Innovation in the Agricultural Industry Mahindra & Mahindra

AGENDA Mahindra & Mahindra Interpreting the data Understanding innovation at M&M Comparing innovation processes Making the decision What happened Key lessons Putting culture in Cross-Border Innovation But first… Understanding the Innovation ChallengeUnderstanding the Innovation Challenge

INTERPRETING THE DATA What do we learn from the history of M&M that is important to understanding innovation? Skilled at partnering Cultural awareness and effectiveness Diverse resources (38,000 employees worldwide) Family pride and involvement Innovation in product, process & service is key World class manufacturing and product development capabilities Explain the impact of the reorganization in the mid ‘90’s Functional organization creates silos Business Sector organization requires integration of perspectives

INNOVATION STRATEGY AT M&M What were the key characteristics of innovation at M&M? Across the board innovation – product, process, service Follow model that 1/5 of revenues come from products/services introduced in past 4 years Frugal engineering – innovate on minimal budget IDEO model – observation leads to ideation Customer/Product focus IDEAS Insight Design Experiment Added value Sales plan

INNOVATION PROCESSES R&D Exploration NPD Exploitation Maverics, “DaVinci” like thinkers, little respect for functional boundaries Nayak, hired in 1974, knows farmers, tractors and frugal engineering, likes to work on his own with no constraints. Work to create new ideas. No formal design, ad hoc. “Lab technicians”, highly specialized and disciplined engineers Work to minimize risk and maximize customer satisfaction, value added and learning Formal design based on research in other companies and McKinsey support.

LEARNING FROM INNOVATION “New knowledge may not be translated into consistent action unless the organization (i.e., its structure, systems, processes, leadership, talents) and its culture (the collectively held values, assumptions and belief systems, coupled with behavioral practices and physical artifacts) can support new behaviors.” (Jassawalla and Sashittal, 2003: 4)

CHALLENGE How do you create a supportive environment for both? How do you motivate, evaluate and reward both? When do new ideas move into the development process? Both processes have to support objectives (in some way): 1. Make products suitable to customer needs 2. Enable learning 3. Create value

MAKING THE DECISION Should Davasia allow the “Sactor” project to continue? How do you decide? IDEAS Insight = combined tractor and transport affordable to lower-income Indian farmers Design = futuristic, smaller tires, functional, “stops traffic” Experiment = multiple prototypes, radical designs, extensive testing, but technical problems Added value = ?? Sales plan = involved late, little market research, little consumer testing; then Goyle & Nagwekar get excited, take Sactor to farmers.

CALCULATING VALUE Price = 1.9 lakhs ($3,958) Cost = 1.45 lakhs ($3,021) Profit =.45 lakhs ($937) Sales = 3,000/year = lakhs ($2.8 million) Investment required = 7-8 crore ($1.45 – 1.67 million)

KEY LESSONS Exploration versus exploitation Which yields higher profits IF successful? When do you integrate? How do you manage both and allocate resources? Both processes have to have effective governance. What happened?

MORE LESSONS Market the product to find the “qualified buyer” and an “uncontested market space” Even if you have a great product, you still function in the context of industry, economy, government regulations, etc.