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B222B - Managing Technology and Innovation for Competitive Advantage Notes and Past Exams, ARAB OPEN UNIVERSITY, UAE

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1. Is the Tata Nano car a disruptive innovation? If so, what are the implications for industry incumbents?

In January 2007, Tata Motors introduced a four-seater car named as ”the Tata Nano” which oath around 1440 Euro (Tybout, Fahey, and Crowe 2017). The car was presented as a disruptive innovation in a tag line “one lakh people's car”. The innovation of Tata Nano was custom tailored according to the Indian customers and other emerging countries. It is considered as a disruptive innovation for the Indian family having a maximum of four members. German automobile suppliers, Bosch and Continental were also played a crucial part in the innovation of Nano. Tata Motors managed to launch a disruptive technology at such a minimum price because of the following factors (Christensen, Raynor, and McDonald 2015):

Currently, scooter and motorcycle drivers are the primary target group for most of the automobile companies in India. Hence, Tata Motors planned to design a car for this group without including the expensive parts such as the airbag, car radio, electric window lifts, and power steering.

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It planned to decentralize the assembly of the Nano model in different parts and thus, involved multiple franchises. This is a perfect example of breakthrough thinking in the business model.

It focuses on a low budget input of raw materials. For instance, around 40% of the parts are purchased through online auctions. Most of the metal parts in the car have been replaced by plastic parts which are glued together, instead of welding. This process again reduces the cost of production.

The introduction of disruptive innovation in the automobile industry encourages the existing incumbents towards more sustainable options. The industry incumbents will be able to achieve mass market penetration through then trustworthy brand image, influential power, financial resource, and innovative skill. Tata Motor is still on the at the early stage of technological disruption, thus, the established incumbents have the possibility to regain its market position by responding to the appropriate opportunity.

2. Select one car innovation that would be considered more incremental in nature, and one that would be considered more breakthrough in nature (or two innovations of your choice from another industry). Explain which of the characteristics of breakthrough versus incremental innovation your examples exhibit.

One of the example case of automotive (car), which can be considered as an “incremental innovation” in nature is from Toyota Company. The Japanese company is a well-established leader in the global automobile industry. The engineering team and R&D department of the company were always keen in introducing improvements according to the customer requirements and existing technology (Woschke, Haase, and Kratzer 2017). Toyota always focuses on incremental innovation by renovating the existing systems and services of the car models. With incremental innovation, it is able to design hybrid cars, which is similar in capability but has an additional source of power.

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Furthermore, they also claim that hybrid car, which can run through power supply is an eco-friendly model and aims to reduces the financial burden of customers as well as reduces the environmental pollution. For example, The Toyota FV2 is an example of incremental Innovation, without disturbing the basic principles of the car (Betancourt, Mooney, and Ross 2018). The basic principles include the internal combustion engine, shift gear change, and steering wheels. Another example is Toyota's principle know as kaizen. In this model, it constantly tries to incorporate little booties and artificial intelligence in its production system. This type of innovation has remained the core competency for the company for the last several decades, as it aims to offer innovative solution to the customer’ requirement. This way Toyota is able to design a faster, safer, environmentally friendly,  and more comfortable car for the customers.

On the other hand, breakthrough innovation is something which is within the company and help to drives it to the next level (Cohen, and Caner 2016). One of the examples of a car company introducing breakthrough Innovation is Ford Motors. In 2014, the company launched its first aluminum-bodied full-size pickup model. The model is 318 kg or 700 pounds lighter than the traditional steel-bodied version. This makes it small fuel efficient as well as nimbler pickup. Notably, in order to achieve competitive advantage, the company aims to bring disruptive technology, such as GPS enabled, and robust design that fits the customers’ requirement as well as their financial capacity.

This model is believed to be a more popular and best-selling vehicle than the F-150 in the United States as well as in other countries (Lee, and Tang 2018). Aluminum is already being used by other automobile companies, however, Ford motors have used it in the entire body for the first time. Ford is one of the leading automobile company and such innovation will be able to bring revolution in the automobile industry. Other elements included in the breakthrough innovation is the inflatable rear seat belt, which won the Breakthrough product award in recent time. This innovation was accepted by the customers and also becomes the reason for their choice of automotive in recent market conditions. Furthermore, the trend was being adopted by other automotive since this was expected by the customers.

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