Tata Group Innovation Management

Executive summary

The following report is about innovation management in the Tata Group. In the introductory section, the report provides a general overview of the importance of innovation in helping organisations to gain competitive advantage. Also, in the introduction, a brief summary of the Tata Group is provided. The key finding is that Tata Group is a conglomerate of companies operating across the globe, despite the past fast growth, the multinational has been facing challenges.

The second section discusses innovation theory in which various models such as 4Ps approach and the innovation ambition matrix are discussed. The key findings in the section are that innovation has a critical role in the growth of an organisation, and there are various strategies that can be applied to enhance innovation.

The third section of the report explores organisation innovation and delves into specific internal factors that affect innovation in Tata Group. The identified factors include human resource, the size of the organisation and the current organisational culture. Innovation strategy is the fourth section of the report that explores the external factors that affect Tata’s innovation capabilities. The external factors are mainly the changing needs of customers, technological changes, and the competition. Finally, in the fifth section, recommendations are provided based on the identified issues. The recommendations include the adoption of an innovation culture, knowledge management, innovation based on customers’ needs, and management processes that prioritise innovation.

Introduction

Innovation

In the contemporary business world, many companies are faced with challenges of how they have to change fast enough to gain and maintain a competitive edge. The challenge is brought about by the increasingly competitive business environment. In order to stay ahead of the competition or to meet the growing needs of the customers who are aligned with the changes in technology and many options in the market, innovation has become a crucial aspect of any business. Gunday et al. (2011) pointed out that innovation is a key component of competitiveness, and it should be embedded in the structures of an organisation.

The swiftly changing business environment necessitates management practices that also apply the same agility to realign with the changes and customer needs. Based on the perspective of innovation and its importance, the following paper explores the challenges that Tata Group has been experiencing and the measures that it can employ to overcome the challenges.

Overview of the Tata Group

Tata Group is a global enterprise that in headquartered in India. The company has over 100 independent companies, and it operates in over 100 countries. The company employs around 350,000 people. Some of the main companies include the Tata Motors and the Tata steel. Despite the international presence of the companies, there have been challenges. For instance, Tata Motors has faced hard times while Tata Steel is struggling in the endeavour to gain competitive edge and maintain its market share.

The challenges are attributed to the changing markets; hence, the need for strategies to remedy the challenges. Even though the company experienced exponential growth in the past, today the operating environment has changed, and there is the need to change in order to compete with its peers in the various industries.

Innovation Theory

In the contemporary business circles, changes are imperative for any business. Thus, the innovation theory is based on the understanding that businesses need to adapt to the new conditions of information, failure to adopt will contribute to their downfall and finally exit the market scene (Francis & Bessant 2005). Innovation entails the scientific, technological, organisational and financial activities that are normally implemented by organisations in order to gain competitive edge (Bessant & Tidd 2011).

According to Liu, Li and Wei (2009), innovation is a fundamental concept for growth strategies for any company. It helps to enhance the competitive advantage of the company by increasing its market share. Innovations provide organisations with strategic orientations that are needed to remain competitive and create value for the customers. Innovation can be understood by analysing different approaches.

4Ps Approach

The key processes are summarised as the 4Ps approach which includes product innovation, process innovation, position innovation and paradigm innovation. Product innovation is concerned with the processes that lead to changes in the products or services that are produced by an organisation. The changes are normally carried out to stimulate the market and create value for the customers. As the competition increases, there is increased need to produce products that meet the expectations of the customers.

Process innovation involves the changes that are made in the way the products are created and delivered to the consumers (Francis & Bessant 2005). This process relates to the chain supply. In the era of corporate social responsibility, this has become a key pillar in gaining competitive edge. For instance, organisations that adopt processes that promote environmental sustainability have been found to attract more customers (Davila, Epstein & Shelton 2006). Also, the process innovation includes improved logistics and efficiency in the production process. For example, ensuring the equipment is upgraded by adoption of lean approaches.

Position innovation entails the changes that are made by an organisation in relation to the way the products are introduced. This dimension of innovation focuses on the marketing processes such as targeting and segmentation. On the other hand, paradigm innovation is the change in the underlying business model (Francis & Bessant 2005). Business model has a direct effect on the speed on which an organisation can implement change.

Technology Push and Demand Pull

There are different models of innovation; in the past, Hill et al. (2013) noted that innovation was used as a linear phenomenon in which each part of innovation was presented as unconnected to the other parts. Thus, the innovation theory was based on two key approaches, the technology push, and the demand pull. Concerning the technology push, innovation was seen as an aspect that results from external factors that were instigated by advances in science.

