved in tandem to be able to electronically capture, manage, store, transmit and retrieve data, information and knowledge in standalone and networked computers as well as global servers and grids. Whatever the historical lapses in writing and preservation of information in the ancient India, it is a just irony that India is now in the forefront of writing the code for all the computer languages. There are, however, two facets to the language and communication paradigm of the computers; the visible and the invisible.

The visible language is user-friendly while the invisible language is programmer-challenging. The greater the user friendliness that is targeted, the greater is the programming challenge. With the growth of the Internet and instant patching and updating the challenge of keeping the invisible language current and contemporary has been increasing.  The invisible language itself has two parts, the programming language and the machine language. While major enhancements have been happening on the programming language front, the machine language remains binary. The relative exclusivity of popular operating systems (4 for computers and 4 for smart phones) vis-à-vis the proliferation of devices (several hundreds) indicates the complexities and challenges of developing an operating system that is truly multi-functional and robust.  Underlying the complexity is the need to write millions and billions of coding lines to support such user functionalities.

Touch and Write

The first improvement to user friendliness came with the incorporation of drop-down boxes and tool bars to guide the user and let the user select from the available options. This development still had to be accompanied by typing of options. The breakthrough, however, came through Apple bringing touch-select as the next level of user experience. The touch experience is intimately tied with the scrolling capability. Despite the dominance of touch in smart phones, touch navigation could pose a challenge in full fledged computing devices given the significantly additional number of operations to be performed. While an Office suite would cater to the detailed navigation, the fact would remain that touch would still be an immediate experience rather than a type-along experience for the user. Microsoft has recently launched Windows 8 as the ’touch and navigate’ platform applicable across all the devices, from phones and tablets to laptops and desktops. Whether text management can now be integrated with touch management is the next frontier for Microsoft to explore and conquer.

For thousands of years, writing has been the hallmark of human civilization. Writing brings out certain faculties of hand and brain coordination, in terms of control and memory as opposed to typing which, though bringing out a different type of hand and brain coordination, admittedly mechanizes the writing faculty. After the initial failure of initial handwriting recognition that was applied on the original Microsoft tablet computer in the early 2000s, the importance of writing on the computers has taken a distant second position. The more recent revival of pen stylus based devices, more especially Samsung Galaxy Note devices, gives hope that handwriting would reemerge and remain as the most intelligent and intellectual form of providing inputs. This would require a new level of integration between software and hardware technologies with superior capabilities for highly variable handwriting between people. However, that certainly is the way to go as the pen stylus brings the added advantage of free hand sketching, drawing and annotations as well as track changes.

See and Speak

Recognition and cognitive technologies would continue to be developed to the extent that look and talk would be the new input channels. The focusing of eyes would soon determine which icon (in the Apple language) or tile (in the Windows language) is desired to be opened by the user. Eventually, even sub-instructions may be tracked and selected with eye contact. The first evidence of the feasibility is already seen in certain devices and software solutions, from recognition of start and stop commands based on eyesight to adjustments to ambient conditions. In devices of the future, there may not be a need to have a dedicated camera key; a mere blink after focusing could snap the photo. Future cameras may detect the natural power of eyes and accordingly adjust their own aperture and focusing settings.

Cognitive technologies have seen a boost with the voice commands in the navigation systems and the more recent Apple Siri and Galay S voice in the mobile devices. These, however, are limited by the preprogramming potential. Open ended speech based input technologies have not so far realized the potential such technologies could hold. Cognitive technologies have speech recognition as the primary platform.  The potential has not been realized mainly because of the phonetic and pronunciation variations across people. Self-learning programs are the answer. Future speech recognition software solutions would reprogram themselves based on an initial cycle whereby a person inputs his or her speaking patterns and profiles. Such technologies would also add an extra layer of security to the computer system by uniquely recognizing the speaking patterns.

Think and Imagine

Probably, the net giant leap would be when the devices start recognizing the thought processes. As the mapping of brain, deciphering of brain waves and decoding of fired up neurons gain traction, potentially  each thought may be identified with a unique fingerprint. The thought rather than the person or the device could be the unique factor that could be standard across any person-device combination. This would require the devices to have powerful electromagnetic sensors that can recognize unique thought waves that correspond to the commands a person desires to give to the device. As with any new endeavor, the thought recognition technologies may be introduced with simple commands and later extended to the whole gamut of human thoughts.

The ultimate frontier could be to imagine the human intents and desires from out of the myriad overt recognizable actions and thoughts. This development would be quite the opposite of the previous hypothesis of universally standardized thought wave technologies. The ability to imagine would be achieved when a device is uniquely synchronized and intertwined with the owner cum user of the device. The device would have an enormous storage ability and analytical power to capture each and every unique thought, command and action to develop a full portfolio of how the user would behave. As the experience and expertise of the device grows, so would its ability to simulate its user’s thinking and imagining for the user and outlining a whole range of options as if the owner himself or herself would be imagining.

Design beyond Device

If the foregoing were to come true, and the author of this blog post believes would come true sooner than later, the devices would no longer me hand operated apparatuses anymore. They would be vested with increasingly higher levels of human faculties. The advertisement by Samsung for its latest mobile phone, Galaxy SIII, claims that it is “designed for humans”. Based on the foregoing discussion, the advertisement for future devices could well read as “designed as humans”, with each device being as uniquely personalized and intelligent as each human being uniquely is .

Posted by Dr CB Rao on December 25, 2012                      

 

Contented Connectivity: The Happiness Mantra for Organizations

Organizations are set up to deliver. Classical theory of organizational delivery hinges around motivation. Organizations are expected to deliver in an optimal manner when people in the organizations are motivated to deliver. Motivation is expected to occur when people feel fulfilled. Fulfillment is observed to occur at two levels; first when people feel that their achievements meet or exceed their aspirations, and second when their achievements are recognized and rewarded. Recognitions and rewards are perceived to occur, from an organization perspective, at two levels; first when the aspirations of the people are aligned to organizational goals, and second when organizational goals are achieved through individual, and team, achievements. However, there is a more fundamental paradigm of organizational delivery that focuses on natural ways of human contentment and connectivity.

