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.

Tags: cars, Case study, channels, design, distribution, emerging markets, Entrepreneurs, How-to, India, Innovation, local, modular, New Product Development, supply chain

Point: Take a Systems Approach to Innovation

Story: I had the opportunity to ask Bill Reinert, national manager of advanced technology at Toyota Motor Corporation, how he manages innovation. His answer was multi-faceted, so I’ll describe his ideas over several blog posts. First, let’s look at the numerous innovations that Reinert and his team integrated into the Toyota Prius hybrid automobile. For the 2010 Prius, Toyota took a systems approach to innovation. That is, rather than simply changing one subsystem, the company redesigned many aspects of the car to achieve the end goal of fuel economy. The Prius isn’t just a regular Toyota car with the combustion engine swapped-out for a hybrid drive system.

To achieve the best possible fuel economy, the 2010 Prius has extensive aerodynamic features. The front, sides, top, back, and bottom are all designed to minimize drag-inducing air turbulence. The changes are much more than cosmetic. Reinert’s team replaced the rarely-seen rough underside of a normal car with smooth aerodynamic panels and two little winglets that reduce drag in the air that passes between the road and the car. Even the wheelhouse liner and shape of the wheels help reduce the drag. The result is that the Prius’ shape gives it a lower coefficient of drag than the “sleek-looking” sports cars on the road.

To reduce fuel-guzzling weight, the team made the battery an integral structural part of the car, not just a bolt-on box. Nothing escaped the team’s scrutiny. The team even improved the interface between the car and driver. The car now provides real-time feedback on fuel consumption and power system activity — something that hypermilers love. Specifically, the new 2010 Prius offers three performance modes in which it can be driven, each at the touch of a button. The car can be driven in EV-Mode (running off the battery alone for about 10 miles), Power Mode for snappy acceleration, and Eco Mode for fuel-sipping energy conservation. The different modes actually change how the car responds to the gas pedal: Eco Mode means that even a lead-footed driver gets better gas mileage. Finally, the new Prius has a solar-powered fan on its roof that cools the cabin temperature so that drivers don’t have to blast the air conditioning when first entering the car.

In all, Toyota created more than 1000 patents during the development of the Prius, resulting in an EPA estimated city/highway mpg rating of 50 in the city, 49 on the highway and a combined 50 mpg.

Action:

• Think about the ultimate purpose of some proposed or available innovation (e.g., a hybrid powertrain can improve fuel economy)
• Examine other design elements for opportunities to achieve that purpose (e.g., aerodynamic shape improves fuel economy)
• Provide users with product features that help them achieve that purpose (e.g., add controls and displays that affect and monitor performance)
• Integrate all the improvements together to mutually reinforce the ultimate purpose.

For more information: Bill Reinert at the Conference on World Affairs

Point: Working with a partner in a different industry can yield innovative results

Story: Gabriel is a Danish manufacturer of environmentally-friendly upholstery fabrics. Founded in 1851, it’s one of Europe’s leading suppliers of furniture textiles and was voted the most innovative company in Denmark in 2007. Because Gabriel knows that it can’t create every idea in-house, the company uses open innovation to weave in the capabilities of outside partners. Open innovation means intentionally leveraging the research and technologies of outsiders, rather than only relying on internally-generated innovations. Gabriel is constantly looking for new materials, new production technologies, and new applications for furniture textiles.

In particular, Gabriel gives special attention to how it forms partnerships for open innovation. First, Gabriel ensures that its partners have the right competencies to match the innovation activity at hand. Second, partners sign a confidentiality agreement so that the ideas can be exchanged freely. Open innovation is even possible with competitors, provided that the companies create clear and explicit contractual agreements from the outset.

In one example, Gabriel looked at the manufacturing technologies used by the car industry to make car seats. After all, a car seat is like a chair on wheels. Together with furniture company Hay, Gabriel introduced a fabric electro-welding technology originally used by Fiat to make car seats. The method laminates tough exterior fabric covering and soft interior filler in a way that greatly reduces production costs of furniture.

Action:

• Look outside your company and outside your industry for people that have similar problems (and possibly useful solutions)
• Identify innovative products or methodologies for collaborative and adaptive projects.
• Create a partnership with the outside co-innovator to share ideas, results, or profits as appropriate.

For more information: Gabriel A/S

Tags: Case study, How-to, Innovation, open innovation, partnering