Innovation Management and Product Management: A Case Study

The article is aimed not only at product managers, but also at all participants and stakeholders involved in creating an innovative product.

Product management processes and product developments follow a comprehensive and stable product vision that must be consistent with all available resources and future plans of the organization. Market and consumer surveys are only part of the next steps required.

Introduction topics

Before continuing with the story, we recommend that you familiarize yourself with the following topics:

Innovation and Product Management: A Case Study

Today, the catchword for any management development program, any seminar, or any national or international conference in business management is on or around the topic of ‘innovation management’. Every business house necessarily has a major project on managing innovation in their individual businesses. The Tatas, for example, are focusing on innovation through a series of initiatives in inciting creativity at every operational level, and they have set up standards to measure individual projects based on innovation. This is to assess the short- and long-term effectiveness of the overall organizational objectives as also for talent identification for future growth strategies of the group. We also come across scholars in the area of business management and global economics expressing their views on the importance and the urgency of focusing on product and process innovations.

Marked difference in capabilities and approach to growth

China and India, as major Asian economies, are in the forefront of global expectations of phenomenal economic growth and are claiming to soon become leading economies in the world. But there is a marked difference in capabilities and approach to growth between China and India. The international view of China is a nation committed to speed of execution, whereas India appears to be more focused on democratic debate, taking an analytically cautious approach towards growing its economic prospects. India is supposed to possess more intellectual capabilities as compared to China, which is growing at an enviable speed in some cases, irrespective of concerns regarding product quality and pricing strategies. Many people seem to be preferred to lead global corporations, with their capabilities of strategic thinking and focused approach to their assignments.

So, an issue like the successful management of innovation should favour the Indian psyche than it should the other major players in the Asian economy. Let us, therefore, consider a case on innovation management in a medium-sized company in India to take the issue further.

M/s Precision Fittings Ltd (PFL) is a medium-sized set-up in Pune, Maharashtra, specializing in the manufacture of precision valves, fittings and flow measuring instruments for the chemical industries and testing laboratories in the automobile industry. Over the years, PFL had earned the reputation of being a reliable unit for the supply of quality equipment and measuring instruments, meeting all the statutory test requirements of the chemical industries and laboratories. Each of the promoters of PFL have rich industrial experience. In view of a business opportunity for the manufacture of precision measuring equipment, they decided to quit their jobs and decided to launch PFL as a new business unit. The entrepreneurial skills and capabilities of the promoters of PFL clubbed with their prior knowledge and business contacts were added advantages for the success of PFL. PFL focused mainly on product differentiation through innovative product designs and cost effectivity through effective process management techniques.

Policy and as per manufacturing philosophy

As a matter of policy and as per manufacturing philosophy, PFL decided to engage at both the worker and the supervisory levels persons with high IQ levels and people who are willing to experiment on the product and process-related aspects in their regular jobs. The workers were trained in conventional productivity improvement techniques and value engineering aspects, which resulted in cost reduction and continuous improvements in product quality. The promoters themselves were focused on keeping pace with the product development and process improvements taking place in their customer’s units as also in their competitors’.

They were also keeping a watch on the developments in the global scenario for similar products and manufacturing technologies. They were regular visitors of international exhibitions on chemical and automobile ancillaries. PFL had a small set-up in the factory to tear down product samples from foreign manufacturers and leading competitors to study the comparative design and manufacturing processes that can be of use to PFL. Besides, it had an in-house testing facility for its own products for sample performance and endurance testing as per customer specifications. This helped the company to avoid product failures and customer complaints, and gain customer confidence. PFL periodically shared its findings on imported product features with their customers, and it was quite often invited to participate in new product development meetings at their customers’ end. A few of the senior engineers from PFL were also allowed to attend such meetings.

Global competition for product lines

As a result of liberalization and globalization, the major companies in the chemicals and automobile industries, the two major customer groups for PFL, started facing global competition to their existing product lines. Also, the requirements for accuracy and safety in product performance, along with innovative process instruments characteristics of online measurements of quality and quantities, called for major revamp and review of the product and process at the customers’ end of PFL. Substitution of mechanical and electromechanical valves and fittings with electronic remote-controlled mechanisms insisted on the replacement and modernization of major processing lines in the set-up.