On the other hand, the demand pull is related to market demand driven by needs of the customers. Therefore, the key assumption of the past innovation theories was that innovation is triggered by external factors which force an organisation to implement them (Antonelli, Crespi & Scellato 2013).

However, in the modern society, this is not the case; the changing business environment is a key determinant of the modern innovation both internally and externally (Galende & de la Fuente 2003). Today, the innovation theory can be explained by application of different models that show the complex interactions in the competitive market as outlined in the 4Ps approach.

Robison (2009, p. 1) defined innovation as, “an idea, behaviour, or object that is perceived as new by its audience”. Innovation is concerned with reinvention of the products and services in order to make them better fits for the target customers. Thus, innovations are about the changes that are made to the processes, products and business models with the aim of retaining a market niche (Francis & Bessant 2005). In innovation diffusion theory, scholars have identified different qualities that contribute to the success of innovation.

They include the relative advantage, compatibility with the existing values, simplicity, ease of use, ‘trialability’ and observable results (Clausen et al. 2012). These five qualities are major determinants in the process of adopting a new product (Baldwin & Sabourin 2000). For example, the relative advantage is the extent to which the innovation increases the social prestige, satisfaction and convenience; hence creating demand.

The Innovation Ambition Matrix

This matrix is based on the understanding that organisations pursue innovation at three levels which include, “the enhancement to the core offerings, the pursuit of the adjacent opportunities and venture into the transformation territory” (Tuff & Nagji 2012, p. 6).

According to Tuff and Nagji (2012), companies that gain competitive edge over their peers have a certain ratio of investment. The ration is broken down into 70% to safe bets in the core operations, 20% is invested in less sure things in the spaces that are adjacent, and 10% is invested in the risk transformational initiatives. It is worth noting that transformational initiatives are important for the ongoing health of the company.

The Innovation Ambition Matrix.
Figure 1: The Innovation Ambition Matrix.

Innovation Organisation

Innovation in an organisation is determined by several factors; these entail the strategies employed by the company to manage innovation and sustainable change processes. According to Power (2016), innovation management entails the adoption of new strategic management principles, practices, and processes or the shift from the customary practices. At the organisational level, there are many factors that affect the innovation.

However, Liu, Li and Wei (2009) stated that the factors can be manipulated through management strategies to enhance the transition process to the intended change. At the organisational level, some capabilities determine the ability of an organisation to sustain innovation. The capabilities include creative abrasion, creative resolution, and creative agility. These capabilities are influenced by factors such as the human resource, organisational resources, and the size of the organisation.

It is thus, the role of the management to ensure that the structures support the innovation processes. In relation to creative abrasion, this relates the management propensity to ensure that a work environment that can generate ideas. On the other hand, creative resolution is the ability of the management to ensure that integrative decisions are made that lead to changes that foster growth (Petsas & Giannikos 2005). The third capability is the creative agility which is concerned with the ability of the organisation to produce products through quick pursuits. Figure 2 is a summary of the internal capabilities that influence innovation.

Capabilities of Innovation.
Figure 2: Capabilities of Innovation.

Internal factors that affect innovation in Tata

The internal factors relate to the microenvironment within an organisation which has direct influence on the processes of the company. Strategic management plays a critical role in determining the innovation environment within the organisation. These relate to the leadership style, firm structure, and the human resources. Concerning the leadership style, Darroch (2005) stated that in the modern business environment, organisations should adopt leadership styles that promote creativity and innovation.

These should be based on the context of business operation. For instance, Tata Group has for many years focussed on product innovation. The recent innovation of Nano car was meant to ensure that its customers can have an affordable car that is environmentally friendly. However, the main internal challenge has been the inclination towards new technology and failure to heed the feedback of the customers. As a result, the company has been failing in the position innovation.

For example, the Nano car did not achieve the expected market penetration (Nair 2012). This has been attributed to company’s inability to carry out proper customer analysis before the product innovation. Francis and Bessant (2005) pointed that the four dimensions of innovations as outlined in the 4Ps approach should be integrated in order to create a synergy within an organisation.

Innovation Strategy

As established, innovations are sources of competitive advantage. The fast technology, globalisation and the changes in the customer demand, shows that the competitive advantage of a company is only temporary; thus, companies have to beat the competition by introduction of new innovations (Tuff & Nagji 2012). There are different external factors that affect the capability of an organisation to remain competitive. For example, the needs of the customers, competition from other industry players, the technological opportunity, and the attractiveness for the investment affect company’s ability to innovate.

