The business world is being disrupted by the combined effects of growing emerging economies, shifts in global demographics, ubiquity of technology and accountability regulation. Infosys believes that to compete in the flat world, businesses must shift their operational priorities.

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January 28, 2008

Big Opportunities

In his recent blog post from Davos, Nandan Nilekani stated, “Clean energy presents a big opportunity – you may even call it a profitable opportunity,” and that solving the issues will require public-private partnership.  He also highlighted that many of these issues are interrelated, so we have to think about them from multiple angles (such as biofuel demand’s impact on food prices). And Kris Gopalakrishnan shared his thoughts on whether Web 2.0 technologies have made innovation democratic, blurring company hierarchies and boundaries. 

Putting these thoughts together, what emerges is a case for using collaborative innovation for solving some of the biggest issues facing humanity – issues such as climate change, food security, basic health and education. 

As Kris pointed out, the advent of the Web 2.0 technologies is changing how we work and collaborate.  And as we master these collaborative technologies, it will be only natural, and expected, that we use them to help solve our biggest issues. 

As we design these collaborative mechanisms, we should keep three points in mind:

  1. The power of collaborative mechanisms is in their openness.  Therefore, it is important to design the collaboration mechanisms to enable experts from different institutions, different countries, and increasingly, different fields of expertise, to come together and contribute.  The World Economic Forum’s WELCOM network is an effort in this direction, though currently with members mostly from business and political leadership.
  2. For these mechanisms to generate useful output, it is important to guide them by making the ‘problem statements’ as clear and specific as possible. A good example of this is Google Foundation’s stated goal to make renewable energy cheaper than coal within a decade.
  3. Just like any marketplace, open collaborative communities require ground rules.  We must come up with new frameworks for building and rewarding IP developed through such collaborative networks.  Otherwise, despite our best efforts we will fail to attract the best and brightest to share their thoughts/IP and collaborate in these communities. 

Interestingly, there is a debate going on in scientific circles on exactly this issue.  For starters, see, Science 2.0: Great New Tool or Great Risk?

January 13, 2008

NANO - Innovation in Automobile

On 10th of Jan 2008 the world saw the launch of the cheapest car, not from Japan or Detroit (who are know as the technology leaders in automotive), but from India. This car is not only going to revolutionize the automobile industry, but also the entire manufacturing industry. This car is going to be an inspiration for many  and is the best example of Innovation and optimizing cost to fuel growth.

The company undertook the transformation journey few years back when it saw huge losses of $110 million in 2001 and today is set to change the rules of the game with the introduction of Nano. The learning from this is that Impossible is Nothing and companies need to constantly innovate.

Nano (entry model) is priced at $2500, (which is the cost of a DVD player in Lexus) and half the cost of the next cheapest car in India. To manufacture a product at such low cost you need high volumes but this alone is not enough, there are many innovation in this product which have helped-

a. Distributed manufacturing - plans are to encourage entrepreneurs to have small assembly units as this would bring down the distribution cost (ship SKD) and also the dealer margin

b. reduce cost of component  by increasing volumes - In addition to high volumes from product sales, the volumes of components can be increased by designing keeping in mind reduction in part count by symetric design for e.g. the handles in Nano are same on Left and Right increasing the volume of this component by twice, similarly the instrument cluster is in the center so that same dash board can be used in left hand drive and right hand drive cars

c. Innovative design  - all possible avenues have been looked at  for reducing the weight of the car like the Mono Volume design, tubeless tyres, single balancer shaft for twin cylinder - all of these have reduced cost.

We have heard of lean manufacturing and the same concepts have been applied to design - Lean Design. 

d. Locational advantage - The manufacturing location identified is one that will get them the maximum incentives  from the government that can be passed on to customers, yet be closer to port and sorce of raw material.

All this has enabled the company to Create Globally Competitive Cost Structure and Create new Offerings for price sensitive markets.

New markets can bring with it a lot of challenges for e.g. providing service to customers - India is a country where there is 1 car per 1000 house hold (unlike US where its 2 per house hold) and majority of the country stays in non urban or rural locations where service infrastructure may be unviable, thus company is considering providing service at door step like the insurance industry through trained / certified personnel's.

Low cost car would also require low cost of maintenance and this possibly would get addressed by keeping cost of spare parts low and this could also impact the the insurance cost which is likely to be one third ($63 per year) as compared to the next cheapest car in India.

Nano is not competing with other cars or two wheelers, it is going to open up a whole new segment in India and India like countries and this would need a whole new approach to managing customer experience. Company would have to look at various distribution model to service markets in India and internationally and building loyalty.  

Challenges - with increasing cost of crude oil (which could see over $150 to a barrel in 2 years), operating cost of this car could become unaffordable. The company should therefore start looking at alternate fuel for e.g. CNG, LPG, battery or methanol for long term sustenance.

One thing that pleases me most is that this has shown others a way, and many more innovations can be seen in days to come as corporates would question their current way of doing things. Constraints bring out the best and CK Prahalad calls this the process of Constrained Innovation.