Frugal innovation : concept Frugal innov market . Local Accessibility&Afford. unit cost . Global Scalability (price) cost-performance cost-performance Driven by market affordable frontier (period t-1) frontier (period t) design with architectural change indifference curves of i.e. Tata Nano car performance-conscious customers Frugal innov. Supply products chosen by performance-conscious I frugal customers . Local offerability leveraging global I innovation indifference curves of cost-conscious partner & affordable R&D, test customers products chosen by . Upgrading local tech. capabilities cost-conscious very inexpensive customers for high impact opportunities but good enough product product 2,500 dollar car economic growth minimum performance required (quality) INTREE 4.0 FORUM quality 1 1 Korea Industry 4.0 Association Source: Lim and Fujimoto (2018) 41. Pre-growth stage 2. High growth stage Price range of existing products offered Price range of existing products offered Income middle Increase -upper income middle segment -upper income segment frugal newly served innovation segment unserved unserved lower income segment lower income segment = served market segments INTREE 4.0 FORUM Source: Lim and Fujimoto (2019) Korea Industry 4.0 AssociationUnit cost, price Products by incremental low cost innovation Products by frugal incremental innovation Products by frugal radical innovation Levels of additional knowledge Modular Architecture Integral required Fig. 9. Frugal innovation: Unit cost, technological/architectural knowledge.Case : Tata Motor's Nano A INTREE 4.0 Foaum The target market of the disruptive business model ' Potential lowest end of the market \"families riding 011 two wheelers, the father driving a scooter, his young kid standing in front of him, his wife sitting behind him holding a baby and I asked myself whether one could conceive of a safe, affordable, all weather form of transport for such a family.\"(Tata Motors, 2008 a). - Price - 25003;: Half level of the cheapest car in India (6000-7000$) - loghly the double price of the motor cycle available in Case: Tata Motor's Nano Low Riders Tata Motors' plans would produce, in real terms, by far the cheapest car ever made. Year introduced Car in U.S. Horsepower Price' Model T 1908 20 $19,700 Beetle 1956 24 11,333 Mini 1961 34 11,777 Tata Motors 2008 33 2,500 " Adjusted to 2007 U.5. dollars. Sources. Tata Motors; Ward's Auto World, Edmunds.com. Source: As cited in Meredith (2008).Case: Tata Motor's Nano . The business model changes the rule of game in the automobile industry: . Lowest end of the market (potential) which has high possibility of market growth . Low-income markets in the developing countries : expected to drive worldwide growth of the automobile industry while markets such as those in the US, Europe and Japan, continue to stagnate (Rahman 2008). . The Nano created a new product category called "Ultra cheap car" . Reno, Nissan are now followers in the entry into "Ultra cheap car" market by declaring their entry into the market in 2010.Case: Tata Motor's Nano TATA 108 1 11 INTREE 40 FOR -Tata Group ranked the 6th in the Business Week-B&G 2008 listing of the world's Korea Industry 4.0 Assoc 25 most innovative Companies (Business Week)Case: Tata Motor's Nano . A compact, rear wheel drive car with a 2 cylinder engine with a capacity of 623CC . multi-point fuel-injection petrol engine reaching a top speed of 105 km/hour. . The original product design differentiated from any car model in the world . in-house two cylinder engine . in-house transmission . in- house body design (Ito 2009).Case: Tata Motor's Nano A Nested system of Product Architecture Architecture of Personal Transport Systems . Poor Road s . Poor Rural Service Network Architecture of Low cost car . Low Cost Steering . Engineering plastics for seat and Interiors Column System .Simple Gauge Display . Single Wiper Architecture of Power Train . Compact engine two cylinders . Aluminum Engine Block . Reduced sensors . Rear Seat Engine *Air intake scoop at rear side . Low Cost Suspension . Lower Body Structure .Modular Components . Tubeless Tire for maintenance kitsResearch Methodology ' Exploratory case study approach ' Text analysis - Press articles(?'5 press articles, 6 CEO interviews) at Tata. Motor's web sites - Other articles available ' Analysis of email interview, direct interview, conference material , internet information ' Focus on analysis of innovation processes in product development Human resources weak in tech. prowess . Resource constraints . Intellectual property : US patents granted TML Suzuki Hyundai Toyota GM USPTO 0 599 1,358 10,096 10,624 Source: Patents granted in the US Patent office. PTC patent filed. 2009. 01. 08. accessed. searched with assignee name "General Motors", "Hyundai Motor", "Toyota Jidosha". "Suzuki Motor" "20 patents and 183 patent applications pending registration in India" (United States Securities and Exchange Commission, 2008). Human resources . project leader age 37 not having experience as a project leader of passenger car development project . average age of product development team: 20s-30s . Tata Motor's experience of car development: India's first indigenous car, INDICA, in 1999. expanded to a similar series of models such as INDIGO, launched in 2002, and INDIGO Marina in 2004.Human resources: weak in tech. prowess Lack of R&D competence in Tata Motors: ' weak in generating original product designs Processes of innovation for low price segment of the market ' Consulting rm assisted process The product development process was implemented with the consulting companies - on the styling design (Institute of Development in Automotive Engineering), lean design (Munro Associate) - design and digital product development technology (1N CAT). 0 The NAN 0 development project was achieved in close cooperation with INCAT. INCAT is an operating company of Tata Technology Limited (TTL). an subsidiaiy of Tata Motors. 