Innovation at Tata Group - Case Study Example

Key words: consumer market, innovation model

Executive Summary

In the recent past, the notion of innovation has proved to be pivotal in the success of businesses worldwide. The latter scenario has been primarily occasioned by an ever-evolving global consumer market and drastic developments in the technological sphere. Therefore, the concept of innovation management has proved quite fundamental for contemporary businesses. Consequently, the generated report illuminates on the most recent problems faced by the Tata Group of companies on an innovation lens and offers valid solutions employing the same criteria. Additionally, the report also offers a thorough audit on the organization’s innovation function and hence provides viable recommendations on how to fully capitalize on the function.

Incidentally, the report is systematically organized in a delicate chronological order aimed at accentuating the general importance of the innovation function and consequently developing the concept around the Tata group situational perspective. Thus, unsurprisingly, the report first explores various literatures relating to innovation. These literature range from; the origin of innovation as an organizational function, specified theories and narratives that expound on the constituents of innovation on a kaleidoscopic perspective, varied models and structures that the innovation process adopts, a range of tools that can be used to facilitate the innovation process and the various types of innovation in existence and which is best suited for specified business models.

Furthermore, the successive section of the scholarly report aims at surgically dissecting the situational dynamics of innovation that face the subject entity, Tata Group. Consequently, the proceeding part of the report is centered on providing a wide range of viable remedies that would be appropriate for quelling the organization’s innovative deficiencies. Systematically, the report will conclude by settling on the most effective recommendations and develop a sound strategy around the latter.

Finally, it would be only prudent to highlight some of the crucial findings derived from the report. Firstly, the report sheds light on the various theories that govern organisations’ innovation functions which include; Action Network Theory, Social Shaping Technology Theory and the Technological determinism Theory. Additionally, the report illuminates on the subsequent models of innovation; conventional linear model, chain linked innovation model, connect and develop model, phase-gate model and the market pull models among others. Furthermore, the report divulges on the various types of innovations which are classified depending on specified criteria such as functionality, impact, industrial patterns and sources. Moreover, the report also offers invaluable insight on the various business innovation tools such as brainstorming, digital prototyping and product lifecycle.

Consequently, in the next section, a thorough investigation on the organisation’s operations was conducted and it was revealed that the company invested relatively too much time and resources on internal research and development systems which proved limited in satisfying the needs of the dynamic consumer market. Evidently, the report explores on a wide scope of possible options among them restructuring the company’s innovation model so as to conform to the global market; among the suggested models included market pull and connect and develop innovation models as they proved relatively flexible and susceptible to any impending changes in the business environment.

Incidentally, a pragmatic case study on the efficiency of connect and develop innovation model is prescribed so as to act as concrete evidence of its prowess. Finally, the reports concludes by developing a long term innovation strategy which entails a perfect blend of a specified innovation model, tools and type to be preferred by the company.

Table of Contents

• Introduction
• Importance of innovation
• Classification and types of innovation
• Innovation models
• Main body
• Investigations and investigation methodology
• Findings and case study
• Recommendations and conclusion
• References

Introduction

As the famous catch phrase dictates, “change is inevitable”, thus businesses globally have had to adapt to various environmental dynamics to ensure their survival in the ever competitive consumer markets (Afuah 2003). Consequently, one of the most imperative environmental elements that businesses have had to precisely conform to is technology. Over the years the notion of technology has proved to be quite rewarding and unforgiving for businesses globally in that it is perceived as a ‘game changer’ in the all respective fields and industries, for instance manufacturing, commerce, mining and the like. The latter phenomenon is echoed by the recent winding up of Reginald Dixon, a company that was renowned for producing cassette tapes which were in turn used to store video and audio files. The company was liquidated due to drastic decrease in sales volumes as their key competence was now rendered obsolete due to the emergence of compact disks (CDs) and alternative forms of high volume media storage such as portable disks. Basically, Dixon was unable to adapt to the existing technological sphere (Annacchino 2011).

The latter prescribed scenario accentuates the importance of innovation in the existing business sphere. Innovation is a proactive organizational function that that enables firms to considerably eliminate impending threats and leverage on prospective opportunities situated in the external business environment to realize and surpass organizational goals. This is achieved through the intense processes of research and development. Contrastingly, unlike technology which is primarily concerned with product development, innovation is all inclusive in that it also carters for generation of new systems and policies that will improve firms.

Furthermore, it must also be accentuated that the organizational function of innovation is accurately adjusted to suit the existing consumer market where consumer preferences are very volatile and are inclined towards value rather than functionality (Hajdini 2010). Consequently, the increasing number of businesses coupled up with up-scaling of production activities of businesses worldwide have served as ingredients to a very competitive business environment where organizations are tasked with the unenviable responsibility of producing value at minimal costs so as to realize significant profit margins which are pivotal to the survival and growth of the a business entity. Incidentally, innovation assists organizations to attain the delicate balance in fulfilling the specified objectives.