What we have in organizational-people interactions is a complex maze of perceptions and realities. The mismatch of perceptions and realities and of facts and imagery leads to turbulence in organizations marked by de-motivated employees, failing performance, missed goals and relative dissatisfaction of both people and organizations. This negative circle is detrimental to productivity and delivery of organizations. The root causes are complex and often invisible, and cannot be managed by planned interventions such as performance management or people development. This blog post proposes that there is a more fundamental foundation than motivation which all organizations must aspire for  to achieve the best levels of productivity and delivery in a natural manner.

Contented and connected

It needs no emphasis that organizations are platforms for collaboration amongst their people constituencies. Without genuine and effective collaboration, organizations cannot deliver to their full potential; they may not even survive the competition. Collaboration in an organization requires that its people are contended and connected. This paradigm is the opposite of what is normally found in practice in organizations that are filled by motivated and individualized approaches. The former paradigm of contended connectivity is based on the positive principles of human psychology as well as oriental spirituality which reflect two essential characteristics: first, one must be at peace with oneself as well as the environment, and the second, one must stay connected with one’s inner self and the outer world through introspection . The later paradigm of motivated individuality is based on the principles of modern management and western social thought which reflect two essential characteristics: first, one can and must go beyond the natural comfort zone to deliver and earn rewards and the second, people must fundamentally be organized through formal structures and systems of the rational mind.  

It is easy to see the difference between the two paradigms. The first is self-administered while the second is the externally imposed, from an individual’s perspective. The second paradigm which draws its sustenance from various motivational theories, starting from the Hawthorne studies, needs constant external attention for sustainability. In fact, the second paradigm is not even truly sustainable as it collapses without external props. The first paradigm, on the other hand, draws inspiration from within, and therefore is truly sustainable. There are fundamental differences between the paradigms, however. The first paradigm requires a relatively well-rounded personality which is brought up with less of materialism and more of spiritualism. Obviously, in today’s world this has been taken up as a motto only by a few enlightened institutions. The second paradigm requires any personality that is prompted by materialism and relativism. Obviously again, most institutions find it expedient to shape personalities on material and competitive quests. 

Contentment versus motivation

Contented is the state of being happy with what one has and what one achieves. It may seem to be a retro theme to suggest that people in the organization should be contended rather than motivated. Being motivated means being driven by a factor or a combination of factors beyond the natural behavior to perform and seek rewards.  In a classic sense, motivation suggests a factored drive-in of performance while contentment suggests a status quo with what one has. The difference between the two concepts is, however, more than semantic. Motivation as a driver is intrinsically materialistic and artificial, and is also stress producing. Motivation is an affected behavior of people seeking constant fulfillment beyond what a human being needs. Contentment, on the other hand, is intrinsically spiritual and natural, and is actually stress relieving. Contentment is an intrinsic behavior of people which is both psychological and biological. For example, when one becomes hungry one tends get contented once the hunger is satiated. On the other hand, a motivated individual driven only by rewards cannot stop seeking materialistic fulfillment even if it is far beyond what his or her life needs.

Contentment, as an oriental principle of life, teaches people to find happiness in what one can find in life. It dissuades people from seeking a utopian world. Given the imperfections that could occur in man-made organizations, contentment helps one to attain equanimity in the face of several stress producing challenges. Motivation, as a Western principle of management, exhorts people to look beyond the base without exploring how the base itself can be intrinsically reinforced. Motivation in some ways is like a superstructure built on weak foundations. In matters of human physical health, immunity and prophylactic approaches to wellness are far more effective and enduring as well as less costly than growth factors and therapeutic approaches to treating illness. In matters of organizational behavioral health too, resilience and perseverance approaches to high performance are far more effective and enduring as well as more effortless than motivation based rewards to bettering performance.   

Connected, despite specialized

Modern organization owes its structures and processes to the concept of specialization. Specialization has been the foundation of the evolution of civilization whether it was functionally established (for example, musician, teacher), socially established (for example, royalty) or religiously indoctrinated (for example, the Hindu caste system). Specialization helped in deepening of knowledge and excelling of practice in the domains but it also led to formation of barriers between the various specializations. This has led to functional, social and religious stresses resulting in volatility in the development of human race. It is not surprising that organizations had to be formed on the basis of specializations but it is certainly concerning that specialization has led to silo formation in organizations. As a result, much like in the case of motivation, organizations resort to various internal and external forums to connect silos. Just as an unenlightened individual believes that he or she is distinct and differentiated in the universe , an individual who is dogmatic in specialization fails to see himself or herself as a part of the organization.

A connected organizational ethos helps functions deliver organizational goals effectively. The foundations of organizational connectivity occur at two levels; one individual and the other functional. The connected individual believes that he or she exists in communion with his or her inner self and in connectivity with every other individual. He or she recognizes that both in gross and subtle manners his or her existence impacts, and gets impacted, by the presence and absence of other organizational members. The connectivity of functions is also viewed and shaped by individuals from their individual lenses. An unconnected individual gets blinded to the relevance and importance of the other functions, and to that extent, fails to grow beyond his or basic core. In the organizational setting as in the social milieu there is no alternative to stay connected while being specialized. The relative success of residential schools and campuses is due to the forced connectivity such residential life enjoins on the residents. The success of the mammoth public sector units such as steel plants in the post-independence India is largely due to the residential townships and the related connectivity which helped individual and functional connectivity.

Contended connectivity, the natural way

An organization which has its people contended and connected would ipso facto be a stress-free and happy organization. But would it be an efficient and effective organization without the commonly used motivational and specialization tools? The answer lies in preparing the individuals to understand themselves in a holistic fashion from the childhood through the schools and colleges. While it should be the responsibility of the homes and families to teach children good values in the socio-religious context, it must be the responsibility of the schools and colleges to teach how an individual can reach contentment and connection by discovering one’s complete self. From overcoming physical and mental limitations to reaching the full potential of one’s body and brain cells should be a part of the curriculums both at school and college levels. An intrinsic personal awareness and execution process based on self-discovery, duly aided by such teachings brings in contentment without any artificial props of motivation.  And a person who is in equanimity with himself or herself stays connected internally and externally.

