Project Management National Conference 2011 PMI India Automotive Product Development in an Emerging Market: Technical & Project Management Challenges Soumen De , PMP EGM, Advance Vehicle Quality at General Motors Tech Centre India2|P a g e Application of Select Tools of Psychology for Effective Project Management
Project Management National Conference 2011 PMI India Contents 1 Abstract..............................................................................................................................4 2 Introduction........................................................................................................................4 3 The Leader as Change Agent.............................................................................................7 4 Develop Project Team - Bringing out the best in people..................................................8 5 Cost Management– Using innovation as a strategy to contain cost...................................9 6 Cross Functional Integration, Supplier Management – To meet the cost expectation.....10 7 Agile Methodology – How to maintain focus and motivation while having divergent thinking.................................................................................................................................12 8 Managing Risks, Managing Negative Stakeholders – From Singur to Sanand...............12 9 Serving Indirect Project Need – Coping up with relocation............................................13 10 Importance of Packaging the First Delivery- Linking with recognition and rewards....14 11 Lesson Learnt – The jury is out…..................................................................................14 12 Disclaimer......................................................................................................................15 13 References......................................................................................................................15 14 Author’s Profile..............................................................................................................163|P a g e Application of Select Tools of Psychology for Effective Project Management
1 AbstractEmerging markets such as India are becoming destination of choice for designand manufacturing of small affordable cars. Different socio economic factors,such as income, standards and regulations, driving conditions and carpenetration ratio justify the need to have car that may not have that technologicalsophistication, premium branding and high price. A car typically has 10000 partsand components that are either sourced or manufactured as per the cost, timeand quality specifications. Extent to which design is economical, functional andeasy to manufacture then drives the car’s revenue and costs. Hence any OEMneeds to relook and reinvent both the product and process developmentprocesses to meet the emerging market and business needs. Nano, the smallcar from Tata can be a case in point.Innovation both in project management and product development processeswere the corner stone of Nano project. It popularized terms such as “GandhianInnovation” and “Frugal Manufacturing” and highlighted why an emergingeconomy like India has been and will continue to attract the attention of almost allautomobile manufacturers in the world. While the jury is still undecided whetherthe Nano will be commercial success or not, valuable insights can be drawn intohow the boundaries of project management were balanced to deliver “thepromise” within the triple constraints of cost, scope and time This paper will helpto understand how the challenges of producing a car in emerging market can beefficiently tackled using the tenets of project and product management principles.Key Words: Gandhian Innovation, Project Management, Frugal Engineering,Agile Methodology2 Introduction“A Small Affordable Car” can serve as a strategic need for any car companyserving the emerging market. A competitive strategy based on cost leadershipand segmentation as defined by Porter’s model (fig. 1) can help OEM adopt theright strategy .
Figure 1: Porter’s model for organizational strategyA very general remark that Ratan Tata made about how he felt when he saw anentire family on a scooter caught in rain and traffic and the debate thereaftertriggered the business need, even though the overall strategy had not beenevaluated and defined. Rather than rebutting the press following the GenevaAuto show in 2003, Tata Motors took the challenge of building a Rs 1 lakh car.While pricing is usually done based on the model shown in the figure 2, for Nanothe price was fixed first then the profit maximization was planned by reducing thevariable cost and increased sales. Tenets of frugal engineering and projectmanagement principles were used to leverage this into a strategic advantage. Figure 2: Contribution margin based pricing strategyThough good project management principles advocates involving customers, andother stakeholders during initiation phase of an project to enhance success byshared ownership, in this case it could not be done as the scope of the projectwas vague at the start. The scope was to develop “a car within a target price ofRs 1 lakh and bring the comfort and safety of a car within the reach ofthousands of families, and meet all the regulatory and key customerrequirements. Nothing was clear, no benchmark, no fixed lines.The project had plenty of risks which could tempt any project manager toabandon the project. However, Tata’s adopted the concepts of FrugalEngineering  to handle the technical risks. Frugal Engineering is the science of
breaking up complex engineering processes/products into basic components andthen rebuilding the product in the most economical manner possible whileGandhian Innovation solves the stated problem by one of the following ways asshown in fig. 3. Figure 3: Principles of Gandhian innovationTata Motors focused on created new technology and modified existing capabilityto create Nano as shown in fig. 4. Different phases of product developmentlifecycle were tightly coupled to integrate different parts to deliver the car withinthe constraints of cost, scope and time. Although it followed the well-knownproduct and project life cycle processes as shown in figure 4, operating inemerging economy demanded adoption of stringent project cost managementprinciples.
