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: 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

Point: Help your customers save water by making better use of your products
Story: The UN designated March 22nd as World Water Day, to draw attention to the need to manage this vital resource. Many companies are examining how to reduce their water usage. Some companies are also looking at their value chain of customers and suppliers, helping their partners reduce water consumption as well. JohnsonDiversey, one of the S.C. Johnson family of companies, is a leading global provider of institutional cleaning and hygiene products. Because it sells cleaning products to large companies, JohnsonDiversey explored how it could help its customers reduce water consumption. For example, breweries use five times as much water to clean their facilities as they do to make their product. JD realized it could help its customers improve their cleaning practices. JD audits water usage at customer plants and then shares best practices from among all customers to reduce water usage and costs. The company also helped food and beverage customers in 21 sites around the world save a billion gallons of water in 2007 through its water management program.

Action:

• In thinking about water conservation efforts, look beyond your company’s borders.
• Examine how your products influence water consumption by customers and consumers
• Create products that enable less water consumption
• Share ideas among your customers to help everyone reduce water usage and costs.

Sources: MIT Crossroads presentation by Antonio Galvao, VP Global Plan and Deliver at JohnsonDiversey and JohnsonDiversey’s Responsible Resource Solutions