In the automobile industry, as a result of changed emission norms, they had to develop fuel-injection systems for low sulfur fuels and to also incorporate improvised electronic engine management systems. This called for major changes in the raw materials and the process requirements at the suppliers’ units. Many suppliers to the chemical and automobile industries had to shift their operations to other clients, in boiler manufacture and material-handling equipment manufacture, which was a major setback to their financial health as the cash-flow situation, while supplying to chemical and automobile industries, was far more comfortable.

Changes in requirements from major customers

PFL, in spite of its competitive advantage as a preferred supplier to its customers, was caught in a turbulent situation on account of speedy changes in requirements from their major customers. In view of their major dependence, along with the confidence of getting assured business from their existing customers, PFL had not thought of any different product line for other industries. It took up the issues bothering them on product features with the top management of their clients. It was also aware that even their clients needed to indigenize the new product requirements as soon as possible.

Senior and middle management employees

After weeks of deliberations among its senior- and middle-management employees and based on their suggestions and comments, PFL came up with a new business model for the long-term revamp of its business model. Wherever possible, PFL had invited its clients’ representatives to participate in these strategy formulation discussions. In view of their long-term business interests, the clients obliged PFL by actively participating in these meetings and sharing their changed requirements whenever possible with the company’s team. The following strategy for the long-term business prospects of PFL was agreed upon for phase-wise implementation (this was on the assumption that further refinements, if needed, would be taken up along with the implementation activity):

PFL will approach its existing clients for exclusive rights or license to undertake the replacement of subassemblies of valves, fittings and measuring equipment of all installations as per the warranty terms of its clients, at the clients’ end and their customer service centres by providing genuine spares and free replacement services throughout India. PFL will pass on the reasonable overriding commission to the regular service centres of its clients. This will ensure nearly 30 per cent utilization of production capacity of PFL for the residual lifetime of the products of its clients customers.

The PFL with the help of its present clients will negotiate with the foreign suppliers of electronic control systems and engine management systems for importing the same on behalf of its clients. These imported components and subassemblies will be stocked by PFL and supplied to its clients as per their schedules. The foreign suppliers will train PFL’s engineers in the servicing, assembly and testing of their products at PFL location. In view of the long-term business potential, the foreign party will install a test bench free of any cost at PFL to enable periodic testing and servicing of their products before dispatch to their clients in India. PFL will deal with all such import requirements of all the chemical and automobile companies who are PFL’s customers.

Feasibility plan to establish a joint venture

The PFL in the subsequent period of six months to one year will work out a feasibility plan to establish a joint venture (JV) with one of the major foreign suppliers to manufacture in India the major components and subassemblies of the JV partner. The existing clients in view of assured supplies of these critical items from PFL will also provide financial help to PFL for the speedy implementation of the JV within six to eight months from the date of finalizing the JV deal. The JV partner to PFL will provide training to selected engineers from PFL in product design and process technology. The joint venture will also upgrade the service centres established by PFL to enable customer services for the new products.

The foreign JV partner will establish a product research and development centre at PFL as part of the venture and train PFL engineers to take over the complete responsibility in the coming two to three years. The PFL engineers from then on will take complete responsibility of catering to all the new products and the product modification proposals of all its customers.
PFL will sign a product and process technology proprietary rights protection agreement with the foreign JV partner to guard its long-term business and technology rights.

Easy strategic plan

PFL implemented the majority of its strategic plan without much difficulty. This was due to the management’s style of providing the necessary environment to its employees to participate in making major business-related discussions. PFL could also encash the ‘innovation culture’ it ensured by allowing its engineers and technicians to freely experiment possible avenues towards PFL’s progress. PFL’s engineers were trained by its JV partner at their facilities abroad. And the involvement of its clients’ executives in its strategy formulation helped to a great extent in consolidating its long-term business. This one emergent situation gave enough strength to the strategic capability of PFL to meet any such eventuality in the future.

PFL went on to develop new products to align with the product design changes specified by its customers, and also to provide advanced technology feed-forward to its customers on the likely changes they needed to contemplate on in their future projects. However, PFL will need to maintain its involvement with its JV partner for a long time to avoid any takeover tantrums of the business ‘hawks’.

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