What is the innovative mindset of a CEO? Innovation can happenin multiple ways: It can be a sustained innovation, incremental innovation, or disruptive innovation. Mr. Velusamy R, President of Automotive Technology and Product Development, and Member of the Group Executive Board, Mahindra & Mahindra Ltd., speaks non M&M’s innovation journey at the Dr. K.C.G. Verghese Endowment Lecture held recently.
Innovation is the need of the hour. All of us innovate. When my father was ploughing the field, I never realized the plough was an innovation. With a combination of wood and a steel frame, he could plough the field. When such a development is used for business purposes, to solve larger problems of society, and to make an organization profitable, we call it innovation. For me, invention and innovation are one and the same. Discovery follows these two.
Albert Einstein wrote the equation for gravity. He said that gravity is not a force. The way you fall down is caused by the curvature of space-time. He assumed that the universe was constant. That was in 1915. Everybody thought the universe was constant and there was no accelerated expansion of the universe. Edwin Hubble, an experimentalist, went to California, set up a telescope, and was looking at it. He found out that the universe was not only expanding but accelerating much beyond the speed of light. That was a discovery. The next day, Einstein went there and physically saw that experiment. He immediately acknowledged that he had made the biggest blunder of his life. If ordinary scientists like Hubble can discover something great, you and I can also discover. That’s exactly what Steve Jobs did. He combined the phone, the music system, and the camera system and made a hefty profit from the Apple iPhones.
Innovations have happened over the years, starting with the telephone and followed by electricity, radio, color TV, microwave oven, and cell phones. We also witnessed the birth of Facebook, the internet, and many other things. You create a business and by the time you reach the peak of it, it starts falling down. You have to continuously innovate; otherwise, you will not sustain the business and you will not be able to make a value proposition. Innovations have been an integral part of human civilization from time immemorial – whether it is to solve problems, improve the quality of life, satisfy curiosity, gain a competitive edge, or leave a legacy.
The CEOs of Kodak, BlackBerry, Nokia, Hummer, Blockbuster, Xerox, IBM, and Sony lost valuable businesses because they did not listen to the ground and to their customers. It’s not about technology or competency or capital. It is the shift that is happening with customers that really matters the most. Unless you incorporate that change and reflect it in your system, process, competencies, and culture, you are not going to produce a different form of output. Nokia did not realize the importance of software. Blackberry thought that their buttons were the best things. They did not realize that customers did not want buttons. Your best product or feature could turn out to be the enemy number one for your growth. When Steve Jobs wanted his team to develop the touch-phone, in one of the design meetings, his Chief Designer said that if the touch-screen technology did not work, he had a plan B of button technology. It is said that Steve Jobs broke that button phone and said, “If we develop a touch-screen, Plan A or Plan B or Plan C–everything should be touch-screen only.” That is the innovative mindset of a CEO.
Price and Willingness to Buy
On the price front, if a customer is willing to pay $1000 for your product, your price should be $700. The gap of $300 is the motivation for the customer to buy the product and stick with you. If the price and the willingness to pay are almost the same, when competition improves the product with an incremental innovation, you will lose the market. It will lead to a dogfight between you and your competitor and you cannot survive in that market. Blockbuster did not realize that its customers were moving to Netflix. In the Blockbuster model, a customer had to take his car to go to the shop, pay in advance and take the cassette, go home and view it. If he did not return it in time, he had to pay a fine. They thought their business model was very solid. People fed them with such data. Netflix used the internet to screen movies. People could watch them from their homes. Its revenue moved from 65 million to 65 billion dollars while Blockbuster crashed from 8.4 billion to 8 million. Netflix listened to the customers. As a CEO, you must listen to the customer and understand their pain points. The day you lose the voice of the customer, you will stop innovating.
You can do innovation in multiple ways. You can keep on doing sustained innovation. That means the innovation accelerates in the beginning, like iPhones. Later, it is the brand that carries the sales rather than the innovation. You have incremental innovation. You can also come with very disruptive innovations like what was done by Netflix. This too will stabilize, beyond a point. Whichever zone you are in, you have to keep listening to the customers and keep watching what is happening in the marketplace.
At Tesla, Elon Musk was determined to do something. He is a software engineer who wanted to build a car. He’s not an automobile engineer who built a software car. He had not seen a manufacturing line. So he asked, “Why are you putting all the sheet metals and so many parts? Remove all these, have software and provide a display. Let everything be controlled by software. I can put a song for a birthday and when the person opens the car door on his birthday, the birthday song can be played.” That is innovation.
A Tesla car may not be as good as a BMW car but has unique software. The car owners need not take it to the workshop for service. All the software can be updated when the car is parked at home. That’s a big difference and a major shift in mindset. The Tesla owner Elon Musk found it out and he applied it. The other car makers were very late to detect it. Again, this suggests that it’s not that the technology you possess can win you business. It’s about knowing what the customer wants.