Organizations can reinforce the contented connectivity paradigm by ensuring equality and equity in organizations. By being an equal opportunity employer and by being equitable in talent management, organizations can avoid the factors that induce stresses and strains in organizations. Lack of equity is a fundamental destabilizing factor which is sought to be countered by various motivational programs; this is much akin to symptomatic therapeutic programs that seek to treat illness. Leaders in organization, who are circumstantially and evolutionarily experience and demonstrate ego states are often impediments to the virtuous processes of contended connectivity. Development of executives, managers and leaders from the grassroots level on the paradigm of contented connectivity is an essential need for organizational excellence. Recruitment of well-rounded mature individuals and enabling them discover their fuller potential and fulfill them all through the careers is a sustainable strategy to efficiency and effectiveness in organizations. Contentment and connectivity of people would make organizations communities of happiness as much as epitomes of delivery.      

Posted by Dr CB Rao on November 17, 2012         

 

Tata Aria, India’s First Crossover: Lessons from the Market Gloss Over

Tata Motors unveiled in AutoExpo 2010 India’s first crossover vehicle, Tata Aria, combining the features of a Sports Utility Vehicle (SUV), a Multi Utility Vehicle (MUV) and a sedan car. The objective was to provide to the Indian automobile users a vehicle that meets every conceivable requirement, from weekday serious business transport to weekend holiday travels, and from highway cruising to off-road punishment. The vehicle was offered in four variants, Pure, Pleasure, Pride and Prestige, with the last two models being the high end models with all-wheel drive (4X4) capability. The vehicles had a host of electronics and safety features hitherto not offered in the Indian automobiles and provided a great combination of style and performance as well as comfort and safety. In fact, one of the campaigns of the company claimed at least thirty six features that were first in class for indigenous automobiles.

Tata Aria also benefitted from the design inputs provided by Tata Motors’ JLR team, which is reflected in the quality of trim and the various bells and whistles for driving and passenger comfort.  Clearly, the emphasis was on providing an international class vehicle to the Indian consumer. The prices ranged from Rs 15 lacs (USD 30,000) to Rs 20 lacs (USD 40,000) ex-showroom. The introduction was accompanied by a marketing campaign that emphasized the capability to seat seven passengers and conquer off-highway applications without any compromise to the feel of a premium car. Due emphasis was also placed on the several sophisticated features of the car. Despite so much going for the car, Aria failed to take off. The sales trickled to hundreds and showrooms started collecting unsold Arias. In a sense, Aria represented for Tata Motors a failure larger than that of Nano. An analysis of Aria saga teaches several lessons in competitive strategy and marketing.

Positioning, the core

The genre of utility vehicles (UVs) in India comprises, apart from Aria, Tata Motors’ Sumo, Grande Dicor and Safari, Mahindra & Mahindra’s Scorpio, Bolero and XUV 500 and Xylo, Maruti-Suzuki’s Grand Vitara and Ertiga, Force Motors’ One, Premier Rio, and Toyota’s Innova  in the largely indigenously manufactured category, and Renault’s  Duster and Koleos, Nissan’s  X-Trail and Evalia, Skoda Yeti, Toyota’s  Fortuner, Land Cruiser and Prado, Mitsubishi’s Outlander and Pajero Sport, Honda’s CRV 4, Hyundai Santa Fe, Mercedes G, GL , M and ML Audi’s Q3, Q5 and Q7, BMW’s  X3, X5 and X7, Volvo XC90, and finally, Land Rover and Range Rover in the largely imported category.  Clearly, for a few thousand vehicles, the utility vehicle model variety is mind boggling. Amongst these, Tata Aria can lay claim to be different from all the SUVs with its car like profile and performance. This has, however, failed to translate into a positioning proposition.

At one level, Aria bore a significant resemblance to Innova which has been the acknowledged king of MUVs in India. With a length of 4780 mm which is longer by 200 mm and a width of 1895 mm which is larger by 125 mm compared to Innova but with the same seven seater profile, Aria began to be positioned in the marketplace by the buyers against Innova rather than against any of the other SUVS, despite the off road capability, imposing looks (with 17” wheels), and the several comparable sophisticated features it possessed. The sophistication and awesomeness of Aria was not a match for the simplicity and friendliness of Innova for the Indian market. This is borne out by the fact that Aria’s hundreds were, in fact, better sales than those of any of the imported vehicles but were just a fraction of the numbers notched up by the indigenous simpletons like Innova, Scorpio and Bolero. M&M’s newer SUVs, Xylo and XUV with greater sophistry also did substantially better. Probably, if Aria was positioned as just a superior Innova the marketing game would have been set differently.

Entry deterrent price 

As Michael Porter theorized, entry deterrent price is a vital concept in the success of new products. The price of a product is closely linked to the positioning of a product. Tata Motors may have calculated that Aria is substantially cheaper than the imported comparables (SUVs) by 25 to 75 percent. On the other hand, given that it was positioned vis-à-vis Innova it was actually perceived to be 25 percent costlier than Innova. Although Aria was made available in a number of variants with increasing sophistication, the premium of 30 percent for the high end model relative to the base model was also seen by the market to be unattractive. Relative to the positioning, therefore, Aria suffered from the classic weight of entry deterrent pricing. The recent introduction of Pure LX as a new base model at Rs 10 lacs, at a dramatic 50 percent discount in price to the earlier base model queers the pitch even more. While the new pricing is certainly entry stimulating, clearly the problem of entry deterrent pricing for other models continues.

