Implosion: India’s Tryst with Reality

by John Elliott

  Anvar Alikhan, a senior corporate executive, points to jugaad’s roots in what he describes as ‘the austere, socialistic India of the 1970s, when we were deprived of everything, and had to make do with whatever we could’. Giving a personal example, he says, ‘When I was a teenager, I was shopping for my first music system and the only thing available was a very mediocre Philips system – which in any case was beyond my budget. So I finally bought an ingenious music system put together by an IIT engineer friend, which had its bass speaker placed inside an earthenware matka [terracotta pot]. The sound was terrific.’

  People often joke that ‘it’s jugaad’ when they innovate to solve a problem. At Kipling jungle camp on the edge of Kanha National Park in the middle of India, I saw people burning leaves at the bottom of a freshly dug pit, prior to planting a tree. When I asked why, they replied, ‘To burn out the termites – it’s jugaad.’ Another day, a plumber said the same thing when he temporarily nailed a vice, which would normally be fixed on a work bench, into a tree trunk to hold pipes that he needed to bend.

  Business in the DNA

  This sort of basic industrial innovation comes more naturally to artisanal, farming and other production-oriented communities than to India’s mostly trading-based businessmen, according to Harish Damodaran, a business journalist who has studied the caste and regional origins of modern Indian business. He argues that conventionally organized production has never been part of the DNA of most of India’s business class because the people come from bazaar and trading backgrounds and not from manufacturing or laboratories.8 While these businessmen have been adept at evolving sophisticated trading and financing arrangements, they are not instinctively attuned to assembly lines and machinery. Manual workers, however, in both rural and urban areas, have the ability to innovate, says Damodaran, though they ‘lacked the capital to convert any of their raw manufacturing innovations – jugaad – into reliable, marketable products’.

  He argues that the resulting divide has had huge implications for innovation in India. ‘Indian business innovation has been mostly restricted to marketing and finance, producing for example the hundi system (an indigenous discountable and negotiable bill of exchange enabling seamless movement of goods and money across the subcontinent), fatka (futures transactions rarely resulting in actual delivery of the underlying commodities), teji-mandi (put- and-call-option contracts), goladari (warehouse receipt financing) or even rotating savings-and-credit schemes like nidhis, kuries and chit funds.’

  Damodaran’s article was pegged to Ranbaxy, a Delhi-based Indian pharmaceutical company, which developed Syniram, India’s first original drug, and was taken over in 2008 by Daiichi-Sankyo of Japan. Apart from this malaria treatment, the mainstream pharmaceutical industry, led by Ranbaxy, has mostly grown by developing generic variations of internationally patented drugs. There are a few other examples where Indian manufacturers have proved exceptions to the general lack of manufacturing innovation – almost all are in the auto industry. As Damodaran notes, all the machinery for rice mills and dairy products is imported.

  The Jugaad Trap

  India’s top managers now fear that the jugaad adulation has gone too far. Anand Mahindra, chairman of the Mumbai-based Mahindra Group, which is strongly focused on innovation, is worried that respect for jugaad and frugal engineering is being overdone. ‘Jugaad can be the death of us if we carry on extolling its virtues,’ he says.9 ‘It was a point on a trajectory of evolution, giving us technological confidence and self-esteem. That was okay in an economy of scarcity – making do without stuff we didn’t have because of shortages, but it is not an end in itself and it perpetuates a lack of self-esteem It is good to do brainstorming, asking how would we do this if we didn’t have what we have. But the rule in a California garage start-up is frugal innovation, so we need to be brutal and realize we didn’t invent this and move on, as they do in California to the frontiers of technology.’

  Mahindra talks about the ‘jugaad trap’ of equating different ways of thinking with what used to be known as ‘appropriate technology’. This, he says, ‘is the most dangerous phrase ever invented – appropriate technology is an act of condescension and makes you think the consumer will make do with lower quality finish, features or aesthetics.’10 That reminded me of the fashion for appropriate technology in the 1980s, when foreign companies would ship old production lines to India to make products ranging from cars to steelworks and pulp mills – and India would be grateful and inefficient.