M&M’s Innovation Journey
At Mahindra, we were really struggling from 2012 to 2020. We made three or four products. We made Marazzo and XUV300. We wanted 10,000 per month volume but didn’t get it quite right. So we went back to the table. We studied NASA. We studied the Challenger space shuttle failure, Columbia space shuttle failure, the Apollo 13 mission and the success of Apollo 11. We got insights. We made movies. NASA is a brilliant organization. It is a hallmark of innovations but it has failures. We realized that it is not the lack of technology perfection that led to the failure of the missions. It is the culture of the organization that makes all the difference.
Whether it is the Air France flight AF447 crash of June 2009 or the Boeing 737 MAX plane crashes, a common underlying cause is the organizational culture. We did correction on the culture of listening to customers and removed the silos. Every department exists for customers. Taking Apple Computers example, if the head of the department of the phone buttons realizes that buttons are not needed for the phones, he should be the first person to tell that he will dissolve his department and give it to the touch-phone department.
We were selling 280 SUVs per month. We launched the new Thar in August 2020. We made a business case to sell 1500 units per month. We opened the booking and the demand was 6000 per month. This SUV had refinement. It had performance in all the areas—drivability, NVH, handling, music system, fuel economy, traction, and high-speed handling. Everywhere, we went beyond the hygiene requirements. If we try to perfect two things and miss out three things, customers will not accept it. Customers pay for a vehicle that has everything above hygiene. That is what we did. We listened to the customers. It was the Corona period and it took us a year to ramp it up. Now we have more than 80,000 bookings open. This vehicle, after three years, is still doing extremely well.
As the Chief Engineer, I was directly involved in the making of XUV700. Earlier, we had XUV500 and its sales came down to 1500 per month. We said our target should be 3000. I was given an open cheque. We started this program in 2018. On the fifth of July, I along with my wife went to Rameswaram after sending the budget file to our Kandivali office. As we came out of the temple, I got a call from our office and I was told that the budget was approved. That was the start date. When we came closer to August 15, 2021, we geared up for 3000 per month. But we got 50,000 bookings in just 2 hours and we stopped the bookings. In the first 50 minutes of the bookings, our software stalled because most of the bookings were made in 10 minutes. The next day, we opened it and in the first 10 minutes, once again we got thousands of bookings. We didn’t know what to do. We had six variants. 93% of the bookings were for the top two variants. We thought that in the top two variants, we could sell only 10%.
The Ducati Award
XUV700 had everything that the customer wanted. Once again, we were listening to the customers. They wanted a sunroof. They wanted a stylish headlamp. They wanted to go to a five-star hotel and get out of this car to say, ‘I have arrived.’ As a proud Indian, they wanted to have a car and say that it is manufactured by an Indian. They wanted to proudly park their car closer to BMW, Benz, and Audi. There was patriotism. There was a craving for status in them and to declare it to the world. It’s not about being arrogant or showing off. It was just a feeling of self-actualization. This car had all the safety technologies and we had the highest level of refinement. We struggled and struggled to get to that level. Innovation is the result of very hard work. If you have to prepare yourself for differentiation, you should be prepared for extreme hard work to execute it, once you have an idea of what to do. Idea is just a form of creativity. It doesn’t bring you anything unless you execute it. That’s our realization. Since then, for the last two years, 10,000 per month is the booking number that we get. It took us two years to increase our production from 5000 to 10,000 per month. This month, we sold about 9700 vehicles. It reveals the belief that the customer has shown in us. XUV700 is a car that got us the Ducati award. I was so proud to receive the award. If you create a product that resonates with the aspirations and trends of the customer, they shower you with orders, they stick to you, and they don’t run away from you. But if you don’t listen to them, they punish you by dragging your sales from billions to millions. The customer is the boss and innovation is your tool.
The next car that we worked on is Scorpio. It is always a blockbuster. When we opened bookings, in 30 minutes, we got 100,000 bookings and we stopped the bookings. It still continues and we have 10,000 per month. So we have three blockbusters. The only change that we made was the culture. Culture can inspire people. You must give complete freedom to your team, with a framework. You have to challenge them. The team is inspired when they have high levels of support and high levels of challenge in their work.
When I finished my B.Tech, I took up a job, and all I wanted to do was to satisfy my boss—because if I didn’t, I would lose my job. That was 27 years ago. Then came the engagement. In this stage, if someone gives you $30 per hour, you work for nine hours and after that you expect not to be disturbed. If one company is not there, then I have another company. In this format, you will not have any kind of innovation and willingness to listen to the customers. The other leadership style is to connect to the people and find out their strengths and their purpose in life. If your leader is able to connect the job to your purpose, give you a challenging assignment and he supports you, you will be inspired. You will come out with innovation. Inspired people give more than 200% output. You need to have the right size but you need to have extremely hardworking people. That’s the formula for innovation.
Change is the only constant in life. Dark energy and dark matter are two things behind innovation. Dark energy is your purpose. If you connect to the purpose, your speed will not be limited even by the speed of light. It will be limited only by your passion.