With the organizational importance of innovation extensively discussed, it would be only prudent to divulge on the various types of business innovations and the nature in which they are classified. Firstly, innovations are classified in accordance to the product life cycle. In this perspective innovations are of the following kinds:

• Line extensions: This type of innovation that primarily entails adding slightly differing products to a particular product line. For instance, the Uniliver group added Aerial to their product line of detergents.
• Acquisition: Alternatively, this is a type of innovation where the buying company incorporates a subsequent company’s processes through purchase. A vivid example is in the case of Pfizer and Allergan (Kennedy 2008).
• Disruptive: This kind of innovation is relatively hard to come by as they are deemed revolutionary in specified product lines. An example is the invention of smart phones mobile phones industry.
• Value engineering: Finally, value engineering innovations are mainly include engineering designs and manufacturing processes where one design or process is envisioned to achieve relatively more cost savings than the other.

Subsequently, innovations are also classified in respect to respect to industry patterns. In this case the various types of innovations include; business models: This is a quite risky venture where an existing business is inclined to overhaul its entire operations and strategies in the efforts of capitalizing on impending environmental changes. These business strategies include supply chain strategies and consumer market strategies ( Limberg 2008). As earlier implied this kind of innovation is quite risky and must be approached with caution. Alternatively, under the same category also lies core competence. Here, a business may decide on altering its core competences such that if an organization was mainly involved in manufacturing activities, it drastically switches to service activities such as marketing, as insinuated the latter scenario represents a quite enormous gamble. Finally, there is channel innovation which primarily entails incorporating changes in the various manner in which businesses distribute their products to the end consumers. This may involve eliminating intermediary parties such as retailers and wholesalers so as to derive optimal profits.

Incidentally, the successive type of innovation categorises innovations according to the relative impact they have in the consumer market. Firstly, under these criteria these innovations are incremental innovations. The latter are innovations mainly aimed at improving the marginal performance of a particular product, for instance, recently Listerine mouthwash added two new flavors to the existing methanol one. Additionally, it would be also prudent to mention that these innovations have only slight effect to the consumer purchasing patterns and sales volumes. Alternatively, the subsequent type of innovations under this category is radical innovations (Monczka 2000). These are usually landmark innovations which are usually realized once in a lifetime and have profound and infinite effect on the market. Examples of these kinds of innovations include; the bulb and telephone, subsequent product lines are built on these maiden products. Finally, the last type of innovation is the transformational innovation. The impact of the latter innovations on the consumer market is usually mild and they occur rather frequently than radical innovations. A vivid example of the latter is the use of synthetically manufactured fibers to manufacture sacks instead of sisal (Ratinejad 2007).

Eventually, the last criterion of categorizing innovations is on the kind of immediate impact they have on the subject company. In this scenario the types of innovations include: cannibalization, market creation and competitor disruption. Cannibalization occurs in the case a business’ innovation, for instance a product ends up deteriorating the sales performance of subsequent products in the same product line. A vivid example is in the scenario where Omo started experiencing dismal performance in sales volumes at the precise moment in time when Uniliver introduced Aerial into the market. Secondly, innovation of a product may also give a company access to a new market segment. For instance, Pay Cable TV Company DSTV recently introduced a cheaper subscription package and thus consequently created a new market segment in their customer portfolio, low to middle income earners. Finally, innovations can also be termed as competitor disruptive, when their conception has a relatively profound effect on the competition. A clear example is when the Diageo group of companies incorporated Keg into its product portfolio, beer sales of its competitors drastically dwindled due introduction of a fairly priced substitute.

Innovation Models

As earlier implied, innovation is an organizational function which has been in existence for quite some time, precisely since the times of the industrial revolution. Since it has been in practice for a relatively significant period of time, various mechanisms have emerged on how to optimally execute the function (Sattler 2011). Firstly, there is the conventional linear innovation model which basically constitutes of three fundamental and interrelated stages.

Initially, there is the basic research where minute details concerning the innovation are inquired so as to provide a rough picture on what the innovation requires. Consequently, the latter stage is the application research stage where thorough scientific research is conducted and relevant documentation are drafted in the form of conformance specifications so as to ascertain viability of the project. Incidentally, the following stage is the development stage where the innovation is transformed into an evident and tangible product or service adding necessary features; however it must be accentuated that only a small number of units are produced as they are intended to serve as prototypes. Finally, after the prototypes have been approved to attain prescribed standards, mass production is commissioned. Furthermore, it must be mentioned that this model has been in use for close to two decades despite the conception of alternative methods of innovation; this is largely because of its simplicity and adaptability (Tidd & Bessant 2013).

Moreover, the other model of innovation is phase gate innovation model which closely resembles the new product development process. Consequently, the first phase of this model is idea discovery where a member of the multi-disciplinary R&D team pitches a potential idea (Tidd & Bessant 2014). Subsequently, the next phase is scoping, which is synonymously referred to as idea screening in the new product development process. Here, the potential idea is subjected through intense scrutiny by specified members of the multi-disciplinary team and its viability extensively analyzed. Incidentally, the idea next is subjected through a thorough business analysis by drafting a business case where respective cost-benefit analysis is carried to establish whether it would be prudent to invest in the business.

