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Mahindra & Mahindra

Mahindra & Mahindra. Innovation in the Agricultural Industry. 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

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Mahindra & Mahindra

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  1. Mahindra & Mahindra Innovation in the Agricultural Industry

  2. 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 Challenge

  3. INTERPRETING THE DATA • What do we learn from the history of M&M that is important to understanding their capacity to innovate? • 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

  4. Functional Form

  5. Business Sector Form

  6. 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

  7. 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.

  8. 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)

  9. 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): • Make products suitable to customer needs • Enable learning • Create value

  10. Motivating Innovative Behavior Rewards and Incentives Ramamoorthy, Flood, Slattery & Sardessai (2005): employee’s perceived obligation to innovate, job autonomy, and pay has a direct effect on their innovative work behavior.

  11. Motivation

  12. DESIGNING INCENTIVE SYSTEMS Management Systems Culture Incentive Systems Innovation Results Innovation Strategy

  13. Setting Goals • Specific versus broad goals • Quantitative versus qualitative goals • Stretch versus realistic goals • Success-driven versus loss-avoidance

  14. Choosing Goals

  15. Evaluating Outcomes • Balance between team and individual performance measures • I did … We did • Subjective versus objective performance evaluation • Judged … Observed • Relative versus absolute performance evaluation • Better than … 10% better

  16. Summary of Differences

  17. 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.

  18. CALCULATING VALUE • Price = 1.9 lakhs ($3,958) • Cost = 1.45 lakhs ($3,021) • Profit = .45 lakhs ($937) • Sales = 3,000/year = 1.350 lakhs ($2.8 million) • Investment required = 7-8 crore ($1.45 – 1.67 million)

  19. 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?

  20. 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. • The pay for performance conundrum

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