  Carlos Ghosn, head of Renault and Nissan, is credited with bringing the phrase ‘frugal engineering’ to India, where consultants and the media seized on it as a simple headline-grabbing concept. Ghosn was about to make a saloon car, the Logan, with the Mahindra group and was impressed, at the launch in 2006, that the procurement costs were 15 per cent below budget. ‘He asked me how we did it, and said we must be emulating “frugal engineering”,’ Anand Mahindra told me.11 (The two companies did not follow through on their joint venture plans. Like many other foreign companies’ entry products in the past 20 years, the Logan looked too boring for the price and did not meet the demands of India’s aspirational market. Mahindra relaunched it as the lower-priced Verito.)

  The Nano Story

  Ravi Kant, vice chairman and former managing director of Tata Motors, describes jugaad as a ‘quick and dirty solution to problems, not an ideal solution but one that works’. A juggaru, he says, is a person who has been able to do this. ‘It’s positive that he has done it, but negative that it may have been done through short cuts and not be ideal.’12 He says that the tiny but spacious 624cc Tata Nano, launched as the world’s cheapest car in 2009 when he was Tata Motors’ managing director, is ‘an example of frugal engineering which reduces costs, but unlike jugaad, does not compromise on quality’.

  The Nano has indeed often been praised as an example of low-cost manufacturing, but its price was made possible partly by substantial state government loans, tax subsidies, and other state government concessions that were initially agreed for a site at Singur in West Bengal.13 The terms were later matched and even improved, when Tata moved the factory to Gujarat14 after the Singur site became a trailblazer for violent social and political protests against the use of rich agricultural land for industry. Tata also cut costs, and the eventual price, by squeezing component suppliers’ profit margins.

  The vehicle development story is well told in a Tata-promoted book, Small Wonder: The Making of the Nano. 15 It tracks the excitement of the car’s evolution, watched over by Ratan Tata, whose interest in design and cars led him to be more personally involved in Tata Motors than most other companies in the group when he was chairman of Tata Sons from 1991 to the end of 2012. He encouraged revolutionary ideas for the Nano that were eventually abandoned, such as having a plastic body and no doors, and assembling the car at small franchised workshops around the country.

  Eventually, the car, though stylish, did not break significant new ground. It made manufacturing savings by being very small – 10ft long and just over 5ft wide – and by cutting a four-cylinder engine from an earlier Tata car, the Indica, in half. It has three nuts instead of four on tiny wheels, and one large windscreen wiper instead of two. The tail-gate does not open, so access to luggage and the radiator is from behind the rear seats, as is the all-aluminium rear engine that can only be accessed by unscrewing six butterfly nuts and lifting off the cover.16 These economies made frugal engineering an end in itself,17 whereas many engineers would argue that it should be used to develop new ideas at a low cost. (Tata Motors now has more interesting plans for car bodies made of composite materials18 along with other innovations, but that is for the future.)

  Sadly, the Nano turned out to be a misguided concept and the launch, which was staged as a mega media event, was preceded for several years by a grossly overdone worldwide public relations blitz. There was even a pop-star-style unveiling of the ‘Peoples’ Car’ at Delhi’s biennial auto show in January 2008.19The extent of the u
nreal hype was illustrated by a blog on the Financial Times website written by Suhel Seth, a Delhi-based television pundit who runs a brand marketing company and has been an adviser to some Tata companies. He wrote excitedly about ‘the launch of a million possibilities’ under the headline ‘Why India Needs a Nano’. He wrongly, as later events showed, described it as ‘a vehicle for Indian aspirations’ and one that was ‘a car for the people’.20 He claimed that it would be seen ‘with awe and pride’, and had ‘many firsts’ to its credit. ‘From a marketing perspective, it has already gone into the lexicon of India’s people and the fact that Tata called it a people’s car is even more suggestive of the transfer of ownership of the brand from a company to its users: the people,’ wrote Seth. Rarely has the FT been so far removed from reality.21 I wrote a rejoinder to Seth’s article on my ‘Riding the Elephant’ blog headlined ‘Tata’s “One-Lakh” Nano: Let’s Cool the Hype’ which appeared on FT.com alongside his piece.

