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Tata Nano: Not Just a Car but Also a Platform

In a recent workshop for senior executives from multinational companies, we asked people to share their interpretations of what the Tata Nano stands for. The vast majority talked about the Nano, the $2,500 "People's Car" that the Indian automaker launched in 2009, in terms such as the world's cheapest car, a car for India's masses, an example of how innovation in the auto industry is shifting from the West to the East, and a car that could choke India's already clogged roads.

Interestingly, not one person talked about the Tata (TTM) Nano as not just a product for an identified market need today but also as a platform for tomorrow. This oversight can be a serious mistake. Every product or service represents many things. It is an intended solution to the perceived needs of certain customers. It is a bundle of features and attributes. It is the core element of a business model that may or may not be economically viable. Importantly, in addition to all of these truisms, it also is the first step on a possible journey whose destination may bear little resemblance to the starting point.

Look at Google (GOOG). When the company was founded, its product was just a clever algorithm that could deliver more useful search results than the leading algorithms of that time. The company made money by licensing its technology to portals such as Yahoo! (YHOO). Some of the most highly regarded Internet marketing experts even suggested that while Google offered a great experience, it was not the foundation for a great business. What these observers overlooked was the possibility that Google might use its search capabilities to enter and dominate online advertising as well as an ever-expanding array of adjacent market opportunities.

Platform for New Products, Markets

Look also at the journey of Apple's (AAPL) iPod since its launch in October 2001. Although a sleek product right from the beginning, the iPod started out as nothing more than an MP3 music player. The real value of the iPod lay, however, not in its initial features or functionality but in its role as a platform for the future launch of other landmark products and services such as iTunes (a music store), the iPod Touch (a full-fledged PDA), the iPhone (an instant market leader in smartphones despite long-entrenched competitors such as Nokia (NOK) and Samsung (005930:KS)), and the hugely successful iPhone App Store (a new platform for iPhone users to buy third-party applications). Apple launched an Internet-connected tablet this week and could end up creating and dominating yet another new category.

Back to the Tata Nano. A leading example of frugal engineering, the Nano is a sturdy, spacious, stable, and safe car that sells for $2,500, less than half the price of the next cheapest car in the world. The company appears on track to deliver the first 100,000 cars to customers by March and has promised to deliver on its current bookings at the originally committed prices. Tata executives remain noncommittal, however, about whether rising steel and tire prices will force them to adjust the prices later in 2010. Notwithstanding this engineering and commercial success, an even more impressive aspect of the Tata Nano is its potential as a platform for new products and new markets. The company will start selling the car in Nigeria this year, and the Nano has already passed European crash-test safety standards. Tata is talking about launching upgraded models of the car at about $8,000 in Europe by 2011 and in North America by 2012.

Regions : Asia

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