Aria’s inflexibility with positioning and experimentations with pricing illustrate that a successful product entry requires both these factors to be properly benchmarked ab initio, failing which they are to be at least dynamically aligned as the market evolves. Had the vehicle been promoted with a clear crossover niche and in comparison with imported vehicles the positioning-pricing equation would have been more positive. Just as the new Camry of Toyota is successfully positioned for corporate leaders, Aria should have been positioned for business leaders with long commutes and who could at times be required to have colleagues to travel with them too. Organizationally, positioning and pricing decisions need to be taken by a highly analytical group of senior leaders well supported by market analytics on the positioning and price elasticity of demand. Internal and external test marketing of positioning and pricing concepts helps companies identify hidden dangers of imperfect decisions.

Service, makes or mars

If right positioning and pricing are the strategic enablers of product success in the automobile industry, satisfying after-sales service is the tactical assurance of product sustainability and customer delight in the marketplace. Ideally, a well designed and manufactured automobile should not require any servicing. Unfortunately in the case of Aria it appears that the incorporation of new generation of electronics caused considerable service issues. The lack of preparedness of the service infrastructure to handle a new generation automobile in the vehicle family has been a concern. This could have been obviated through extensive road testing on one hand and intensive training of service engineers in the new generation electronics on the other. Many of the observations made in the author’s previous blog on Tata Nano in terms of exclusive dealerships for passenger cars apply equally well to Aria. The typical sedan customer expects to have his or her high cost automobiles to be sold and serviced with exclusivity and timeliness.

The post-design and post-manufacturing value chain comprising distribution, sales and service chain (DSS chain) is a significant tactical enabler of successful new product introduction. Pre-certification of this vital DSS chain and the infrastructure is rarely done by companies to the same scale it is done in respect of design and manufacture. Pre-certification of the DSS chain helps a company make important tactical choices in respect of regional versus national launch, pilot marketing versus full scale marketing, flexible positioning versus harmonized positioning. Service part of value chain is also an important part which lets the company know how several of the add-on features that are offered in the new model are effective in practice and also are perceived by the customers. Even a limited period regional launch provides a great opportunity for a perfect national launch. Aria would have certainly benefitted from such an approach.

Options unexplored

Tata Aria crossover vehicle is yet another testimony that Tata Motors and its team of dedicated and innovative engineers can develop, manufacture and commercialize pioneering automobile concepts. In an effort to straddle all the segments, Aria probably was stuck in the middle as a people carrier, pitted in the process against the most popular vehicle in that class, Innova. Innova has been a utilitarian combination of form, performance, price, reliability and service providing the best value for money. Innova has been an excellent traffic manager as its form profile of a sedan helped navigate city traffic more effortlessly compared to the larger Aria. Aria’s off-road and highway superiority probably did not overcome the disadvantages of city traffic negotiation. An option Tata Motors could have explored with considerable probability of success was a shorter and less awesome 5 seater variant for the city traffic and the larger 7 seater variant for the long distance cruise. With most aggregates and components as well as trim remaining common, the economies of scope on a larger volume base would have been significant.

The other option would have been to connect each variant of Aria as launched to different customer segments with appropriate add-on features, in a pick and choose manner. A whole new consumer experience could have been provided to build and order a crossover of one’s preferences. That would have been a great way to align the features and users, given the vehicle’s unique profile of multiple features and multiple usages. The third option could have been to accept all the criticisms, refresh the models to new standards and launch a new Aria series with a suitably upgraded DSS system. To facilitate this, all Arias on stock should have been liquidated with aggressive discounts rather than allowed to linger on. In Aria, Tata Motors, as it has in respect of Nano, a technology winner that has not been completely tested to perfection and supported in the field with commitment. Now that the evaluation and correction phase is over, it is incumbent on the part of the company to convert a technology promise into a positioning success in the marketplace with the right performance, price and service. As with Nano, the stakes are high not merely for Aria and Tata Motors but also for Indian technology and marketing in the overall.

Posted by Dr CB Rao on October 28, 2012  

       

Tata Nano Technology Marvel: The Need for Marketing Muscle

When Ratan Tata set out on a mission to have Tata Motors design and manufacture the world’s smallest four door micro car with a capacity to seat comfortably a family of five adults at a price of INR 100,000 (USD 2000 approximately) which is less than half of the price of India’s ruling small car, Maruti Suzuki 800, there was disbelief. However, when Nano was finally unveiled in the 2008 AutoExpo, its successful development was welcomed with rapturous applause. And, when it could not be manufactured in the originally envisaged green-field plant at Singur there was disappointment all round  that one of the best indigenous industrial marvels of India was being stymied. Well-wishers followed Nano’s manufacturing journey from Singur in West Bengal to Sanand in Gujarat and appreciated Ratan Tata’s commitment and gumption to commercialize Nano despite the multitude of challenges.

Post launch, however, Nano car did not exactly set the Indian car market afire. It was received with a rather tepid response, and the initial glitches did not help the car either in its image. Given that the pricing was attractive and the car was cute and spacious the inability of Nano to translate the consumer and corporate expectations into robust market demand and sales is intriguing. Nano’s maximum monthly sales has not exceeded 10,000 units while the sales have languished below the 1,000 units per month for most months since its launch in 2008. This compares with market leading sales of Maruti Suzuki’s  Alto sub-compact car at over 35,000 units per month.  In fact, there would be no comparison of a new product that had, or probably would have, its performance-price equation so favorable for the consumer.  It is somewhat strange that management schools have not yet thought it fit to analyze Tata Nano from a management perspective. This blog post seeks to fill a vital gap in this respect, hoping also to throw some useful pointers to make Nano a mega success, a feat that the car, Tata Motors and Ratan Tata richly deserve.

‘Design to demand’ variance

The primary reason for Nano’s failure relative to its potential can be traced to the huge variance between the concept that triggered its design genesis and the platform on which it was eventually positioned in the marketplace. The genesis of Nano can be traced to Ratan’s desire to offer an affordable and safe car for the typical Indian small family of a couple and two or three children, which otherwise travels riskily on a two-seater two wheeler. Given that a high end two wheeler costs INR 70,000, Nano as a five seater, four door car at INR 100,000, with all its features, had an unbeatable value proposition. Given that India absorbs each year 20,000,000 two wheelers the demand potential for Nano even on the basis of conversion of only 10 percent of two wheeler buyers into Nano buyers would have been huge. Nano would have easily become the largest selling car in the Indian car market had events gone right for the car, several of them in the management’s own control.