Figure 4: Innovations in IndiaTo get best deal, Tata went to Bosch, Germany for the new engine managementsystem, IDEA, Italy for styling and exterior design and Indian Sona Koyo for lightweight steering shapes. Figure 5: Relationship of product and project life cycles3 The Leader as Change AgentRatan Tata donning the role of Project sponsor and internal customer, playeda model project champion, and provided enormous leadership to the project.While the project needed major changes in how the company wanted to dobusiness and carry our engineering design, bringing in major changes in a largecompany like Tata Motors demands the leadership clearly understands theinterrelationship of the following factors• Right strategy which the company believes in.
• Right people capable to drive the strategy, and• Right operating mechanism to allow the team to select the path they need to execute the strategyWith the strategy of making “a small affordable car” in place, the next thing wasto get the right people. It is known that early involvement of the team membersadds expertise during the planning process and strengthens commitment to theproject. A leader driving change has the get capable PM and put in place astrong team on which he can rely on. As per PMBOK, “Pre-assignment” and“Negotiations” are important tools to acquire project team. The leader knew thatto drive a complex project like Nano he has to depend on people who havedemonstrated significant technical and project management in similar projects.Girish Wagh, a second generation Tata employee and a mechanical engineerwho was involved in similar “Indica” and “Ace” program” was “pulled” in as PMand asked to lead the Nano project. The “Indica” project taught Tata Motors andWagh, a new product introduction process (NPI) from Warwick Manufacturinggroup (WMG) Ravi Kant, the new MD who had demonstrated strategic leadership skill in Indicaand Ace project was selected to lead the project.The team selection was done mostly by an internal talent search process whereyoung and high potential individuals were identified. To influence negotiation withfunctional managers to relieve their “high potential” staff, suitable “hype” wascreated, wherein getting included in the Nano project was considered to be anhonour.4 Develop Project Team - Bringing out thebest in peopleKant started indentifying young talent and gave them an opportunity to be a partof the Nano team. These people would often be called for an informal lunch anddinner meeting organized by their MD. This process created the rightenvironment and passion for the team to become motivated to execute the Nanovision laid out by their leader. It can be observed that the leader cared less aboutflaunting his own IQ and more about fostering a culture of intelligence. Under hisleadership the employees did not just felt smarter, they actually got smarter. Heled like a multiplier , to ensure that he got much more from the team (eventwice as much) without adding resources or overheads, hence additional cost.
Attributes of leadership style who leads as a “multiplier” are given below• The talent magnet – Attract talented people and uses them to their highest potential• The liberator – Creates an intense environment that requires people’s best thinking and work• The challenger – Defines an opportunity that causes people to stretch their thinking and behaviours• The debate maker – Drives sound decisions by cultivating rigorous debates among team members• The investor – Gives other people ownership in results and invests in their success.5 Cost Management– Using innovation as astrategy to contain cost.Obviously the project wanted to create a “unique product” as defined in PMBOK-a product that was first constrained by cost, but by no means allowed the otherparameters such as scope and schedule to be free floating. The car has to stillmeet the performance criteria, safety norms and emission norms of the industryand my no means considered as “half-car”. Optimized design coupled with valueengineering concepts can be used to reduce cost and execution time andimprove the quality and performance of the project deliverable. Tata usedinnovation as a strategy to carry out project cost management.
The Fredrik Innovation framework  in fig. 6 can be used to explain what wasused in this project. It can be considered as an example of “Architecturalinnovation” where the components were rearranged to come out with a novelarchitecture which met the vehicle specs. Few examples, the engine was placedin the rear compartment, the battery was placed under the seat, the spare tirewas located under the front hood to free up cabin space to meet the specs whilemeeting the cost target. The fuel filler cap is under the nose of the car, whichsaved the cost to create an extra hole in the side. Similarly single wiper in thefront was another cost saver. Figure 6: Henderson Clark model of innovation6 Cross Functional Integration, SupplierManagement – To meet the cost expectationTo convert the architectural innovation of Nano into a successful operationalplan, efforts need to be coordinated across function and organizationalboundaries. In Nano the cross functional team comprised of design team, thesales and marketing team, and more importantly suppliers. The OEM andSupplier participation is usually 50-50 in architectural innovation as shown in fig.7. Hence supplier selection and supplier contract management was crucial.
