Tata Swach: Relying on Innovation with Eye Towards Bottom Line

Dec.11.09 | About: Tata Motors (TTM)

Innovation seems to be pouring out of the Tata Group (NYSE:TTM) at a very rapid clip. The Tata Nano, which relied heavily on the company’s suppliers for their cost savings and creativity, raised the proverbial innovation bar by dramatically lowering the cost of an automobile thus making them available to a larger portion of the Indian population (and perhaps the rest of the world in the future). Now the company is back in the headlines with a new, revolutionary, potentially life-saving product with huge demand. The Tata Swach is a low-cost water filter aimed at the HUGE number of people in India and worldwide who lack access to clean, safe drinking water.

I’ll let this CNBC video fill you in on the details of this low-margin, high volume (in terms of sales, not water volume) water purifier Tata wants to have in 3 million Indian homes within the next 5 years.

The collaboration story thus far focuses on Tata Group companies. But I wouldn’t be surprised if the more in-depth story on the life saving device (approximately 380,000 children die each year of diarrhea in India alone) actually tapped into their suppliers in order to keep costs down and innovation up. Given Tata’s success with that model in the past, it seems likely they’ve employed it across much of the Tata Group, particularly when trying to achieve a game-changing design AND a low price point.

What’s the lesson here for other companies, that are striving for differentiated products at a lower cost than their competitors? Tata’s key to success seems to be starting with a price point and product, then working backwards through the R&D process with a constant eye on the bottom line. And to get there, they rely heavily on their suppliers for innovation - in terms of specifications and process efficiencies.

Can you do the same? Are your suppliers ready, willing and able to help?

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