This potential has not been realized mainly because the company fought shy of converting its design inspiration into a marketing value proposition. Either because of the Tatas’ corporate ethic of not directly attacking competitors or because of casual hope that Nano would have its own natural demand pull,  the company never had an aggressive marketing campaign that directly appealed to the Indian small family, especially the young family, on a platform of safety and security. The dilemma for the Tatas would have been whether such a campaign would imply that its co-industrialists market two-wheelers as unsafe family transportation vehicles or that the India traffic system turns a blind eye to the overloaded Indian two-wheelers on the road. Independent of such conundrums, the important lesson for corporations from the Nano experience is that the original design genesis and the ultimate marketing platform must have a clear nexus and alignment. The other lesson is that marketing must rise above the paradoxes to deliver a clear product proposition to the consumer, without fear or favor, and without prejudice or bias.

Gross and subtle, Mind and heart

Whenever the design inspiration for a new product is extraordinary and out of the box, even if it is seemingly explicit, the challenge for the marketer increases manifold. Successful companies have focused time, effort and cost to market and institutionalize new concepts in the consumer mind. A classic example is that of Samsung launching a massive campaign for its large smart phone Galaxy Note as a phone cum tablet, ‘phablet’, with the unique proposition of a stylus to write and sketch. The company did not think that it was distorting its own smart phone and tablet markets that were growing exceedingly well under the Galaxy umbrella brand, nor did it think that it was cannibalizing its own smart phones or tablets. The power of unique technological concepts needs to be demonstrated to the marketplace, also positioned in the minds of the consumers and instilled in in a gross manner. In respect of Nano, the technological innovation of the product should have been demonstrated with unceasing and high-force campaigns rather than sporadic and low profile advertisements. Mind space can be secured only through powerful, explicit and rational delineation in respect of technological factors.

Gross campaigns need to be reinforced with subtle messaging too, particularly when the product really needs to change the segment proportion within the overall market, and wrest the overall market share in competition with a different group of products made by competition. Nano was indeed faced with the dilemma of challenging the two wheeler segment with a superior value proposition of safety of a micro four wheeler. Gross messaging would have not served the purpose, apart from possibly being a strict no-no for the Tatas corporate competitive behavioral philosophy. Emotional subtlety that appeals to the heart is the key to such messaging. Here again, we have the example of Cadbury positioning its milk chocolates as a ‘sweet’ for homely and auspicious occasions in competition with traditional Indian sweets. For the Indian small family, the concept of caring for the life partner and protecting the kids through the small car as opposed to leaving them to the vagaries of environment and turbulence of road traffic in a two wheeler would have been highly effective, for example. Equally, in a society where owning a car is considered to be a symbol of having arrived to a noticeable stage in life, owning a Nano car at the very early start of the career, independent of the relative affluence, would be an impressive value proposition. Subtlety impacts heart positively, which in turns influences the mind share of the buyer.

Value qualifiers

All marketing literature talks about value for the consumer being a function of price and features of a product. In respect of Nano, technology speaks for itself in terms of compact exterior and spacious interior on one hand and the power to drive and fuel to conserve on the other. Any additional value drivers must appeal to both the mind and heart, if the above gross and subtle messaging is accepted. Electronic braking system and front and side air bags would reinforce the safety tag. Experimental evidence of crash test safety would reinforce the safety image even further. An ability to upgrade Nano to a Manza sedan as the family evolves in life, through Tata exchange and finance schemes, could be another value driver. It would be important for the company to first develop a list of various additional features that could add value as a comprehensive list of value qualifiers, and then select value drivers which are appropriate to different groups of customers. For example, a 2 DIN music system will be a stronger value add for a couple while a safety kit as outlined above will probably be a more welcome value add for a couple with babies or kids.

The fundamental value creation, however, starts at the dealer point. The low price of Nano means that the turnover on Nano sales and service would be the lowest for the typical dealership in the Tata family of vehicles. This problem is further compounded by the initial strategy of having a combined dealership covering all vehicles, from cars and utility vehicles to trucks and buses. The implication for Tata Motors as also to all other automobile manufacturers in India is that dealership can no longer be considered just a point of sale. The infrastructure and organization for automobile dealership would need to extend vertically along the product value chain as a continuum of design, development, manufacture, distribution, sales and service. Ideally, Tata Motors would need to have completely different dealerships for cars and utility vehicles on one hand and commercial vehicles (light, medium and heavy trucks and buses) on the other. In each case, the product should receive the same level of care; for example a Nano micro car should receive the same attention as a high end Aria crossover and an Ace mini-truck the same attention as a high end Prima luxury truck. Value qualification by dealership should be an important component of Nano resurgence strategy.

From breakeven to breakthrough

Tata Motors which has received acclaim for being the pioneer in indigenous development of passenger cars and utility vehicles has been losing ground in that segment in recent years. This has been admitted by Ratan Tata himself in the annual shareholders meeting of Tata Motors.  The appointment of Karl Slym, a GM veteran who had a successful stint in GM India, as the Managing Director of Tata Motors has been indicative of the resolve of Ratan Tata to turn around Tata Motors’ fortunes in the passenger car sector. Hopefully, Tata Nano will be a beneficiary of his attention, given that Tata Nano car initiative is at crossroads. The car has certainly seen a revving up of sales in recent months.  However, even with the recently achieved monthly high of 10,000 Nano cars, the production level is below the breakeven point of 150,000 Nanos per annum. Breakeven should not be a concern, however. To utilize the current capacity of 250,000 Nanos per annum and the potential capacity of 400,000 Nanos at the 75 acre site which also has an adjunct component park, Tata Motors requires breakthrough strategies.

