How TESLA did it differently from TATA Nano
TESLA and TATA Nano had similar audacious goal i.e to bring an innovative car to the market. They had technological challenges, time constraints and high expectations from the end user however both companies took a different approach and different paths to achieve their aspirations. TATA nano failed and TESLA got tremendous success.
In hindsight, it's so clear how TESLA took Lean & Agile Innovation approach whereas TATA Motors took a traditional waterfall approach for Innovation. The result is one created a new market segment and is leading it and other competing in the segment of Ultra Low Cost (ULC).
TATA (www.tata.com) is a leading Indian conglomerate. It deals in from salt to software. TATA Motors is a leading Indian Automotive company which now owns brands such as Jaguar Land Rover. In 2003, its chairmen Mr. Rata Tata announced a car under $2200 USD (100000 Indian Rupees) for common citizen who can’t afford a Car otherwise. This was a tall order as next cheapest car available in the world was of around $5000 USD by a Chinese company. 50% reduction in car cost meant revamping whole car manufacturing, designing, and delivery process. A number of Scientist and Engineer took up the challenge to realize the dream of “People’s Car”. Several inventions were done to realize the dream. Finally, in May 2009, TATA Motors launched car “Nano” which met the cost criteria. In no time, the car became popular and a number of orders started rolling in, resulting setting up new manufacturing lines. The bubble was burst very soon because of expectations mismatch, car performance and few reported incidents such as car fire. In a year time frame, new versions were launched, the price has to be increased for new models (which can meet most people’s expectation from a car!) up to $3500. Competitors reduced prices to enter in this new nano segment and slowly TATA nano even though has numerous inventions could not survive market expectations. Today TATA nano is produced only on order!
TESLA is a different story. Elon Musk announced an audacious goal of an affordable electric vehicle. However, instead of developing an affordable electric vehicle first, TESLA came up with an expensive sports Car (Car body from Lotus — a leading sports car company) with TESLA Fitted electric system. Next came Model S with TESLA designed body and soon it became people’s choice. Today TESLA is a leading car and created a new segment of Electric vehicle.
TATA Nano vs TESLA
- TATA Nano had a number of challenges from technical and market perspective. TATA nano gave more weight to the technical challenges and focused on developing new technologies and design without gathering evidence if there was a Product/Market fit for TATA nano? Tesla on the other hand also had a number of technical challenges but it focused only in the riskiest one which was about creating a battery that on one charge can run a car for a day for common use. Tesla evaluated product/market fit by launching its battery/electric system fitted Lotus car first without developing the whole car from scratch.
- TATA nano took a traditional waterfall approach of requirement, design, build and launch a product as big bang whereas Tesla humbly took it as an opportunity to learn by adopting agile and lean methodology of evaluating problem/solution fit and product/market fit before scale. TATA Nano came with the basic and advanced model. Basic model met targeted price but the car was below the expectations of the end user. There was no time to address customer feedback in this approach. On the other hand, TESLA realized its vision step by step. The first step was to develop an electric car but not an affordable one. The first model of TESLA was an expensive sports car. It got very few order but good money and valuable feedback from early adopters. It improved the product in an agile manner by implementing customer feedback.
- TATA nano low price triggered a high number of orders which led to premature scale up. Orders piled up, increased strain on existing resources and resulted in long waiting time for customer followed by cancellation. The company Finance got a hit. TESLA tested its hypotheses and evaluated market potential before giving itself permission to scale. Using carefully crafted launch strategy from one model to next by controlling demand (Launching expensive car first ) and getting more time to understand customer needs and market dynamics before scaling up to deliver promised value, TESLA reduced market risk before scale up.
TATA Nano failed in a short time even though it was technical marvel because it followed the traditional approach to talk to the customer late in the product life cycle. The focus was on the invention.
On the other hand, TESLA with a similar audacious goal took a calculated, lean and agile approach of iterative cycles of build, measure and Learn to come with the best class product. The focus was innovation and customer was part of the journey!