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In the Nano's headlights

The biggest reason why Nano is a great innovation is because it thinks about the next decade and not just the next quarter

Business Standard  |  New Delhi 

The Nano has more than lived up to its nickname — the people’s car. Judging by reports that the car has attracted bookings of close to a million, the market has now confirmed that the car has been a stupendous achievement for Tata Motors and its chairman, Ratan Tata, who conceived of just such a vehicle and marshalled his forces to deliver what most auto-makers had declared would be an impossible task. It is a tribute to India’s achievements in low-cost innovation that the global automobile giants have been forced to sit up and take notice of Tata Motors’ ability to design, develop and sell a sub-compact car at the lowest possible cost. Consider this: even a DVD player in some US cars is priced at over Rs 1 lakh. At the heart of the innovation was obviously Mr Tata and his team’s ability to think out of the box and dream beyond the obvious in manufacturing and designing a product with the right mix of parameters. The cost factor — Rs 1 lakh, defined finally as ex-factory and not cost to the consumer — meant that the company had to adopt a clean-sheet-of-paper approach, which meant all components of the car had to be designed from scratch, with nothing carried over from Tata’s other vehicles, or any models of competitors. However, the biggest reason why Nano is a great innovation is because it thinks about the next decade and not just the next quarter.

India’s huge bottom-of-the-pyramid market, as articulated by management guru C K Prahalad, has attracted other innovators too. Take Sunil Bharti Mittal, whose outsourcing innovations have dramatically lowered the cost of telephony for Indians. Mr Mittal may have been driven to think out of the box by the challenge thrown by Mukesh Ambani, who gave life to his father Dhirubhai’s concept of a phone call costing no more than a post-card. Bharti Airtel innovated its business model to meet the low tariff challenge. The company made some remarkable outsourcing innovations and put its entire IT piece in the hands of IBM, and its networks in the hands of Ericsson and Nokia. Under these first-of-their-kind contracts, the company was not required to pay for the hardware it installed. Rather, it paid for the traffic that came out of these networks. It was a risky model, but one that had the potential to open up new frontiers in telecom network management. The rest is history, as many companies across the world adopted the model to meet competitive challenges in their respective markets.

But while celebrating such low-cost innovations, it should not be forgotten that there are concern areas that need attention, as evident from the World Bank report titled “Unleashing India’s innovation”. The report points out that aggregate domestic R&D spending has never exceeded 1 per cent of GDP, and 80 per cent of this comes from the public sector; of the top 50 applicants for patents in India, 44 were foreign firms and just two of the remaining six were private Indian firms; and India produces fewer than 7,000 PhDs a year in the faculties of science, engineering and technology. What these statistics say is that though the country’s entrepreneurial model has delivered successes, there are problems related to the funding of innovations, lack of focus on intellectual property rights and the deficiencies of a higher education system that does not encourage innovative attitudes. People like Ratan Tata and Sunil Mittal are in a small minority.

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First Published: Tue, April 28 2009. 00:35 IST