  Cost increases meant that Tata could only sell a very basic no-frills version (without air conditioning) at the ‘one lakh car’ (Rs 100,000) price that Ratan Tata originally promised, so the slogan became a marketing drag. Aspirational Indian families, who Tata dreamed of upgrading from unsafe overloaded scooters, did not want to own the world’s cheapest product. Many would not have had space to park it near their homes in cramped narrow streets.

  Production of the Nano was initially held up because of the move from West Bengal to Gujarat. The launch had to be delayed and Ravi Kant and his team had the monumental task of setting up a temporary production line at another Tata plant in five months. ‘That was a nightmare. I don’t think any auto company in the world has done that,’ says Kant. Output recovered after a new factory was established in Gujarat, but the combination of the price, customer apathy and slow production build-up (plus some electrical fires in the cars) meant that only 175,000 were sold in the first two years compared with a production capacity of 250,000 a year. Later, the Nano was revamped with stylish colour schemes and a bigger engine with the aim of becoming an iconic low-priced car that would appeal to the middle class, not mass buyers.

  While the Nano remained frugal, a family engineering company in Bengaluru was showing how to develop new engineering at low cost with plastic-bodied electric cars.

  The Reva Dream

  ‘Frugal engineering is jugaad plus innovation,’ says Sudarshan Maini, an engineering enthusiast and perfectionist. ‘When you see that jugaad is not producing the right quality and quantity for what you need, you innovate further to achieve it. That makes it a stepping stone to both innovation and frugal engineering.’

  On my first visit to India in 1982, Maini held up a small precision-tuned automotive component between his fingers. ‘This is what we can produce in India,’ he proudly told me, standing in the Bengaluru factory of Maini Precision Products, a company he had set up nine years earlier to prove he could turn out international quality engineering components to micro tolerances and attract export customers. The finely machined and ground component was a cast iron lapping mandrel with a tolerance of 1 micron which, Maini explained, ensured the fine internal finish needed for fuel injection systems. Such levels of precision were all but unknown in India. Maini became motivated at the beginning of his career in the 1960s at Guest Keen & Williams (part of the British GKN group) in Kolkata. ‘So much was being talked about poor quality, but I knew we could produce the best quality in the world,’ he says.22

  Maini’s memories illustrate the problems that the manufacturing industry faced in the early decades of independence. He was frustrated by the standards of work and by ‘lots of wasteful scrap and poor production’ at the Koltata factory when he took over as the company’s first Indian assistant manager. Employees were work-shy and management was weak. He tells a story about a man who had been given two weeks’ leave every year for the previous five years after producing telegrams that said his father had died.

  ‘I called him and asked, “How many fathers do you have?”,’ says Maini. ‘He was very upset and said he was going to kill the personal officer who had taken 500 rupees every year for getting the leave sanctioned.’

  In the mid 1990s, General Motors (GM) started buying components from India and selected Maini, which became the American company’s smallest supplier. The components that GM needed were difficult to make because machining operations left complicated burrs (rough edges) on the metal surface. The order was for 8,000 pieces a day, which required 45 women just to remove the burrs. Jugaad came into play when the Mainis thought of a simple low-cost solution – a small device that enabled the burrs to be seen through a 45-degree mirror, making removal easy and reducing the number of workers involved to two.

  ‘If General Motors tells us it needs a special component in 30 days, we do a jugaad solution for that sort of fast development and production, maybe making it manually,’ says Sandeep, Maini’s eldest son, who now heads the group. The second stage is to put in a process to make the component reliably, and that means producing it by appropriate technology that is not jugaad – the process equals reliability.

  Maini’s enthusiasm for perfection led the group to expand sales from Rs 1 crore in 1982 to Rs 350 crore in 2012, with 70 per cent of the production being exported and a product range that was diversified from automobile components to higher levels of precision engineering for the defence and aviation industries. Companies like Bosch, BAE, Boeing, Volvo and GE have become customers and the group is also into specialist vehicles and plastics, and is looking at automated logistics systems and warehousing.

