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.