Figure 7: OEM and Supplier relation in different types of innovationThe innovation strategy demanded appropriate supplier selection strategy andprocurement management approach for the project. The Nano has about 2000parts, much less than any standard car. Of these parts 80 % has to be developedby suppliers. Tata considered suppliers to be vital for the success of the project.Tata shared their vision with the suppliers. The “vendor park” concept where thesupplier will be collocated with the OEM was one of the innovation in theprocurement management plan. Suppliers needed to be competent, trustworthyand involved from the start of the project. The idea was to limit the number ofsuppliers to 100 and the rational was To demand the lowest possible cost, one has to guarantee maximum business volume to suppliers. To foster the strongest possible partnership with suppliers and cultivate a true sense of sharing of both business risk and long term profitability. Follow an open approach with suppliers to facilitate contribution to innovation in design and manufacturing process.Defying convention, Tata wanted the suppliers to give the best possible pricefrom day one rather than when production hits the peak. The cost–reductionexercise was driven to a large extent by design. It went beyond the traditionaldesign approach and looked at integrating functions e.g. combination switches,combined wiper etc. Integration and fine tuning of supply chain process was alsocarried out to contain cost.Cost and waste was driven down by reducing inventory, eliminating waitingtimes, increasing the utilization of warehouses, truck and plants. Similarly on themanufacturing front, all the frills and excess automation were removed. The teamhad gone through 8000 plus ideas, bound together through three waves of cost-reduction initiatives . Early and intense engagement of the suppliers was the
way costs were controlled. Cost reduction ideas were generated with the entirevendor base rather than just the selected suppliers. The entire vendor base wasintegrated through IT to have just-in-sequence and this helped to reduceinventory. Concurrent engineering practices (project fast tracking approach) werefollowed to meet the schedule constraint, wherein car, suspension, engineprograms were running on parallel track while the design of Nano body shapewas taking place.7 Agile Methodology – How to maintain focusand motivation while having divergent thinkingNano did not follow the traditional linear or waterfall model. It followed “Agilemethodology”, where with every sprint or iteration more and more clarity wasadded to the project scope. Agile meant adding clarity or change in the scoperather than adding more to the scope. E.g. the hatchback option was discardedto save on cost and weight. To reduce weight, plastic lost out to sheet metal butnot before 100 product prototypes had been developed and tested. Threesupplier companies and seven plastic raw materials manufacturer helped Tatago beyond traditional thinking and carry experiments to provide clarity into whichsheet metal should be preferred over plastic . Scope was definitely changedbut it added lots of business value to the project. The team learned about thecapabilities and limitation of plastic and more importantly this learning resulted infurther reduction of sheet metal costs.8 Managing Risks, Managing NegativeStakeholders – From Singur to SanandSingur in West Bengal was chosen for production of Nano. An initial agreementwas signed in March 2006 and the foundation stone was laid in January 2007.An inappropriate stakeholder expectation management strategy turned the landlosers and opposition into a hostile lot  and the timeline to roll out the car fromfactory by July 2008 was threatened. While work of the project continued with agreat amount of effort by the leadership to keep them motivated and stakeholdermanagement continued simultaneously, all efforts to become operational had tobe abandoned on 03 Oct 2008.After 18 months and, ` 15 billion (INR) of expenditure the project seemingly got“derailed”. Tata’s faced what can be described as a Low probability highimpact event or “Black Swan” event .Black Swan events have catastrophicconsequences that have the potential to take the business down under.Identification of Black Swan events as a part of risk management plan is alwaysdifficult for any PM. Having failed to identify this as a potential risk, appropriatemitigation to handle the crisis was not in place.Conventional project management thinking would have tagged the project as a“failed project”, document the lesson learnt, and formally close the project. Tata’s
“Risk Response Plan” was created “on-demand “ and the decision was to “moveout” from Singur not “phase out “ the project Nano.The project leadership team started negotiating with different states and indouble quick time identified Sanand in Gujrat as the new home for Nano. OnOctober 7, a mere 4 days after the pull out, the deal was sealed. The “lessonslearned” from Singur helped to take quick and sound decisions. Sanand waschosen because of favourable political climate, land being not too low ascompared to Singur and situated just 500 meters from the highway. Tata tookpossession of the land in Nov 5 2008 and started erecting the factory a day later.To manage “revised time schedule”, parts from Singur plant were taken down,tagged and photographed, then packed and loaded in trucks in a predefinedmanner before shipping them to Sanand. To avoid damage of parts andassociated consequences, transportation was done on the golden quadrilateral,a longer route, but better quality roads. The engine manufacturing machinerywas first transported to Pune, so that engine can be produced concurrently whilethe Sanand facility was getting prepared . In little more than a year (February2010), the plant was fully operational, and the first Nano was ready to be rolledout from Sanand plant.9 Serving Indirect Project Need – Coping upwith relocationA change in project trajectory necessitated taking care of many “indirect” projectneeds, like relocating the employees and their families etc. This was amplydemonstrated during the relocation. Tata acknowledged and emphasized withpeople and provided all possible support to those who were forced to uprootthemselves and their families and start afresh with new life and unfamiliar place.
