Point: How you get a product to market may be as important as what you get to market.

Story: The previous post looked at product systems innovation to build a new car. Going a step further: some companies expand the systems thinking to include distribution and service. Consider Tata Motors, which created the world’s cheapest car, the Tata Nano. To reach a retail price of $2,000, Tata focused on the costs of every system of car, including the system for distributing and selling the car. To keep costs low, Tata created a modular design and an innovative distribution model. Tata will manufacture modules centrally and, in some cases, ship the cars as kits to local entrepreneurs who will assemble & sell them. Tata designed to the modules to be glued together rather than welded because gluing is less expensive and doesn’t require costly welding equipment. Tata will also train the entrepreneurs to do servicing.

Similarly, Hindustan Unilever pioneered a distribution model in 2001 to get its personal care products into the hands of rural villagers. A significant fraction of rural villages lack paved roads, making traditional truck-based distribution very difficult. The company developed a network of 14,000 women and women-owned co-ops to serve 50,000 villages. The women handle the logistics and door-to-door retailing of a range of personal care products. To address the needs of the market and the novel distribution system, Hindustan Unilever changed product packaging. By using this approach, Hindustan Unilever does not have to deal with the problem of moving product in rural India. The women or their employees come to the company’s urban distribution centers to get the product.

Action:
* When designing new products or services, consider how those products will be distributed.
* Think about the role that local entrepreneurs or business partners can serve
* Design the product to support the distribution channel (e.g., modularity, ease of assembly, packaging, etc.)

For more information: Vijay Govindarajan discussed Tata Motors’ strategy at the HSM webinar on March 18 and will be speaking at the World Innovation Forum being held May 5-6, 2009 in New York City

Hindustan Unilever’s distribution model: Discussed at MIT Center for Transportation and Logistics Roundtable on Supply Chain Strategies in Emerging Markets led by Dr. Edgar Blanco.

Point: To innovate & discover: notice the unexpected

Story: When Galileo discovered the moons of Jupiter, he showed for the first time that not everything revolved around the earth. After discovering the moons of Jupiter, he turned his eye and his telescope toward other planets. He hoped to find moons around other bright planets, such as Venus. His search of Venus, however, proved fruitless. Venus had no moons.

But during his observations, Galileo noticed something else: Venus didn’t appear as a perfect disk the way that Jupiter did. Venus waxed and waned in phases just like Earth’s moon does. That is, Venus’ appearance gradually shifted from a crescent to a half-disk to a full disk. These observations led Galileo to realize that Venus must to be orbiting the sun, not the Earth. This contradicted the prevailing Earth-centered model of the solar system and confirmed the new heliocentric theory of the solar system. Although his initial search of Venus proved moonless, noticing the phases helped Galileo prove the more important point of the new model of the solar system.

Action:

• Leverage observations, experiments, and surveys to collect more data than the minimum
• Don’t discard unusual, unexpected, or disappointing results — try to explain them
• Use “unexpected” observations to develop new knowledge or to find new opportunities

For more information:

Galileo at Work By Stillman Drake

Galileo and the Discovery of the Phases of Venus

Planetary Motions By Norriss S. Hetherington

Point: The customers of your customers are your customers, too.

Story: Cisco Systems makes networking gear for a wide range of customers, from massive data centers to home-office networking routers. Anyone who wants to build an internet-based network is a potential customer of Cisco. But, the bulk of Cisco’s sales go to corporate customers. So when you think of Cisco Systems, you don’t think “cheap video cameras.”

So why did Cisco pay over half a billion dollars to acquire Pure Digital, makers of compact inexpensive digital video cameras? Pure’s consumer-friendly little Flip Video products seem far removed from Cisco’s corporate industrial-grade networking technology.

Here’s Cisco’s logic: Consumer video cameras connect to the networks of Cisco’s corporate customers. Digital video consumes a lot of network bandwidth. Just 5 minutes of decent quality digital video requires over 4,000,000 bits per second for streaming and consumes 167 MB of total volume of transfered data. Multiply that by more the 100 million downloads a month at video-sharing sites like YouTube, and the result is prodigious demand on networking performance at data centers, internet backbones, and broadband internet providers. Thus, the buyers of these digital video cameras are important customers that drive the behavior of Cisco’s big corporate customers.

If Cisco can increase the sales of low-margin $100 digital video cameras, then it can increase the sales of high-margin $1 million high-performance networking equipment.

Action:

• Look at the customers of your customers: their behavior drives your customers’ demand
• Examine how and why your customers use your product to support their own customers
• Consider new or expanded applications that would boost your customers’ customers’ usage and thus boost demand for your product
• Invest in technologies that directly increase that customers’ customers’ demand or that help support the demand.