Tata Nano is more than just one another passenger car model. It represents the passion and creativity of the Indian Business and the innovation and skill of the Indian engineers to develop and manufacture a passenger car with a feature and cost profile that no other automobile company, global or Indian could ever conceive of and commercialize. More than the success of Nano as a car model of Tatas, far more is at stake for the Tata Group as well as the Indian industry. The author of the blog post hopes that Tata Motors would persevere and make an enduring success of Tata Nano based on an effective strategic format. The announcement by Tata Motors that it would take Tata Nano to the US at an appropriate price tag is indicative of the resolve of the management to take up the challenge by scaling even higher bars. As this blog post brings out, an integrated techno-marketing strategy, customized to the marketplace, is required to reposition Nano car for accelerated growth in India and also position it for successful entry into advanced countries.   

Posted by Dr CB Rao on October 24, 2012           

The ABC of Leadership for Youngsters: Performance-Focus-Capabilities Model

In today’s information driven world, leadership is no longer an aspiration sought after by only a few. It is the new generation’s aspiration to be in charge of its destiny through entrepreneurial enterprise or become empowered to transform by heading a business or a company. And, it is no pipe dream. India’s growing club of entrepreneurial entities and the increasing tribe of graduate trainees becoming the chief executives of their corporations do indicate that becoming a leader is a dream worth having. It is, however, not clear whether the young generation understands what it takes to become a generation of leaders. This blog post addresses certain foundational factors that could ensure a successful transformation of the leadership dream into reality in terms of a performance-focus-capabilities model.    

Theories of leadership, covering the A to Z of leadership abound. Many bring out how personality attributes, knowledge base, skill levels and behavioral propensities influence leadership development. Many theories also provide inputs on how the ability to craft a vision, draft a strategy and ensure execution is an essential triad for successful leaders. Unfortunately, however, many of these are applicable or can even be only appreciated, only when the young entrants reach a particular stage, often mid-career, in the organizations. Many times, it becomes too late for most professionals to change at that stage. Lack of an appropriate model for the entrants to absorb and institutionalize is a glaring gap which this post addresses. The model presented herein is simple and uncomplicated and is relevant all through the four decades plus of an executive, managerial and leadership career that a youngster would coast through.

ABC of leadership

It is indeed feasible to capture the ABC of leadership in terms of nine foundational factors, symbolically driven by the three starting alphabets equally. These are Aspiration, Analysis and Achievement, Balanced, Binary and Buoyant, and Competence, Communication and Collaboration. These, however, need to be observed with caveats that are contextual and which mentor the youngsters on the complexities of leadership with the right perspectives. This enables the youngsters to be directionally incremental but resolutely focused on their goals. The caveats prevent the youngsters from diffusing their energies, and instead help them conserve and regenerate their energies. Leadership achievement is a step by step marathon race where the strong and steady are bound to reach the zenith.

Leadership journey typically takes place under competitive conditions with different organizational ecosystems providing different enabling and disabling environments. The organizational ecosystems themselves are shaped by the nature of the industry and the business, the life cycle of the organization and the overall socio-economic opportunities that India as a rapidly growing emerging nation offers. Irrespective of whether the culture of an organization explicitly promotes leadership development or not, organizations committed to growth require not only leaders at the top but also grassroots leadership at the bottom of the organizational pyramid. The three sets of factors can be viewed as the foundations of performance, focus and capabilities, all equally important and mutually enabling.

Performance factors: aspiration, analysis and achievement

Aspiration is at the core of any leadership drive. Typically, the new entrant would have been able to enter the organization based on the educational aspiration and the domain aspiration that he or she would have pursued. Particularly in the Indian educational system, aspirations are set high from the early schooling as a result of which aspiration as a drive is not a new phenomenon to a fresher to the corporation. Aspiration, however, needs to be exercised in moderation in an organizational setting. It would be inappropriate for a fresher to set for himself the goal of becoming the chief executive of the organization. On the other hand, an aspiration to grow in career as fast as the organization would permit would be a feasible goal. Another desirable goal would be to be differentiated and credible in performance. The more plausible and realizable the aspirations are in the short term, the higher would be the motivational levels to succeed with greater challenges later. One of the dictums of good leadership behavior is that if one does the right things the right results would follow.

Analysis is the bridge that connects aspiration with achievement. The ability to analyze a problem and develop a structured solution enables a professional to be efficient and effective in his or her job. Analysis does not happen in vacuum. Proper analysis requires a thorough knowledge of products, processes and business in a holistic sense to be able to grasp, size up and address a challenge. Good organizations enable this knowledge in their graduate and postgraduate trainees by rotating them in all the departments for a sufficiently long duration of two years. By combining the capabilities of scientific, technical and business analysis taught in educational institutions with the knowledge of products, processes and customers acquired in the organization, the fresher can reinforce his or her analytical capabilities meaningfully. Successful organizations in India are differentiated by such structured trainee programs.    

The fundamental lesson for any fresher in an organization is that an activity does not represent an achievement. In fact, several activities need to be routinely performed and several others non-routinely (and creatively) performed to lead to an achievement. An achievement is a distinctive accomplishment that transforms several inputs into a desired outcome. Individuals and corporations need achievements, not mere activities, to stay competitive. Holistic knowledge, insightful analysis and dedicated application enable a fresher to become capable of differentiated achievement. Credibility is an important component of achievement. Alignment of expansive deliveries to stretched commitments tends to be the hallmark of a credible executive.

Focus factors: balance, binary and buoyant

Life is a balance of attributes and objectives. Career life is even more so. Just as a corporation needs to titrate each of its goals and strategies in terms of the rewards and risks, the individual employee needs to develop an innate orientation towards rewards of high performance and risks of poor performance. Such balance emerges by supplementing knowledge with skill, experience with intuition, aggression with thoughtfulness, analysis with decisiveness, objectivity with empathy and task orientation with people orientation, to identify a few. A balanced way of performance reinforces credibility.  Industrial life requires fulfillment of multiple objectives seemingly in dissonance with each other, harmonization of which is the true test of a balanced executive.