10 Importance of Packaging the First Delivery-Linking with recognition and rewardsProject leaders recognized how media was going to play a critical part toreinforce the sentiment of pride of working on the Nano project, which wasscheduled to be launched at the Delhi Auto Expo in January 2008. Seven Nanoswere crafted with discipline at Engineering Research Center (ERC) Pune andtransported under secrecy to Delhi.. Ratan Tata, personally checked every detailof the show cars at ERC and went over the presentation he has to make 2 weeksbefore the D-day . Tata generated interest in the media when he explainedhow Nano tag got selected from a variety of choices such as Nio, Inca etc.Everything was carefully examined and planned. The ‘unveiling’ opened with apre-recorded 11 minutes presentation , covering a variety of subjects oninnovation, the progress from bicycles to motorized vehicles and of course thefamous , the-family-of-the-scooter story. Enough hype around the “launch” madea record participation of 1,80,000 people visiting the stall by noon. Tata told theydelivered, and highlighted that a “promise is a promise”. The importance ofcreating the “first impact” with a long awaited deliverable could not have beenhighlighted betterOne of the many positive press coverage was provided by Gavin Rabinowitz ofthe Associate press who compared Nano bringing a kind of transportationrevolution that Ford’s Model T brought in US long time ago. It was tagged as theworld’s cheapest car. To reward the team for the excellent work done, Tataadopted a unique way to reward the team. The PM was asked to select 10 teammembers from the team of 500 to join the Chairman during the Nano launch onthe stage. Wagh selected the members in such a way that every group of theproject was represented. What better recognition for the team than sharing themoment of glory with the Chairman, with the entire world as an audience. Waghnoted “I was overwhelmed. It certainly was the greatest recognition I have everreceived”. It was a unique way of recognizing and rewarding people. The teamgot good dose of intrinsic rewards and the associated motivation.11 Lesson Learnt – The jury is out…“Nano journey from vision to launch” as shown in fig. 8 beacons an aspiring PMto look back and appreciate the amazing power of innovation, projectmanagement, team work, and inspirational leadership. Despite all the hurdles,the team was united and tied to the common vision of the chairman, “Deliverthe car as per the promise” . Call it in response to external threat for producingsmall car in emerging market or trying to address a social cause to put Indianson the wheel, the Nano delivered. There are still some challenges in Nano’sjourney. The volume needs to exceed 400,000 per annum for profits tomaterialize .
Figure 8: Nano’s journey from vision to launch The distributed manufacturing concept that Nano will be assembled byfranchised local entrepreneurs, presently on hold, needs to be tried out too. ForTata the launch of the Nano is a landmark in transport comparable to the firstpowered flight by the Wright brothers, or the first moon-shot. Like a modern-dayversion of Henry Ford, Tatas idea of an affordable car that is light and simple,yet made from high-quality materials is a red letter day for all Indians. For anyPM, it is also landmark in terms of how the product and project managementboundaries were stretched to deliver “the promise”.12 DisclaimerThe ideas and thoughts mentioned in this paper are solely my personal opinionand in no way represent the opinion of either Tata Motor’s or any otherorganization.13 References Chacko Philip, Noronha Christabelle, Agarwal Sujata, Small Wonder, 2010 http://en.wikipedia.org/wiki/Frugal_engineering http://en.wikipedia.org/wiki/Porter_generic_strategies http://en.wikipedia.org/wiki/Singur_Tata_Nano_controversy
 http://en.wikipedia.org/wiki/Tata_Nano http://innovationzen.com/blog/2006/08/11/innovation-management-theory- part-3 Prahalad C K and Marshelkar R A, Innovations Holy Grail-II, Business Today, Jun 12, 2011 Taleb Nassim, Goldstein Daniel, Sitznagel Mark, The six mistakes executives make in risk management, Harvard Business Review, December 2009 Talgeri Kunal N, Srinivasan Sriram, “The Countdown begins Now.”, www.outlookbusiness.com, Feb 2009 Wiseman L & McKeown G, Bringing out the best in people, Harvard Business Review, June 201014 Author’s ProfileSoumen De, PMP, presently is the EGM, Advance Vehicle Quality atGeneral Motors Tech Centre India. He has a diversified experience of18+ years in managing plant floor, R&D and advanced engineeringfunctions in reputed companies like Tata Motors and General Electric. Heis six sigma green belt, has presented technical papers at differentnational and international conference and has 14 patents to his credit.