Furthermore, at this point, a viable business model is formulated entailing the production process, key competencies, funding and prospective distribution channels (Trott 2008). Thus, after the business blueprint is formulated, sample prototypes of the products are manufactured so as to ascertain performance and conformance of the product to the provisional manuscript. Here, improvements may be carried out to enhance the performance of the product. Evidently, the complete prototypes are subjected to market testing at this stage known as testing and validation. Here, the overall reception of the product from the consumer market is deduced (van Riel 2005). The final stage of this innovation model is the launch where the product is subjected to mass production and marketing.

Additionally, it would be also prudent to mention in between each stage there are ‘gates’ where a decision must be taken by the specified team on whether to drop the innovation or continue with the development process. This decision is hinged on various factors such as deliverables and precision of results (Fiore 2004).

Finally, the third model of innovation is; connect and development innovation model where innovation is carried out on an extrinsic perspective. This essentially means that innovation is sourced from an external third party. A vivid example is where a company outsources expert manufacturing competences from a more qualified entity (Rainey 2008).

Tata Group

The Tata group is a multinational entity with subsidiary firms with interests in industries such as the automobile industry, insurance, agriculture and mining. Due the wide scope industries associated with group innovation is a fundamental function in company operations. Consequently, in the last decade the company undertook a bold step in setting up the Tata Group Innovation Forum managed by the Tata Total Quality Management team (Chesbrough 2006). The former acts an idea incubation hub where staffs sourced from varied disciplines converge to conceive, develop and implement viable ideas.

Moreover, it is also prudent to mention that the company encourages innovation from its staff through setting up of the Tata InnoVista awards held annually to commend the most innovative staff (Michelini 2012). The importance of the innovation function to the company can be further accentuated by the fact that the company was estimated to have spent over $2 billion on research and development in the preceding financial year, a significant 2% portion of the organizations $102 billion revenue.

However, despite all the pre-mentioned efforts in innovation, the company still encountered problems related to innovation in that Tata Steel encountered has recently experienced a surge in sales volumes due to the volatile consumer market where consumer preferences change in short periods of time thus providing little time for research and reduced lead time for new product development. Additionally, this scenario is replicated across other subsidiaries (Kaplan 2012).

Consequently, a thorough investigation was carried in the relevant market to ascertain how other industry players were able to confront similar type of situational hurdles. Thus, the best methodologies to employ when carrying out the investigation would be benchmarking and conducting oral interviews, preferably the former. Through the benchmarking process the requisite was able to formulate an appropriate case study which would be pivotal in offering viable solutions (Osterwalder 2009).

Proctor and Gamble Case Study

Case description

In the early 21st century, the world’s leading cereal producer Proctor and Gamble were faced with the unenviable problem of an obsolete product portfolio which started to vividly reflect on annual sales revenue. Consequently, the research and development team were tasked with generating new product ideas. Incidentally, one of the members suggested that the company should develop a product line of crisps where jokes and nature facts were in-printed on the surface of each crisp (Kaynak & Hassan 2014). Thus, consumers would be mentally engaged when consuming the product therefore increasing chances and possibilities of brand loyalty.

As much as the idea was ingenious, it would normally require considerable investment in terms of time and resources for the organization to fully manufacture the product. Additionally, in between the two years it would be difficult to determine if the idea would be a potential hit with the market. Furthermore, the company had not yet acquired the relevant technology to manufacture edible ink and the know-how on how to in-print the ink at mass production rates (Sadler 2003).

Faced with numerous uncertainties, the team opted to survey through the vast network of its associates to establish if any of them had required technology. Surprisingly, after a short time, the company located a bakery in Italy that was already accustomed to the process. Immediately, the organization embarked on acquiring the technology of course at a stipulated fee and integrating it to its production operations. In a short while, full scale mass production of the Pringle Crisps commenced worldwide and the product was a hit with the global market grossing almost a billion dollars yearly. Significant costs associated with retail and distribution were saved that year.

Recommendations and Innovation strategy

Following the case study it would be only prudent to advise the Tata Group of companies to adopt rather flexible innovation models due to the ever dynamic consumer market. Rigid and strenuous innovation models such as chain linked and phase and gate innovation models may be perceived as efficient and effective but are not adaptable and may require huge investments in time and resources. Consequently, the latter scenario may prove unsustainable due to the existing competitive environment which tends to focus on value creation and cost reduction.

Thus, the recommended innovation model to be adopted would be a fusion between the linear and connect and develop innovation model where both technical and business expertise would be adequately addressed. On the perspective of Tata Group of companies, it would be recommended that Tata Steel satisfy consumer demands by producing light weight but quality steel products. Consequently, the company would be mandated to adopt the connect and develop model to produce the said products from graphene, a cheaper alternative to steel, therefore achieving both value creation and cost reduction. This technology is readily available to subsequent industry players.

Additionally, the company should also strive to focus its research and development resources on transformational innovation as they have proved to be less risky but equally rewarding for businesses in the past.