Focused and timely decisions and actions are required for an organization to stay aligned to effective performance. Fresh entrants while learning a whole lot of inputs and absorbing a whole set of options need to be decisive. Like a computer that achieves efficiency and effectiveness through a binary language (on-off, and nothing else), executives need to appreciate that they need to believe in one way or the other, and aim at one outcome or the other. The ability to review multiple options quickly and narrow down choice helps executives become decisive and timely. Successful executives see activities and outcomes in clear right or wrong lenses and not in may-be or could-be lenses. Acquiring binary processing capability (ethical or non-ethical, technically correct or incorrect, for example) early on in careers helps youngsters with a critical element of leadership.

Buoyancy is that creative and energetic ability of a person not only to stay afloat but let the system stay afloat. Both the internal and external environments that an executive encounters in an organization are likely to be replete with unpredictable developments. It is not always a perfect environment that a fresher encounters in his or her career span. It is always inspiring to recall that some of the best scientific and technological developments, including the Nobel prize winning achievements, were accomplished by passionate inventors with makeshift equipment and laboratories. A fresher entering the portals of the institution should never have a sinking feeling that what he expected of his organization of choice, be they material necessities or technical tools, is not available. Rather, he should focus on delivering individual and team buoyancy through creative functioning and innovative use of resources.

Capability factors: competence, communication and collaboration

Competence is the core of career sustenance. As technologies develop and businesses become competitive, an organization needs to be at the leading edge of science and technology as well as managerial processes to remain relevant. Archaic educational and professional knowledge needs to be updated and refreshed continuously by professional executives. While great organizations have robust programs of continuous education, executives need to continuously be on a self-driven mission to upgrade their competencies as a personal commitment. Executives must never lose their scientific, technical and management core capabilities in pursuit of generalist approaches, required as they are as they move upwards. Core competencies are the ultimate key differentiators in leadership journey.

The second essential capability relates to communication ability. In today’s globalized world, an ability to correctly and perceptively represent and absorb each other’s viewpoints is critical to the success of business. Communication ability should not be confused with language ability. The best of language would fail if the flow of technological, scientific and business thought is not well presented sequentially and perceptively. The Japanese knew little English but mastered global business because of their clarity in understanding and presenting the core issues. Indian executives need to understand that effective communication requires a grasp of the current and emerging issues and a delineation of proactive and responsive solutions in a manner that appeals to stakeholders from multiple environments and cultures.

Collaboration is the ultimate byword for individual and organizational effectiveness. Authority provides controlling ability but in today’s liberal world far less is amenable to control. Moreover, control prevents free expression and stifles creativity. In contrast, an ability to influence (but not lobbying to influence!) promotes creativity, which is essential for organizational competitiveness. Influence, in turn, is enabled by collaboration. An ability to collaborate with peers, juniors and seniors while competing for resources and striving for recognition is a challenge for fresh entrants. However, an investment of time and effort to understand the nuances of collaboration within the competitive framework of an organization is indeed a critical need for today’s young aspirants on the leadership journey.

Self-help is a relevant help

Talented and educated individuals daily join the multitudes of Indian corporations with the hopes and aspirations of making it big in their careers. While companies, on their part, make their efforts to train and develop youngsters, the needs of learning and development far outweigh what companies can realistically provide. It is in the enlightened self-interest of young executives to completely absorb what is offered on the job and constantly update and equip themselves beyond that too. The model of performance-focus-capabilities presented herein provides a relevant framework for young entrants to become young leaders, in the process contributing to business and corporate growth, and national wealth.  

Posted by Dr CB Rao on October 21, 2012               

     

Indian Automobile Marketing: A Three Layer Demand Model

The Indian automobile market has grown to be one of the largest and fastest growing markets in the world, with an annual production of 20 million vehicles comprising domestic sales of 17 million vehicles and export sales of 3 million vehicles per year (2011-12 data). The domestic sale comprises over 13 million two-wheelers, and nearly 3 million cars and utility vehicles, with other categories of vehicles constituting the balance. The rapid growth has put an enormous pressure on the already congested and inadequate road system in India but that does not seem to deter either the customers or the manufacturers. Clearly, however, a combination of rising incomes and increasing number of players with a liberalized import system has led to the growth in the market. Compared to other developed markets, however, the scale and scope of the market has not motivated either the customers or the manufacturers to seek or introduce more relevant marketing approaches, respectively.

It is not an exaggeration to say that the automobile dealerships in India typically have showrooms no bigger than what white goods manufacturers have (after adjusting for the size and variety of products). It is also commonplace to have representative models on display rather than comprehensive product range. The approach of having large sales yards through which customers can have walkthroughs and have reviews of multiple models at a glance is also non-existent. Salespersons typically tell only the broadest of the features and let the customers decide on purchases on their own. Much emphasis, on the other hand, is placed on media advertisements, often with celebrities to build corporate brand equity and develop product differentiation. Typically, therefore, a pre-decided customer enters a narrowly equipped dealership to make a purchasing evaluation without much choice.

Constituents of demand

This blog post hypothesizes that most consumer goods have three layers of demand. The first is a steady state replacement cum augmentation demand which is related to economic factors of the society in terms of population growth, GDP growth, job growth, purchasing power, urbanization, rural modernization, transportation needs and infrastructure growth. This may be called the economic demand. The second layer of demand relates to the pull of new products and models whereby superior technology as expressed in a number of design and performance parameters, including the styling of the car, create additional demand, for both replacement and augmentation, over and above the economic demand. This may be called technology demand. The third layer of demand is purely seasonal related to festive seasons, New Year sales or simply discounts. This may be called promotional demand. In an ideal industrial situation, the bulk of the demand should be driven by the economic demand with technology demand and seasonal demand providing impetus to move demand to the next trajectory.