In general, the company has been facing a sluggish innovation. For example, in relation to Tata Tea, the company finished five years without launching a new product. Tata Group has not embraced the winds of change.

For instance, its fast evolvement in the past was in a different India in which getting the consumers was not an issue. Today, the consumer landscape has changed, there are many young people both in India and outside with better purchasing power. In addition, there are more options for the consumers to choose from. The company needs to adopt a consumer-centric culture that will inform its innovation path. The focus has been on product innovation. Even though the company boasts of human and organisational resources, the organisational culture that focuses on the needs of the customers has been lacking.

Recommendations

From the analysis, it has been established that innovation at Tata group is affected by both internal and external factors. The internal factors include the firm organisation, the human resource management while the external factors include the changes in demand, and technological changes (Becker & Egger 2007). Thus, Tata should adopt strategic management practices that focus on enhancing the internal business environment as well as incorporate measures to deal with the external business environment. It should create a management team that will ensure synergy across the different companies. The key focus should entail:

  1. An innovation culture (make innovation a continuous process)
  2. Knowledge management.
  3. Prioritisation of customer needs.
  4. Management processes that prioritise innovation.

Make innovation a continuous process (innovation culture)

One of the issues identified in relation to Tata group is the problem of complacency and the assumption that products demand grows forever; hence, the failure to invest in new products and processes. Tata should adopt a strategy of finding the next S-curve. This should be based on understanding that products, markets and models of business go through growth that is predictable and maturity is normally depicted as an S-curve (Power 2016).

This is normally the case with the product innovation in which returns diminish when the most attractive customers are reached. Figure 3 is an illustration of the S-curve. At this point, price competition sets in, the support for customer becomes a challenge and the product loses lustre (Power 2016). In the case of Tata, the leadership seems to have been blinded by the past speedy growth; hence, as the reality of S-curve becomes real; it is very late to design the next competitive strategy. As a result, there is need to adopt a culture of being paranoid and to employ leadership which embraces innovation as a continuous process.

S-Curve.
Figure 3: S-Curve.

Knowledge Management

Human resource is a key internal factor that determines the direction of growth (Marina 2007). For a company to be successful in the innovation, it needs to have a vision and foresight. These are critical conditions for innovations. However, to achieve them and ensure sustainability, there is the need for management practices that focus on talent management, i.e., recruiting and retaining the right people who support the endeavours of the company.

As a result, Tata group needs to put in place knowledge management system that will ensure that there is a good work environment that supports innovative ability of the company. The knowledge management system should include the training opportunities for its staff, effective communication and put in place organisational structures that ensure balance in the company (Christensen 2003). The structures should include recognition programs, grants which are aimed at motivating the employees in order to enhance creativity and innovation (Adam 1998). This will also help the company to shift from the overbalance towards product innovation and strike a balance for other dimensions of innovations.

Prioritisation of customer needs

In the competitive global environment, companies have turned their focus to the needs of the customers. As a result, there is a common trend to embrace tools such as customer empathy map which are applied to uncover opportunities to create value for the customers. Von Stamm (2008) noted that proper understanding of the customer needs and responding to the complaints from customers is the basis for a lean approach to product innovation. For Tata, product innovation should be based on rapid prototyping, pivoting to improve its products and partnerships with lead users.

Management processes that prioritise innovation

There is the need for the Tata’s top management to make innovation a priority. This will be critical in the creation of the culture of innovation. Leading the way should form the part of the strengthening the human resource capabilities (Power 2016). Besides, this will be important in attaining the agility required to ensure that the company is always on the path of innovation. For example, in other multinationals such as Google, the management has made it a policy to ensure that employees spend a day every week to out on new ideas.

Conclusion

It is evident that innovation plays a critical role in ensuring that an organisation can compete with its peers. The key dimensions of innovation include the product, process, position, and paradigm. In order to ensure sustainable innovation, there is the need to integrate the four dimensions. Concerning Tata group, it is evident that the company has mainly been inclined to product innovation and hence it has not been able to gain competitive edge.

Also, there are internal and external factors that have influenced the dynamics of innovation in the company. Key to the factors has been the human resources, the organisational culture and other contingent factors such as the size and the organisational structure. Therefore, in order to address the challenges, Tata group needs to adopt innovation management strategies that will help the multinational ensure continuous innovation culture and knowledge management.

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