0 used to be British engineering company until 2005. global leading provider of product development IT seivices utilizing digital innovation technology (digital innovation technology: 3 D CAD. simulation, CAE. PLM) - having the world's premier automotive, aerospace and consumer durable manufacturers as customers Processes of innovation for low price segment of the market . Supplier leveraged product development process. . external suppliers provided 85 percent of Nano's components (Gopalan & Mitra, 2008): in value terms . Participation of local resident supplier firms including MNCs Component suppliers involved in early stage of product development From friction to cooperation Examples: Bosch(engine)(Germany), IDAE (Styling)(Italy), Emcon technologies(exhaust system) (US), Lumax Lighting (US) Tail light fixtures, GKN (UK) DriveshaftsProcesses of innovation for low price segment of the market External resource assisted product development process: new product development technology-digital technology. - 3D CAD (computer aided design) - CAE(computer aided engineering) software or simulation software (01' other packages) - PLM(product life cycle management) - the technology could complement the weakness of human resources in product development. The company utilized the digital technology strategically. TM has a. strategy of active utilization of the digital technology that supports the product development process: according to the company annual report. Digital innovation technology invested in Tata Motors Product Production Manufacturing Design Engineering Planning CATIA, Pro/E CATIA DELMIA PLM ERP MES Courtesy of TATA Motor Limited by Nitin Rajurkar(2006)The process change after the adoption of the digital PD tech. Previous Platform Design Planning Manufacturing Plan for What is Earlier 1996 DFM No experience Hence designed Freedom to Decide Build designed for manufacturing design Sequence New Platform Design Planning Manufacturing Design for Manufacturing Design to match Build Sequence of INDICA current process Since 2006 PFMEA/DFMES & plant Validation of Assembly Adoption of existing Facilities Complexity, Logistics Courtesy of TATA Motor Limited by Nitin Rajurkar(2006)Processes of innovation for low price segment of the market NANO is more advanced than INDICA or INDIGO in using digital technology . CAE . digital mockup . digital validation for final assembly . digital validation for body . digital factory modelingProcesses of innovation for low price segment of the market ' a signicant change of the planning and manufacturing process due to the investment in the digital technology for supporting product development: ' the designing activity : closely connected with planning and manufacturing activities, ' design for manufacturing and validation of assembly : over the digital space Processes of innovation for low price segment of the market The car development project started from the bench marked product as an actual product the basic concept of \"reshaping\" the benclnnarked model to be the one with target cost. reverse product development process: the product development does not start from idea. generation to design-build-test stage. - starting from a benchrnarked product: Maruti 800 - not for imitation (developing modied design of the existing car model) - process: differentiated 'om the process made within the rm in advanced country 0 Milestone of xing the basic concept the successful development of the two cylinder engine=> x the basic concept of the car(the car with two cylinder engine & the structure of the car) the car with engine located at the back of the seat. Processes of innovation for low price segment of the market ' Sub sequent detailed design: lean design ' Process of eliminating, reducing low value added design and activities supporting the designs: Simple design strategy in the further product development stage: - company's strategy of 'lean design' ' merge and elimination of functions and components, reduction of the Size of components Design for manufacttu'ing applied in reduction of cost : Some components modular involvement of the supplier Involvement of lean design strategy company Processes of innovation for low price segment of the market Note Prototype * Lean design checking until Ci/Pi equals to Cupt Digital Innovation Technology design External Resource assess and evaluate test Product C /Pt C /P; C / P = Target Cost/ Target Performance C/ P- Cost/ Performance at developing process Co/ PD= Base Cost/ Base Performance Cb/Pb Base model Rev. Expl. Prod. Concept Design Prototype ProductDiscussion . The features of the processes of innovation for low price segment of the market . External resource leveraged process . Leverage of suppliers and consulting firms New technology enabled process: process utilizing the digital product development technology . Reverse process of product development with lean design approach . It is the creative process of exploring basic concept and detailed designs Conditions for supporting the features: conjectures . Local large firms in the large developing country . With financial resources, access to global resources (suppliers and consulting firms) can be made possible The large firms can persuade the suppliers to join in the development of the components . Huge home market which provides favorable condition for innovative product development for low price segment of the marketIndustry Digital Transformation : leveraging connected things... Experience/Performance Product Service OT CO OT O CF LOT DT OT CO OT HA co XIE : Heung Song (2018), Bassam et al. (2020) 28Frugal . Frugal innovation Innovation . lower end of the market . Leapfrogging innovation through application of frontier tech. . niche market including the high and middle end of Leapfrogging the market Leapfrogging Frugal innovation innovationFrugal innovation example : Retrofit Sensor Frugal innovation case-concept stage Cost New machines X B Retrofit Solution Local market affordability A D' GOAL#2 - Market leadership with Extreme Retrofit Solution 2 (X) Acquire new machines D Dynamic (A) Change the controller (B) Official unlocking controller D (C) Hack the exiting controller GOAL#1 - Extreme Retrofit Solution 1 (D) Added-on module Quality Lim C, Lee JH, Sonthikorn P, Vongbunyong S. (2021) Frugal innovation and Acceptable quality for Source: Lim et al. (2021) leapfrogging innovation approach to the Industry 4.0 challenge for a developing country. Asian Journal of Technology Innovation. 29(1):87-108. INTREE 40 FORUM Korea Industry 4.0 Association enabling full Industrie 4.0 capability 30 Copyright @ 2021 Korea Industry 4.0 AssociationPRECIPALM Hannover Messe 2021 Thene is Spatial Variability in Sol Properties, Lindaphs Frugal & leapfrog innov. example : platform solution crop yield Puting the right mapp inputs for farmers at theright rate, in the fight place lind at the right time By introduction of precisi Source: PT Pupuk Kalimantan Timur (Pupuk K in Hannover Messe 2021 Digital Edition Source: Hung Song (2021)Industry Digital Transformation(IDX) in Frugal & Leapfrogging Innovation Context High IDX Digitalization Low Low High Transformational service value/Business value Source: Pieter Schalkwyk's presentation in IIC member meeting 2018