In the context of India, with a population growth rate of 1.3 percent per annum and a GDP growth rate of 5 to 8 percent, and with all other parameters following a growth trajectory, the automobile demand can comfortably cruise at a rate of 10 to 16 percent. This has, in fact, been the trend too. However, the inter se ratios of economic demand, technology demand and promotional demand are sub-optimal. The author of the blog post believes that the economic demand must be 60 percent, technology demand 30 percent and promotional demand 10 percent of the total demand in an ideal socio-industrial situation. The author hypothesizes that in India, these proportions are at 60, 10 and 30 percent respectively. In other words, there is a strong manufacturer induced push to demand, which also tends to be seasonal. While the effectiveness of the marketing departments in creating such seasonal push is commendable, it needs to be further titrated in terms of its constituent push factors

Economic demand

The economic demand for automobiles is heavily driven by two wheelers, given the nature of income patterns, road conditions and inadequacy of public transportation. Nevertheless, passenger cars have emerged as a strong growth sector aided by new models. Looking to the future, there are both gloomy and bright sides to the likely movement of economic demand. The bright side is that the huge annual sales of 17 million two wheelers presents a huge opportunity to the car makers to double their sales to 5 million annually if only they are able to offer an economically viable alternative to the two wheeler usage. In addition, the trend to possess a second farm home or opt for weekend travels boosts the demand for a second car, especially in the utility vehicle segment. The gloomy side is that with the roads highly congested and parking spaces severely restricted, potentially the limits to growth in automobile population have already been reached. From an ideal perspective, the public transport must really be boosted in terms of both quantity and quality so that excessive use of automobiles, two wheelers at least, is moderated.

Given the current restraints, the economic demand can be sustained only if a significant part of it is taken over by replacement demand rather than augmentation demand. This paradigm is also closely linked to the industrialization or professionalization of the used car market. Rising oil prices, growing environmental concerns and the stricter emission norms (BS IV) would serve to enhance the demand for new cars as replacement with better performance characteristics, especially emission, fuel economy and drive. At the same time, unless more manufacturers and dealers come into the used car market in a big way (Toyota has made a good start with the UTrust program), it would be difficult to make used car sales a meaningful demand option (rather than a customer exigency option as is currently in vogue). The shape and scale of the replacement demand can only be sparked with appropriate technology strategies of the company, which would be reflected in terms of technology demand. In an ideal scenario again, the technology demand should funnel itself equally into replacement demand and augmentation demand.

Technology demand

Technology driven demand is what keeps the economic demand buoyant. While economic demand grows on sheer socio-economic factors (cars were indeed sold in India even technologically the models were outdated), it is the technological profile of the automobile that determines the level of technology demand. The smaller size (sub-four metre length) and fuel economy of the cars are often incentivized h through excise duty concessions by the government. This, often, presents a skew in the development of cars with relatively price-inelastic larger models being largely imported (as completely built units or kits) and only the lower end, mass produced cars being indigenously manufactured from the component stage. While at first glance this may seem appropriate for India’s economic and road conditions, lack of a manufacturing scale across the models does deter the Indian automotive industry from becoming globally competitive in future.

The Indian car industry is driven completely by global names. The good thing about this is the ready access of models and manufacturing plant. The challenging thing about this is the lack of indigenous R&D to the extent desirable. There is evidence from the track record of Tata Motors and M&M that investments in indigenous research and development do contribute to product development. Toyota Etios and Maruti Suzuki Ertiga are pointers to what customization to a market can accomplish in terms of product portfolio. If the parent corporations and the Indian subsidiaries arrive at a paradigm by which annual product updates and refreshes are developed locally and new model introductions are done globally, there could be benefit to local and global corporations as well as local and global consumers. The Indian industry should view local development as a clear strategy to achieve a larger technology induced demand, enhance replacement demand and finally keep integrating the technology demand into economic demand.

Promotional demand

Promotional demand to stimulate sales or clear stocks, or even pave the way for model upgrades is not unique to India. Even the most developed markets deploy the tactics most vigorously. The sharp drop in prices of Apple iPhone 4 and 4S ahead of the launch of iPhone 5 or the lowered pricing of the vintage BMW 3 series car in the wake of the new replacement are clear examples of firms realizing that customers are alive to new technologies taking shape. That said, long festive season promotion is an approach which is probably unique to India. The months of October to January typically emerge as the manufacturers’ sweet spot in terms of promoting higher demand on the plank of celebrations and auspicious occasions. When the seasonal promotion is combined with new product introductions, the marketplace can, in fact, turn lively. This festive season alone the Indian car manufacturers have begun the introduction of over 20 new models, some of them brand new introductions. Intensity of competition and increase of demand, coupled with lower prices could boost a seasonal increase in demand.

The manufacturers, however, have to seriously consider if the Indian automotive dealer infrastructure is geared to do justice to the promotion of multiple products. As mentioned earlier most Indian dealerships have little or no display yards as the dealerships in the West have, or the way even a space starved country like Japan has. The dealer showrooms can hardly display four or five models as compared to ten or fifteen which most manufacturers would have (ignoring the variants). The approach of salesperson explaining the full features on a dedicated basis is also, by and large, absent. Most dealerships do not also have customized sales and service solutions which recognize that a substantial proportion of cars in India is driver driven. This emerges as a blind spot given the increasing sophistication of the new breed of cars that are being introduced in India. Most promotion is done by manufacturers that too through newspapers and television advertisements, oftentimes with movie celebrities as brand ambassadors. The manufacturers would need to relook at dealer economics and enable a more holistic marketing, sales and service paradigm to integrate dealer point selling into the economic demand and technology demand processes.     

The three layer demand model

Automobile marketing is a complex amalgam of socio-economic factors, technological factors and consumer need factors. While the sheer power of economic development provides the motive force for the expansion of the Indian automobile industry, understanding the demand paradigm in terms of economic demand, technology demand and promotional demand as proposed in this blog post would help the automobile manufacturers, global and Indian, to come with proactive and responsive strategies that optimize the long term demand-production models. There is considerable talent in the country, economic, engineering and marketing, to sub-model each of the demand layers and come up with firm-specific strategies which could collectively foster healthy competition in the Indian automobile market, and also enable the Indian automobile industry achieve global competitiveness.    

Posted by Dr CB Rao on October 20, 2012