  Maini’s youngest son, Chetan, expanded the family’s engineering traditions by spending 15 years pioneering electric cars, which culminated in March 2013 in the launch of the latest ‘e20’ version of a car called the Reva.23 Chetan Maini’s interest in electric cars began with model vehicles when he was a child. While studying at the University of Michigan in the US, he worked, in 1990, on General Motors’ award-winning Sunracer solar-powered racing car, and in 1994, he co-founded the Reva Electric Car Company (RECC).

  The Reva was first developed with an American company and the Mainis saved costs by sending some components from India, including a dashboard instrument panel from an established manufacturer in Coimbatore, the jugaad capital of southern India. ‘We designed and developed the testing equipment for a variety of components, including batteries, which on an average cost us less than 1 per cent of what we would normally pay if we bought the same in the market – a typical jugaad example,’ says Sudarshan Maini. Assembly of the electric cars started in 2001, with five people producing the first seven vehicles in Bengaluru. To avoid having to build an assembly track for the small quantities, the car’s tubular metal frame was put on wheels and pushed down the production line.

  Eventually, to become a global brand, Reva needed more funds than the family was prepared to risk, and in 2010, the Mahindra auto-based group bought a 56 per cent stake in a new company, Mahindra Reva Electric Vehicles. Mahindra put in a total investment of Rs 100 crore and the Maini family holds a 24.6 per cent stake.24 The e20 is being produced at a new factory where 35 per cent of the energy needs are solar powered. The factory can produce 30,000 cars a year, a relatively small number by auto industry standards, but it is substantial for electric vehicles and a huge increase from the 4,000 older Revas sold till 2012. The 2013 sales target was a modest 400–500 vehicles, priced at around Rs 6 lakh, so it is not cheap.

  It seems sad for a family that put so much effort and money into the project for 15 years to have to lose control. ‘We had mixed emotions about letting go,’ says Sandeep, explaining the catch-22 situation that they could not get financial backing till they produced a viable model and production line, which could not be done without funds. ‘We didn’t have deep pockets – we were technical creators, and we also needed competence to develop markets and car manufacturing processes.’ Mahindra met those requirements. Anand Mahindra is committed to using frugal engineering to drive innovation a
nd, having talked to various other companies, the Mainis felt that he had the most commitment to electric vehicles and appreciation of what Chetan, who is still in charge as Mahindra Reva’s chief executive, had been trying to achieve.

  In recognition of his work, Chetan was awarded The Economist magazine group’s Innovation Award for Energy and the Environment in 2011.25 The dream is that the e20 could become the first electric car in the world to make a profit, but that will be difficult, given the price and the lack of demand for such vehicles. Sudarshan has told the story of the Reva in a book published in 2013.26

  The family is proud of its frugally engineered innovation, which has broken new ground with all-electric power, zero emissions and solar power battery-charging ports. Drivers can have access to the car from a smart phone app that can control air conditioning and locking controls, and trigger a remote emergency battery charge system. ‘It’s definitely been worthwhile as a pioneering effort that doesn’t come along every day,’ says Gautam, Sudarshan’s middle son. ‘We gained a lot of respect because people know we put our own money at stake,’ says Sandeep.

  Notes

  1. ‘SC brakes on road “menace”‘, The Telegraph, 16 May 2013, http://www.telegraphindia.com/1130516/jsp/nation/story_16904625.jsp#.UfjbXqyfouQ

  2. ‘Ludhiana fails to shed most-polluted city tag’, Tribune, http://www.tribuneindia.com/2012/20121004/ldh1.htm

  3. Sudarshan Maini, founder of Maini Precision Products of Bangalore, in conversation with JE.

  4. ‘UPA is a “jugaad” expert: Nitish Kumar’, The Times of India, 18 September 2012, http://articles.timesofindia.indiatimes.com/2012-09-18/india/33925129_1_upa-allies-fdi-decision-upa-government