Assignment 1

Assignment 1

Task 1

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

We have called this "open distribution" innovation because it mobilizes large numbers of third parties to reach remote rural consumers, tailor the products and services to more effectively serve their needs, and add value to the core product or service through ancillary services. Three innovations in products and processes come together to support "open distribution:"

increased modularity (both in products and processes)

aggressive leveraging of existing third-party, often noncommercial, institutions in rural areas to more effectively reach target customers

creative use of information technology, carefully integrated with social institutions, to encourage use and deliver even greater value.

Modular designs combined with creative leverage of local third-party institutions help participants to get better faster. Companies such as Tata and Cummins are going far beyond "customer co-creation" in the narrow sense of soliciting isolated ideas from customers. Instead, they are building long-term personal relationships with customers, enriched by the specialized capabilities of broad networks of third parties that generate much deeper insight into customer needs and afford opportunities to tailor value.

Such innovations are quite different from those in the retail distribution systems pioneered by companies such as Dell (DELL) and the leading big-box retailers. These U.S. companies developed completely self-contained and highly standardized facilities and services for customers. But the open-architecture approach pioneered by Indian companies may offer much greater opportunity to deliver more tailored value to customers than the closed-architecture U.S. approach. The techniques initially developed to reach poor and rural customers may have even greater potential when used to reach highly demanding, affluent, urban customers in Western economies. (www.enn.com)

As Ratan Tata, chairman of the Tata group of companies, observed in an interview with The Times of London: "A bunch of entrepreneurs could establish an assembly operation and Tata Motors would train their people, would oversee their quality assurance and they would become satellite assembly operations for us. So we would create entrepreneurs across the country that would produce the car. We would produce the mass items and ship it to them as kits. That is my idea of dispersing wealth. The service person would be like an insurance agent who would be trained, have a cell phone and scooter and would be assigned to a set of customers."

In fact, Tata envisions going even further, providing the tools for local ...