Chapter Three Types and Patterns of Innovation Tata Nano: The World's First Rs. 1 Lakh Car On a rainy day in 2002, Ratan Tata, Chairman of India’s Tata Group, was driving to the airport in Bangalore. In front of him was a typical sight: an entire family on a two-wheel scooter. The father drove the scooter with a young child standing in front of him, and his wife held a small baby in back. Suddenly the scooter skid- ded and overturned, sending the family tumbling. Tata and his driver narrowly escaped running over the poor family.’ At that moment, Ratan Tata conceived of a dream that would take five years and the help of a global network of 800 suppliers to realize: a car that was affordable by the masses of India. In a seem- ingly off-handed comment Tata mentioned to a reporter that the car would be priced at around Rs. 1 Lakh (approximately $2,200). Despite extreme difficulties in meeting this price point, and increases in both parts and commodity prices during its development, Tata upheld what he viewed as a promise to the Indian public: to produce a Rs. 1 Lakh car. Tata Group and Tata Motors The Tata Group was founded in 1868 by Jamsetji Tata and is one of India’s oldest and most revered companies. It is headquartered in Mumbai, India, and comprises 114 companies in 8 business sectors; it earned revenues of $72 bil- lion in 2011. Tata Motors is one of the businesses within the Tata Group. It was established (as Tata Engineering and Locomotive Company, or TELCO) in 1945, and is South Asia's largest auto manufacturer; it produces passenger cars, com- mercial vehicles, vans, and coaches The Nano Project Ratan Tata decided to stay personally involved in the Nano project, and also put Ravi Kant, the Vice Chairman of Tata Motors, in charge to ensure that the proj- ect had senior support. At the time Tata began developing the Nano, the least expensive car in the world was the Chinese QQ3, priced at $5,000. It quickly 4344 Part One Industry Dynamics of Technological Innovation became clear that trying to make a Rs. 1 Lakh car by benchmarking against exist- ing cars and trying to make them less expensive was not going to be successful, so Tata and Kant decided to instead benchmark many of the systems in the car against two-wheel scooters. Many things that were taken for granted about producing a car had to be challenged. For example, rather than an engine with at least three cylinders, the Nano would be designed with two cylinders, which would both reduce the cost and the weight of the car. The car would not have electric windows or locks, anti-lock brakes, or air bags. Its tires would have innertubes; its seats would have a simple three-position recline; and there would be only one windshield wiper and one rear-view mirror for the entire car Meeting many of the design challenges of the car was incredibly difficult, but many of Tata's suppliers looked at the project as an exciting challenge. Rather than being given a design dictated by Tata, they were given weight and cost objectives and given free rein to try to find a way to meet them. Many suppliers came up with startlingly unique ways of lowering the cost of the car, such as a hollow steering column and a single fuel injection valve for both of the engines’ ylinders. Power steering was unnecessary due to the low weight of the car. Radios were not included with the base model of the car, but could be purchased as an optional accessory. Everything about car design had to be reconceptualized to realize the Nano, from the car's frame, to its major power systems, to even its trim. As summa- rized by Girish Wagh, head of the Tata team, “The entire system was being reinvented. Innovation at the aggregate level trickled down to system, then to sub-systems, then to parts. We went through a tremendous amount of iteration in the design process. The entire engine was redesigned thrice, the entire body was redesigned twice, and the floor plan of the car redesigned around ten times, the wiper system redesigned more than 11 times.” The Launch The Nano was officially launched in March of 2009, at its intended price of Rs. 1 Lakh, and meeting all of the Indian’s government's safety and emissions standards. It weighed 1,320 pounds, and was rated at 50 miles to the gallon.© Ratan Tata, who is exceptionally tall, even sat in the car (to demonstrate that the Nano had ample interior space despite its small size), and remarked, “We made a promise to the world and we kept it.” Demand for the Nano was very strong, but the car was not without its early struggles. First, plans to manufacture the car in West Bengal met with resis- tance by farmers, forcing a costly move of both Tata's manufacturing and many suppliers.’ Then several Nanos caught fire, leading to extremely bad publicity for the car, Tata reinforced the exhaust systems of the car to avoid such problems in the future, but it would take some time for the car's reputation to recover. Tata Motors sold 70,432 Tata Nanos by March 2011, far short of the 20,000 per month the company had estimated. Market feedback suggested that many would-be Nano buyers preferred to hold out for the Maruti 800, which was roughly twice as expensive but considered more luxurious. However, from anChapter 3. Types and Patterns of Innovation 45 innovation perspective, the car was an unmitigated success: it showed the world that a dramatically less expensive automobile was possible, and inspired similar projects by automakers worldwide. Discussion Questions 1. Is the Tata Nano a radical innovation or an incremental innovation? Competence enhancing or destroying, and from whose perspective? Is it a component or an architectural innovation? 2. What factors do you think influence the rate at which consumers have adopted (or will adopt) the Tata Nano? 3. What would have been the advantages or disadvantages of Tata collaborat- ing with another automaker on the Tata Nono? Who might it have collabo- rated with? 4, Do you believe the Tata Nano will be profitable? Will the Tata Nano lead to other advantages in future auto platforms developed by Tata? Freiburg, K., Freiburg, J, and Dunston, D. 2011. Nanovation: How a Litle Car Can Teach The World 10 Think Big and Act Bold. Nashville, TN: Thomas Nelson. Pelepu, K., Anand, 8, and Tahilyani,R, 2011. Tata Nano—The People’s Car. Harvard Business School ase, 9-710-420: page 8 Taylor, A. 2011. Tata takes on the world: Building an auto empire in India. Fortune, 163{6}86-92. bea. OVERVIEW technology trajectory The path a tech- nology takes through its life- time. This path may refer to its rate of perform ance improve- iment, its rate of diffusion, oF other change of interest The previous chapters pointed out that technological innovation can come from many sources and take many forms. Different types of technological innovations offer dif- ferent opportunities for organizations and society, and they pose different demands upon producers, users, and regulators. While there is no single agreed-upon taxonomy to describe different kinds of technological innovations, in this chapter we will review several dimensions that are often used to categorize technologies. These dimensions are useful for understanding some key ways that one innovation may differ from another. The path a technology follows through time is termed its technology trajectory. Technology trajectories are most often used to represent the technology’s rate of per- formance improvement or its rate of adoption in the marketplace. Though many fac- tors can influence these technology trajectories (as discussed in both this chapter and the following chapters), some pattems have been consistently identified in technology trajectories across many industry contexts and over many periods. Understanding these patterns of technological innovation provides a useful foundation that we will build upon in the later chapters on formulating technology strategy. ‘The chapter begins by reviewing the dimensions used to distinguish types of in- novations. It then describes the s-curve patterns so often observed in both the rate of technology improvement and the rate of technology diffusion to the market. In the last section, the chapter describes research suggesting that technological innovation follows a cyclical pattern composed of distinct and reliably occurring phases.